<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
GENERAL MOTORS CORPORATION
(NAME OF ISSUER)
GENERAL MOTORS CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
CLASS E COMMON STOCK
(TITLE OF CLASS OF SECURITIES)
37044240
(CUSIP NUMBER OF CLASS OF SECURITIES)
J. MICHAEL LOSH
EXECUTIVE VICE PRESIDENT
GENERAL MOTORS CORPORATION
3044 WEST GRAND BOULEVARD
DETROIT, MICHIGAN 48202-3091
(313) 556-3549
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
COPIES TO :
WARREN G. ANDERSEN ROBERT S. OSBORNE, P.C.
GENERAL MOTORS CORPORATION KIRKLAND & ELLIS
3031 WEST GRAND BOULEVARD 200 EAST RANDOLPH ST.
DETROIT, MICHIGAN 48202-3091 CHICAGO, ILLINOIS 60601-6636
(313) 974-1528 (312) 861-2368
This statement is filed in connection with (check the appropriate box):
a.[X]The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [XThe]filing of a registration statement under the Securities Act of
1933.
c.[_]A tender offer.
d. [_None]of the above.
Check the following box if soliciting materials or an information statement
referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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<S> <C>
$25,683,110,907.75 $5,136,622.18
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</TABLE>
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*Valued in accordance with Rule 240(a) and (c), solely for the purpose of
determining the filing fee, on the basis of the average of the high and low
prices reported on the New York Stock Exchange Composite Tape on April 12,
1996 for the Class E Common Stock, which will be converted into common
stock of Electronic Data Systems Holding Corporation on a one-for-one basis
pursuant to the merger described in this Transaction Statement.
**Calculated based on the transaction valuation multiplied by one-fiftieth
of one percent.
[X]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Filing Party: Electronic Data
$8,856,245.14 Systems Holding Corporation
Form or Registration No.: Date Filed: April 16, 1996
Registration Statement on Form S-4
being filed simultaneously herewith
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<PAGE>
ITEMS 1 THROUGH 17. INTRODUCTION
This Rule 13e-3 Transaction Statement is being filed by General Motors
Corporation, a Delaware corporation ("General Motors"), in connection with a
split-off (the "Split-Off") of General Motors' wholly owned subsidiary,
Electronic Data Systems Holding Corporation, a Delaware corporation (together
with its subsidiaries, "EDS"), pursuant to a merger in which each outstanding
share of General Motors Class E Common Stock, $0.10 par value per share (the
"Class E Common Stock"), will be converted into one share of EDS Common Stock,
$0.01 par value per share (the "EDS Common Stock"). As a result of the Split-
Off, EDS will become an independent, publicly held company, holders of Class E
Common Stock will become stockholders of EDS rather than of General Motors,
and Class E Common Stock will cease to exist. All other outstanding shares of
General Motors capital stock will remain outstanding, and the terms of such
stock will remain essentially unchanged.
EDS has filed a Registration Statement on Form S-4 (as amended and including
exhibits, the "Registration Statement") with the Securities and Exchange
Commission concurrently herewith in connection with the Split-Off.
The cross reference sheet on the following pages, which is supplied pursuant
to General Instruction F to Schedule 13E-3, shows the location in the
Solicitation Statement/Prospectus that forms a part of the Registration
Statement of the information required to be included in response to the items
of this Transaction Statement. The information set forth in the Registration
Statement, which is attached hereto as Exhibit (d)(1), is incorporated herein
by reference in its entirety, and responses to each item herein are qualified
in their entirety by such reference.
ITEM 16. ADDITIONAL INFORMATION
The information contained in the Registration Statement is incorporated
herein by reference in its entirety.
1
<PAGE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
Exhibit (a)(1) Not Applicable.
Exhibit (b)(1) Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), dated March 31, 1996, which
is attached as Appendix B-1 to the Solicitation
Statement/Prospectus that forms a part of the Registration
Statement filed as Exhibit (d)(1) hereto.
Exhibit (b)(2) Opinion of Lehman Brothers Inc. ("Lehman Brothers"), dated
March 31, 1996, which is attached as Appendix B-2 to the
Solicitation Statement/Prospectus that forms a part of the
Registration Statement filed as Exhibit (d)(1) hereto.
Exhibit (b)(3) Opinion of Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), dated March 31, 1996, which is attached as
Appendix B-3 to the Solicitation Statement/Prospectus that
forms a part of the Registration Statement filed as Exhibit
(d)(1) hereto.
Exhibit (b)(4) Presentation to the General Motors Board of Directors
Regarding Split-Off of EDS, dated March 31, 1996, given by
Merrill Lynch.
Exhibit (b)(5) Presentation to the General Motors Board of Directors
Concerning the Split-Off of EDS, dated March 31, 1996, given by
Morgan Stanley and Lehman Brothers.
Exhibit (c)(1) Merger Agreement dated as of April , 1996 between General
Motors and GM Mergeco Corporation ("Mergeco"), which is
attached as Appendix A to the Solicitation Statement/
Prospectus that forms a part of the Registration Statement
filed as Exhibit (d)(1) hereto.
Exhibit (d)(1) Registration Statement.
Exhibit (e)(1) Not Applicable.
Exhibit (f)(1) Not Applicable.
2
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN SOLICITATION
SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS
-------------------------- -----------------------------------
<C> <S>
1.Issuer and Class of Security
Subject to the Transaction
(a)............................ Introduction; Summary--General Motors
(b)............................ Introduction; Class E Common Stock--
Introduction; Solicitation of Written
Consent of General Motors Common
Stockholders
(c)............................ Class E Common Stock--Price Range and
Dividends
(d)............................ Risk Factors Regarding General Motors
after the Split-Off--Loss of Potential
Availability of EDS Funds and Assets;
Class E Common Stock--Price Range and
Dividends;--Dividend Policy;--
Considerations Relating to Multi-Class
Common Stock Capital Structure
(e)............................ Security Ownership of Certain Beneficial
Owners and Management of General Motors
and EDS--GM Hourly Plan Special Trust
(f)............................ See Annex 1 to this Transaction
Statement.
2.Identity and Background......... General Motors, the person filing this
Transaction Statement, is the issuer of
the class of equity securities which is
the subject of the Rule 13e-3
transaction.
(a)............................ The persons enumerated in General
Instruction C to Schedule 13E-3 (each,
an "Instruction C Person") are John F.
Smith, Jr., Anne L. Armstrong, John H.
Bryan, Thomas E. Everhart, Charles T.
Fisher, III, J. Willard Marriott, Jr.,
Ann D. McLaughlin, Harry J. Pearce,
Edmund T. Pratt, Jr., John G. Smale,
Louis W. Sullivan, Dennis Weatherstone,
Thomas H. Wyman, J. Michael Losh, G.
Richard Wagoner, Jr., Louis R. Hughes,
J.T. Battenberg, III and C. Michael
Armstrong.
(b)............................ See Annex 1 to this Transaction
Statement.
(c)............................ See Annex 1 to this Transaction
Statement.
(d)............................ See Annex 1 to this Transaction
Statement.
(e)............................ To the best of General Motors' knowledge,
during the past five years, no
Instruction C Person has been convicted
in a criminal proceeding (excluding
traffic violations or similar
misdemeanors).
(f)............................ To the best of General Motors' knowledge,
during the past five years, no
Instruction C Person has been party to a
civil proceeding of a judicial or
administrative body of competent
jurisdiction and as a result of such
proceeding was or is subject to a
judgment, decree or final order
enjoining further violations of, or
prohibiting activities subject to,
federal or state securities laws or
finding any violation of such laws.
(g)............................ Each Instruction C Person is a U.S.
citizen.
3.Past Contacts, Transactions or
Negotiations
(a)............................ Not Applicable
(b)............................ Incorporation of Certain Documents by
Reference; Special Factors--Background
of the Split-Off; Security Ownership of
Certain Beneficial Owners and Management
of General Motors and EDS--GM Hourly
Plan Special Trust
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN SOLICITATION
SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS
-------------------------- -----------------------------------
<C> <S>
4.Terms of Transaction
(a)............................ The Split-Off; Relationship Between
General Motors and EDS--Post Split-Off
Arrangements; EDS Capital Stock
(b)............................ Not Applicable
5.Plans or Proposals of the Issuer
or Affiliate
(a)............................ Not Applicable
(b)............................ Not Applicable
(c)............................ Not Applicable
(d)............................ Not Applicable
(e)............................ Not Applicable
(f)............................ Not Applicable
(g)............................ Not Applicable
6.Source and Amounts of Funds or
Other Consideration
(a)............................ Estimated Fees and Expenses
(b)............................ Estimated Fees and Expenses
(c)............................ Not Applicable
(d)............................ Not Applicable
7.Purpose(s), Alternatives,
Reasons and Effects
(a)............................ Special Factors--Purposes of the Split-
Off
(b)............................ Special Factors--Alternatives to the
Split-Off
(c)............................ Special Factors--Alternatives to the
Split-Off;--Background of the Split-Off
(d)............................ Special Factors--Effects of the Split-
Off;--Certain U.S. Federal Income Tax
Considerations
8.Fairness of the Transaction
(a)............................ Special Factors--Recommendations of the
Capital Stock Committee and the GM
Board; Fairness of the Transactions;
The Split-Off
(b)............................ Special Factors--Recommendations of the
Capital Stock Committee and the GM
Board; Fairness of the Transactions
(c)............................ Special Factors--Requisite Vote for the
Transactions; The Split-Off--Merger
Agreement; Solicitation of Written
Consent of General Motors Common
Stockholders
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN SOLICITATION
SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS
-------------------------- -----------------------------------
<C> <S>
(d)............................ Special Factors--Requisite Vote for the
Transactions
(e)............................ Special Factors--Recommendations of the
Capital Stock Committee and the GM
Board; Fairness of the Transactions; The
Split-Off
(f)............................ Not Applicable
9.Reports, Opinions, Appraisals
and Certain Negotiations
(a)............................ Special Factors--Fairness Opinions
(b)............................ Special Factors--Fairness Opinions
(c)............................ Special Factors--Fairness Opinions;
Appendix B--Fairness Opinions
10.Interest in Securities of the
Issuer
(a)............................ Security Ownership of Certain Beneficial
Owners and Management of General Motors
and EDS; See also Annex 1 to this
Transaction Statement.
(b)............................ See Annex 1 to this Transaction
Statement.
11.Contracts, Arrangements or
Understandings with Respect to
the Issuer's Securities....... The Split-Off--Merger Agreement
12.Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction
(a)............................ Solicitation of Written Consent of
General Motors Common Stockholders.
Other than as set forth in such section,
General Motors has not received any
notice of intent with respect to the
vote on the Split-Off from any person
enumerated in Item 12(a) of Schedule
13E-3.
(b)............................ Special Factors--Background of the Split-
Off;--Recommendations of the Capital
Stock Committee and the GM Board;
Fairness of the Transactions; The Split-
Off; Solicitation of Written Consent of
General Motors Common Stockholders.
Other than as set forth in such
sections, General Motors has not
received any notice that any person
enumerated in Item 12(a) of Schedule
13E-3 has made any recommendation with
respect to the Split-Off.
13.Other Provisions of the
Transaction
(a)............................ The Split-Off--No Appraisal Rights
(b)............................ Not Applicable
(c)............................ Not Applicable
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN SOLICITATION
SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS
-------------------------- -----------------------------------
<C> <S>
14.Financial Statements
(a)............................ Incorporation of Certain Documents By
Reference; Summary--Certain Per Share
and Other Financial Information--GM
Common Stock Historical Per Share Data;
--General Motors Ratios of Earnings to
Fixed Charges
(b)............................ Summary--Certain Per Share and Other
Financial Information--GM Common Stock
Pro Forma Per Share Data;--General
Motors Summary Consolidated Historical
and Pro Forma Financial Data; General
Motors Unaudited Pro Forma Condensed
Consolidated Financial Statements
15.Persons and Assets Employed,
Retained or Utilized
(a)............................ Special Factors--Background of the Split-
Off--Negotiating Teams; Solicitation of
Written Consent of General Motors Common
Stockholders
(b)............................ Solicitation of Written Consent of
General Motors Common Stockholders
16.Additional Information.......... The information contained in the
Registration Statement is incorporated
by reference herein in its entirety.
17.Material to be Filed as Exhibits
(a)............................ Not Applicable
(b)............................ Fairness opinions of each of Merrill
Lynch, Lehman Brothers and Morgan
Stanley, which are attached as Appendix
B-1, B-2 and B-3, respectively, to the
Solicitation Statement/Prospectus that
forms a part of the Registration
Statement filed as Exhibit (d)(1)
hereto; Presentations to the General
Motors Board of Directors given by (i)
Merrill Lynch and (ii) Lehman Brothers
and Morgan Stanley, which are filed as
Exhibits (b)(4) and (b)(5) hereto,
respectively
(c)............................ Merger Agreement between General Motors
and Mergeco, which is attached as
Appendix A to the Solicitation
Statement/Prospectus that forms a part
of the Registration Statement filed as
Exhibit (d)(1) hereto
(d)............................ Registration Statement filed as Exhibit
(d)(1) hereto
(e)............................ Not Applicable
(f)............................ Not Applicable
</TABLE>
6
<PAGE>
ANNEX 1
ITEM 1(F). ISSUER AND CLASS
Since January 1, 1994, General Motors has purchased Class E Common Stock on
four occasions. On February 22, 1995, General Motors purchased 106,000 shares
of Class E Common Stock at a price of $38.3125 per share, which thereby
represented the average purchase price for Class E Common Stock purchased by
General Motors during the first quarter of 1995. On November 2, 1995, General
Motors purchased (i) 25,000 shares of Class E Common Stock at a price of
$48.9375 per share and (ii) 25,000 shares of Class E Common Stock at a price
of $48.3125 per share, resulting in an average purchase price of $48.625 per
share of Class E Common Stock purchased by General Motors during the third
quarter of 1995. On April 2, 1996, General Motors purchased 11,073 shares of
Class E Common Stock at a price of $53.1875 per share, which thereby
represents the average purchase price for Class E Common Stock purchased by
General Motors during the second quarter of 1996 through April 15, 1996.
ITEM 2(B) THROUGH (D). IDENTITY AND BACKGROUND
The following information with respect to principal occupation or employment
and name of the corporation or other organization in which such occupation or
employment is carried on and in regard to other affiliations has been
furnished to General Motors by the Instruction C Persons. In addition to the
affiliations mentioned on the following pages, the Instruction C Persons are
active in many local and national cultural, charitable, professional, and
trade organizations.
ANNE L. ARMSTRONG, P.O. Box 1358, Kingsville, Texas 78364; Chairman, Board
of Trustees, Center for Strategic and International Studies; former Chairman
of the President's Foreign Intelligence Advisory Board and former Ambassador
to Great Britain; Joined General Motors Board in 1977; Director of American
Express Company, Boise Cascade Corporation, Glaxo-Wellcome and Halliburton
Company; Member of the Council on Foreign Relations and Board of Overseers
Hoover Institution.
JOHN H. BRYAN, Sara Lee Corporation, Three First National Plaza, Chicago,
Illinois 60602-4260; Chairman and Chief Executive Officer, Sara Lee
Corporation, Chicago; Joined General Motors Board in 1993; Director of Amoco
Corporation, First Chicago NBD Corporation and its subsidiary, First National
Bank of Chicago; Member of The Business Roundtable and Vice Chairman of The
Business Council; Chairman of Catalyst; Trustee of the University of Chicago
and the Committee for Economic Development.
THOMAS E. EVERHART, California Institute of Technology, Parsons-Oates Hall
of Administration, 1201 East California Boulevard, Pasadena, California 91125;
President and Professor of Electrical Engineering and Applied Physics,
California Institute of Technology, Pasadena; Former Chancellor of University
of Illinois, Urbana-Champaign; Joined General Motors Board in 1989; Director
of Hewlett-Packard Corporation, Reveo, Inc., Corporation for National Research
Initiatives, Community Television of Southern California (KCET); Member of
National Academy of Engineering; Vice Chairman, Council on Competitiveness.
CHARLES T. FISHER, III, 100 Renaissance Center, Detroit, Michigan 48243;
Retired Chairman and President of NBD Bancorp, Inc. and its subsidiary NBD
Bank, N.A., 611 Woodward Avenue, Detroit, Michigan 48226-3408; Joined General
Motors Board in 1972; Director of Hughes Electronics Corporation, AMR
Corporation and its subsidiary American Airlines, Inc., First Chicago NBD
Corporation and its subsidiaries First National Bank of Chicago and NBD Bank
(Michigan).
J. WILLARD MARRIOTT, JR., Marriott International, Inc., One Marriott Drive,
Washington, D.C. 20058; Chairman, President and Chief Executive Officer,
Marriott International, Inc., Washington, D.C., since October 1993; Chairman,
President and Chief Executive Officer, Marriott Corporation (1985-1993);
Joined General Motors Board in 1989; Director of Host Marriott Corporation
(formerly Marriott Corporation), Host Marriott Services Corporation, Outboard
Marine Corporation, and the U.S.-Russia Business Council; Serves on Board of
Trustees of National Geographic Society, Georgetown University and the Mayo
Foundation; Member of The Business Council and The Business Roundtable.
7
<PAGE>
ANN D. MCLAUGHLIN, 4320 Garfield, N.W., Washington, D.C.; Former U.S.
Secretary of Labor (1987-1989); Vice Chairman, The Aspen Institute; President,
Federal City Council, Washington, D.C. (1990-1995); Joined General Motors Board
in 1990; Director of AMR Corporation and its subsidiary American Airlines,
Inc., Federal National Mortgage Association, Harman International Industries,
Host Marriott Corporation (formerly Marriott Corporation); Kellogg Company,
Nordstrom, Potomac Electric Power Company, Sedgwick Group plc, Union Camp
Corporation, and Vulcan Materials Company; Trustee of The Public Agenda
Foundation, The Conservation Fund and Rand; Board of Overseers, Wharton School
of Business, University of Pennsylvania.
HARRY J. PEARCE, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan 48202-3091; Vice Chairman, General Motors Board since January
1, 1996, and Executive Vice President, Electronic Data Systems Corporation,
Hughes Electronics Corporation, GM Locomotive Group EMD, Allison Transmission
Division and Corporate Affairs since 1994, Executive Vice President and General
Counsel (1992-1994), Vice President and General Counsel (1987-1992); Joined
General Motors in 1985 and its Board in 1996; Member of The President's
Council; Director of Hughes Electronics Corporation, Marriott International,
Inc.; Member, The Conference Board, Northwestern University School of Law
Visiting Committee, and Board of Visitors, United States Air Force Academy;
Trustee, Howard University.
EDMUND T. PRATT, JR., Astor Lane, Port Washington, New York 11050; Chairman
Emeritus and currently director of Pfizer Inc., 253 East 42nd Street, New York,
New York 10017; Joined General Motors Board in 1977; Director of Hughes
Electronics Corporation, Chase Manhattan Corporation and its subsidiary Chase
Manhattan Bank, N.A., International Paper Company, Minerals Technologies Inc.
and AEA Investors, Inc.; Member of The Business Council.
JOHN G. SMALE, The Procter & Gamble Company, P.O. Box 599, Cincinnati, Ohio
45201-0599; Chairman of the Executive Committee of General Motors since January
1, 1996, former Chairman, General Motors (November 2, 1992-December 31, 1995);
Retired Chairman and Chief Executive of The Procter & Gamble Company; Joined
General Motors Board in 1982; Member of the Executive Committee of The Business
Council; Board of Governors, The Nature Conservancy; Emeritus Trustee of Kenyon
College.
JOHN F. SMITH, JR., General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan 48202-3091; Chairman, General Motors since January 1, 1996,
and Chief Executive Officer and President since November 2, 1992, President
(April-November 1992), Vice Chairman, Board of Directors (1990-1992), Executive
Vice President, International Operations (1988-1990); Joined General Motors in
1961 and its Board in 1990; Member of The President's Council; Director of
Hughes Electronics Corporation, The Procter & Gamble Company; Member of The
Business Roundtable, The Business Council, U.S.-Japan Business Council and the
Chancellor's Executive Committee of the University of Massachusetts; Member of
Board of Overseers of Memorial Sloan-Kettering Cancer Center and Member of
Board of Polish-American Enterprise Fund.
LOUIS W. SULLIVAN, Morehouse School of Medicine, 720 Westview Drive, S.W.,
Atlanta, Georgia 30310-1495; President, Morehouse School of Medicine, Atlanta,
Georgia, since January 21, 1993; U.S. Secretary of Health and Human Services,
200 Independence, S.W., Washington, D.C. 20201 (1989-1993); Joined General
Motors Board in 1993; Director of Georgia Pacific, 3M Corporation, Household
International Inc., CIGNA Corporation, Bristol-Myers Squibb Company and Equifax
Corporation.
DENNIS WEATHERSTONE, J.P. Morgan & Co. Incorporated, 60 Wall Street, 21st
Floor, New York, New York 10260; Retired Chairman and currently director of
J.P. Morgan & Co. Incorporated and its subsidiary Morgan Guaranty Trust Company
of New York; Joined General Motors Board in 1986; Director of L'Air Liquide,
Merck & Co., Inc. and the Institute for International Economics; Member of The
Business Council; President and trustee of the Royal College of Surgeons
Foundation, Inc., New York; Trustee of the Alfred P. Sloan Foundation;
Independent member of the Board of Banking Supervision of the Bank of England.
THOMAS H. WYMAN, S.G. Warburg & Co., Inc., 277 Park Avenue, New York, New
York 10172; Chairman, S.G. Warburg & Co. Inc., New York, and former Chairman,
President and Chief Executive Officer, CBS Inc.,
8
<PAGE>
New York; Joined General Motors Board in 1985; Director of Hughes Electronics
Corporation, AT&T, Zeneca Group PLC (London) and United Biscuits (Holdings) plc
(Edinburgh); Member of The Business Council; Trustee Emeritus of The Ford
Foundation and of The Aspen Institute; Chairman Emeritus of Amherst College.
C. MICHAEL ARMSTRONG, Hughes Electronics Corporation, 7200 Hughes Terrace,
Los Angeles, California 90045-0066; Chairman and Chief Executive Officer,
Hughes Electronics Corporation since March 1992; Senior Vice President,
International Business Machines Corporation, Old Orchard Road, Armonk, New York
10504 (1989-March 1992); Member of the President's Council.
J. T. BATTENBERG, III, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan, 48202-3091; Executive Vice President, General Motors since
July 1995 and President, Delphi Automotive Systems since July 1994, Senior Vice
President (July 1994-July 1995), Vice President and Group Executive in charge
of the Automotive Components Group (May 1992-July 1994), Vice President and
Group Executive in charge of the Buick-Oldsmobile-Cadillac Group (June 1988-May
1992); Associated with General Motors since 1961; Member of the President's
Council.
LOUIS R. HUGHES, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan, 48202-3091; Executive Vice President, International
Operations, General Motors since November 1992 and President, International
Operations since September 1994, President, General Motors Europe and Vice
President and Group Executive (April-November 1992), Chairman and Managing
Director of Adam Opel AG (March 1989-April 1992); Associated with General
Motors since 1966; Member of the President's Council.
J. MICHAEL LOSH, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan, 48202-3091; Executive Vice President and Chief Financial
Officer, General Motors since July 1994, Group Executive in charge of North
American Vehicle Sales, Service, and Marketing (May 1992-July 1994), Vice
President and General Manager of Oldsmobile Division (June 1989-May 1992);
Associated with General Motors since 1964; Member of the President's Council.
G. RICHARD WAGONER, JR., General Motors Corporation, 3044 West Grand
Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President, General
Motors since November 1992 and President, North American Operations since July
1994, Chief Financial Officer (November 1992-July 1994), President and Managing
Director of General Motors do Brasil (July 1991-November 1992), Vice President
in charge of finance for General Motors Europe (June 1989-July 1991);
Associated with General Motors since 1977; Member of the President's Council.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
ITEM 10(A)
The following table sets forth, as of February 29, 1996, beneficial ownership
of Class E Common Stock for certain Instruction C Persons and pension and
profit-sharing or similar plans of General Motors (excluding its subsidiaries).
Upon consummation of the Split-Off, each outstanding share of Class E Common
Stock will be automatically converted into one share of EDS Common Stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
BENEFICIAL OWNER OWNED
---------------- ------------
<S> <C>
J. T. Battenberg, III....................................... 1,208
J. M. Losh.................................................. 5,659
General Motors Retirement Plan
for Salaried Employees..................................... 7,295,169
General Motors Savings Plans Master Trust................... 14,760,025
General Motors Canadian Savings-Stock Purchase Program...... 100,310
</TABLE>
9
<PAGE>
ITEM 10(B)
On various dates between February 9 and April 10, 1996, certain pension and
profit-sharing or similar plans of General Motors (excluding its subsidiaries)
effected multiple transactions in Class E Common Stock. During such period, the
General Motors Savings Plans Master Trust purchased an aggregate amount of
approximately 4.5 million shares of Class E Common Stock at prices ranging from
$53.75 to $56.595 per share and sold an aggregate amount of approximately
323,000 shares of Class E Common Stock at prices ranging from $53.188 to $57.75
per share. The General Motors Canadian Savings-Stock Purchase Program also
purchased within such period an aggregate amount of approximately 8,200 shares
of Class E Common Stock at an average price of $56.225 per share and sold an
aggregate amount of approximately 680 shares of Class E Common Stock at an
average price of $56.6801 per share. In addition, on February 21, 1996, the
General Motors Retirement Plan for Salaried Employees sold 15,800 shares of
Class E Common Stock at a price of $55.855 per share, and on February 23, 1996,
the General Motors Hourly-Rate Employees Pension Plan sold 21,300 shares of
Class E Common Stock at the same per share price. Since April 10, 1996, other
transactions in Class E Common Stock may have been effected by certain General
Motors pension and profit-sharing or similar plans in the ordinary course.
10
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
General Motors Corporation
/s/ John F. Smith, Jr.
By: _________________________________
John F. Smith, Jr.
Chairman, Chief Executive Officer,
and President
Dated: April 15, 1996
II-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
(a)(1) Not Applicable.
(b)(1) Opinion of Merrill Lynch, dated March 31, 1996, which
is attached as Appendix B-1 to the Solicitation
Statement/Prospectus that forms a part of the Regis-
tration Statement filed as Exhibit (d)(1) hereto.
(b)(2) Opinion of Lehman Brothers, dated March 31, 1996,
which is attached as Appendix B-2 to the Solicitation
Statement/Prospectus that forms a part of the Regis-
tration Statement filed as Exhibit (d)(1) hereto.
(b)(3) Opinion of Morgan Stanley, dated March 31, 1996,
which is attached as Appendix B-3 to the Solicitation
Statement/Prospectus that forms a part of the Regis-
tration Statement filed as Exhibit (d)(1) hereto.
(b)(4) Presentation to the General Motors Board of Directors
Regarding Split-Off of EDS, dated March 31, 1996,
given by Merrill Lynch.
(b)(5) Presentation to the General Motors Board of Directors
concerning the Split-Off of EDS, dated March 31,
1996, given by Morgan Stanley and Lehman Brothers.
(c)(1) Merger Agreement dated as of April , 1996 between
General Motors and Mergeco, which is attached as Ap-
pendix A to the Solicitation Statement/Prospectus
that forms a part of the Registration Statement filed
as Exhibit (d)(1) hereto.
(d)(1) Registration Statement.
(e)(1) Not Applicable.
(f)(1) Not Applicable.
</TABLE>
<PAGE>
Exhibit b(4)
===========================================================================
Presentation to
GENERAL MOTORS CORPORATION
BOARD OF DIRECTORS
Regarding the Split-Off of
Electronic Data Systems
March 31, 1996
<PAGE>
Table of Contents
===============================================================================
A. Overview of Transaction
B. Changes to Terms of MSA
C. Impact of Increased Price of EDS Stock Held by the GM Pension Plans
D. Benefits Foregone as a Result of the Transaction
<PAGE>
================================================================================
OVERVIEW OF TRANSACTION
================================================================================
<PAGE>
<TABLE>
<CAPTION>
Overview of Transaction
- ----------------------------------------------------------------------------------------------------------------------------------
General Motors Corporate Structure
<S> <C>
Pre-Split-Off Post-Split-Off
----------- ---------------- ------------ ----------- ---------------- ------------
| Class E | | Class $1 2/3 | | Class H | | EDS | | Class $1 2/3 | | Class H |
| Common | | Common | | Common | | Common | | Common | | Common |
| Stock | | Stock | | Stock | | Stock | | Stock | | Stock |
----------- ---------------- ------------ ----------- ---------------- ------------
Dividend | | | Dividend | | | Dividend
tied to | | | tied to | | | tied to
EDS | | | Hughes | | | Hughes
| | | | | |
Earnings --------------------------------------- | ---------------------------------------
Attribution | .100% 100%. 76% 24% . | | | 100%. . 76% 24% . |
| . . . . | | | . . . |
| . General Motors Corporation . | | | General Motors Corporation |
| . . . | | | . . |
--------------------------------------- | ---------------------------------------
| | | | | |
| | | | | |
| | | | | |
| | | | | |
-------------- ------------- ------------ -------------- ------------- ------------
| Electronic | | General | | | | Electronic | | General | | |
| Data | | Motors | | Hughes | | Data | | Motors | | Hughes |
| Systems | | (Auto) | | | | Systems | | (Auto) | | |
-------------- ------------- ------------ -------------- ------------- ------------
. . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current MSA New MSA
</TABLE>
<PAGE>
Overview of Transaction (cont'd)
- --------------------------------------------------------------------------------
Summary of Shareholder Considerations
(Italicized Items Have Been Financially Quantified)
- --------------------------------------------------------------------------------
General Motors Corporation
- --------------------------------------------------------------------------------
Class $1 2/3
- --------------------------------------------------------------------------------
POSITIVES
- --------------------------------------------------------------------------------
. Special Inter-Company Payment received by GM in connection with the
Split-Off [Italicized in original]
. Changes to terms of MSA [Italicized in original]
. Class E Stock held by pension plans
- reduced pension expense/funding as a result of increase in market price
of shares [Italicized in original]
- non-employer security/diversification
. Removal of potential business conflict between EDS and GM/Hughes
. Reduced goodwill amortization, if any
- --------------------------------------------------------------------------------
NEGATIVES
- --------------------------------------------------------------------------------
. Give up ability to control EDS
. Give up potential credit and liquidation benefits from EDS ownership, if
any
. Give up purchase option at 20% premium to market
. Separation allowance and transaction costs [Italicized in original]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class H
- --------------------------------------------------------------------------------
POSITIVES
- --------------------------------------------------------------------------------
. Changes to terms of MSA [Italicized in original]
. Removal of potential business conflict between Hughes and EDS
- --------------------------------------------------------------------------------
NEGATIVES
- --------------------------------------------------------------------------------
<PAGE>
Overview of Transaction (cont'd)
- --------------------------------------------------------------------------------
Summary of Financial Implications of Transaction Benefits to General Motors
<TABLE>
<CAPTION>
Valuation Impact to General Motors
----------------------------------------------
Factor $ in Millions % of Class E Market Value (a)
------ -------------- -----------------------------
<S> <C> <C>
Special Inter-Company Payment $500 1.9%
MSA Modifications:
Outsourcing During MSA Primary Term 0 to 270 0.0% to 1.0%
Outsourcing After MSA Primary Term 280 to 740 1.0% to 2.7%
Structural Cost Reductions 0 to 160 0.0% to 0.6%
Terms of Payment 0 to 120 0.0% to 0.4%
Separation Allowance and Transaction Costs (b) (70) to (50) (0.3)% to (0.2)%
-------------- -----------------------------
Value from Negotiated Benefits $710 to $1,740 2.6% to 6.4%
Increased Market Price of EDS Stock in the GM Pension Plans 260 to 550 1.0% to 2.0%
-------------- -----------------------------
Total Value of Transaction Benefits $970 to $2,290 3.6% to 8.5%
============== =============================
- ---------------------------
(a) Based on 483 million Class E shares outstanding at a closing stock price of $55.875 on March 26, 1996.
(b) Includes the $50 million allowance to EDS under the Separation Agreement for various uncertain, contingent and disputed matters
and the expenses of implementing the Transaction to be borne by General Motors.
</TABLE>
<PAGE>
Overview of Transaction (cont'd)
- --------------------------------------------------------------------------------
Framework for Assessment of Transaction Benefits
[GRAPH APPEARS HERE REFLECTING INFORMATION DESCRIBED IN TABULAR FORM BELOW]
<TABLE>
<CAPTION>
Range of Value
------------------------
Low High
--------- ----------
<S> <C> <C>
Value of Transaction Benefits
Value from Negotiated Benefits 2.6% 6.5%
Total Value of Transaction Benefits 3.6% 8.5%
Value References
Change of Control Transactions
Recapitalizations 2.9% 11.6%
Competitive Acquisitions 7.1% 23.1%
Negotiated Acquisitions 1.2% 5.8%
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Changes to Terms of MSA
- --------------------------------------------------------------------------------
<PAGE>
Changes to Terms of MSA
===============================================================================
In assessing the value impact of the Split-Off on the MSA, a comparison must be
made between the contract negotiated in the context of the Split-Off (the "New
MSA") and that which would have existed in the absence of the Split-Off. Both GM
and EDS agree that the MSA currently in existence (the "Current MSA") would have
been modified even in the absence of the proposed Split-Off, although the extent
to which it would have changed is not clear. In order to quantify the financial
benefits to GM of the New MSA, each factor was considered separately to
establish a range of possible changes in the absence of the Split-Off.
<TABLE>
<CAPTION>
- ---------------------------|----------------------------------------------------------------------------------------
| Current MSA New MSA
|--------------------------------------------|-------------------------------------------
<S> | <C> |<C>
Term | Perpetual | 10 years ("Primary Term"), extendible upon
| | mutual agreement
| |
Outsourcing (1) | None | Limited during Primary Term, unlimited
| | thereafter
| |
Structural Cost Reductions | Existing cost-reduction targets | Generally higher targets with no sharing
| with cost/profit sharing between | of deviations
| GM and EDS on under-/over-achievement |
| |
Sector Agreements | Various expirations from 1995 to 1998 | One to three year extensions
| |
UPR Cost Reductions | Reviewed annually to reflect market | Pricing for certain items now determined
| conditions | for next three to five years
| |
Terms of Payment | Zero days domestically; 35 days or more | Increased to a minimum of 35 days by 1999
| internationally |
| |
Scope | Substantially all data processing and | Expanded to include GM Plant Floor
| telecommunications |
- ---------------------------|--------------------------------------------|-------------------------------------------
</TABLE>
- --------------------------------
(1) Throughout this presentation, the term "Outsourcing" means services formerly
performed by EDS and sourced or proposed to be sourced to GM from third
parties other than EDS.
<PAGE>
Impact of Outsourcing During MSA Primary Term
- ------------------------------------------------------------------------------
The ability to do limited outsourcing (i.e., outsourcing away from EDS) under
the New MSA to be entered into in connection with the Split-Off is intended to
provide market testing of the price competitiveness of EDS services. The ability
to outsource would replace the existing procedure whereby GM and EDS jointly
pursue benchmarking and the Capital Stock Committee audits costs and margins
realized by EDS on GM contracts as compared to other EDS commercial contracts.
Outsourcing from third parties may result in direct financial benefits to GM
whenever a third party provides GM with lower priced services than EDS, either
because it is a more efficient supplier of services or because it is willing to
work for lower profit margins.
In addition, it is likely that any contract exposed to the competitive
procurement process will end up being more attractively priced for GM, merely
because the competitive environment will force EDS to pay special attention to
its cost structure. As a result, creative new ways of performing services or
redefinition of the required services to be performed may be found that reduce
the cost to EDS of providing services under the contract, allowing a price
reduction without necessarily affecting EDS' margins negatively.
Modeling Our valuation of the financial benefits to GM derived from
outsourcing has two components:
. The value of the financial benefits derived from contracts
outsourced ("Outsourced Contracts") is the after-tax present
value of price reductions applied to the cumulative amount of
spending under Outsourced Contracts during the 10-year New
MSA term.
. The value of the financial benefits derived from contracts
exposed to outsourcing but retained by EDS ("Retained
Contracts") is the after-tax present value of price
reductions applied to the cumulative amount of New MSA IT
spending under Retained Contracts during the Primary Term.
The value to GM of the financial benefits derived from the
outsourcing process is the sum of the two value sources
discussed above.
A portion of outsourcing benefits is allocated to Class H
shareholders based on the fraction of MSA services provided to
Hughes (Delco).
<PAGE>
Impact of Outsourcing During MSA Primary Term (cont'd)
- -------------------------------------------------------------------------------
Key Assumptions* . Terms of the Proposed New MSA incorporated in the March 19,
-----------------------------------------------------------
1996 term sheet
---------------
. GM expectations
---------------
. Growth of GM IT spending:
- 5% per year in volume for total North America, others as
specified, resulting in an average nominal growth (with
price reductions) of 2% per year.
. Plant Floor is in-scope.
. EDS win rate of 75% for contracts exposed to outsourcing.
. All outsourced contracts expire at the end of 2005.
. Financial value of outsourcing to GM
------------------------------------
. Price reductions achieved on Outsourced Contracts of 12%
to 20%.
. Price reductions achieved on Retained Contracts of 6% to
10%.
. GM tax rate of 35%.
. GM after-tax cost of capital of 11%.
- -------------------
* Except if otherwise noted, based on discussions with GM management.
<PAGE>
Impact of Outsourcing During MSA Primary Term (cont'd)
- -------------------------------------------------------------------------------
After-Tax Value Impact to GM
To the extent that, absent the Split-Off, the MSA would have continued to cover
all IT services and, accordingly, GM had no opportunity to expose any services
to competitive bidding, the after-tax value impact to GM of the outsourcing
provisions contained in the New MSA would have been:
<TABLE>
<CAPTION>
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------ --------------------------------- -------------------------------
Price Reduction Present Value Price Reduction Present Value Price Reduction Present Value
- --------------- ------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
12% $66 6% $99 12%/6% $165
14% 77 7% 115 14%/7% 192
16% 88 8% 132 16%/8% 220
18% 99 9% 148 18%/9% 247
20% 110 10% 164 20%/10% 274
</TABLE>
The portion of the value to GM of services exposed during the Primary Term which
is allocated to the Class H shareholders is between $1 million and $2 million.
To the extent that the Current MSA would have been modified to incorporate
limited outsourcing during the next ten years even without the Split-Off, the
relative value impact of the New MSA would have been less. If, in the extreme,
the outsourcing options in the absence of the Split-Off were the same as under
the New MSA, there would be no outsourcing benefit to GM as a result of the
Split-Off.
<PAGE>
Impact of Outsourcing After MSA Primary Term
- -------------------------------------------------------------------------------
The financial benefits to GM of outsourcing to third parties are applicable to
both the Primary Term of the New MSA and the perpetual period following the
Primary Term, although such benefits are probably more significant with respect
to individual contracts during the Primary Term than when contracts generally
can be outsourced after the Primary Term.
The value impact to GM of both the outsourcing and exposure processes are
determined relative to the degree of outsourcing and exposure to outsourcing
which would have existed in the absence of the Split-Off. The Current MSA does
not contemplate GM purchasing IT services from any source other than EDS but may
have been modified to have included limited outsourcing, similar to the New MSA,
during the Primary and post-Primary Terms.
Modeling Our valuation of the financial benefits to GM derived from outsourcing
has two components:
. The value of the financial benefits derived from Outsourced
Contracts is the present value of the after-tax savings from the
price reductions on such contracts. In order to compute this
savings, the amount of outsourcing that would occur under the New
MSA was compared to both no outsourcing and limited outsourcing in
the absence of the Split-Off.
. The value of the financial benefits derived from Retained Contracts
is the present value of the after tax savings from the price
reductions on such contracts. In order to compute this savings, the
price reductions applied to the total amount of GM IT spending
retained by EDS under the New MSA was compared to both no
outsourcing and limited exposure to outsourcing in the absence of
the Split-Off.
The total value to GM of the financial benefits derived from the
outsourcing process is the sum of the two value sources discussed
above.
The portion of outsourcing benefits attributable to Class H
shareholders is allocated based on the fraction of MSA services
provided to Hughes (Delco).
<PAGE>
Impact of Outsourcing After MSA Primary Term (cont'd)
- -------------------------------------------------------------------------------
Key Assumptions* . GM expectations
---------------
. Growth of GM IT spending after 2005 is 2% per year.
. If the Split-Off occurs, the degree of outsourcing
increases linearly from 6.8% in 2005 to a steady
state value in the range between 20% and 40% in
years after 2014. All GM IT spending is exposed to
outsourcing after 2005.
. In the absence of the Split-Off, two extremes were
considered.
- no outsourcing, and
- limited outsourcing, under which the degree of
outsourcing remains constant at 6.8% after 2005.
27.2% (consistent with an EDS 75% win rate) of
GM's IT spending is exposed to outsourcing after
2005.
. Financial value of outsourcing to GM
------------------------------------
. Price reductions achieved on Outsourced Contracts of
6% to 10%.
. Price reductions achieved on Retained Contracts of
3% to 5%.
. GM tax rate of 35%.
. GM after-tax cost of capital of 11%.
- -------------------
* Except if otherwise noted, based on discussions with GM management.
<PAGE>
Impact of Outsourcing After MSA Primary Term (cont'd)
================================================================================
(dollars in millions)
After-Tax Present Value Impact to GM of a Modification from No Outsourcing to
the New MSA
<TABLE>
<CAPTION>
- -------------------------
Years 10 to 20
- -------------------------
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------------- -------------------------------------- ----------------------------------------
Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing
Price ------------------------ Price ------------------------- Price ---------------------------
Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40%
- --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% $52 $ 71 $ 90 3.0% $166 $157 $148 6/3.0% $218 $228 $238
7% 61 83 105 3.5% 194 184 173 7/3.5% 255 267 278
8% 69 95 120 4.0% 222 210 198 8/4.0% 291 305 318
9% 78 106 135 4.5% 250 236 223 9/4.5% 328 342 358
10% 87 118 150 5.0% 277 262 247 10/5.0% 364 380 397
</TABLE>
<TABLE>
<CAPTION>
- -------------------------
After Year 20
- -------------------------
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------------- -------------------------------------- ----------------------------------------
Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing
Price ------------------------ Price ------------------------- Price ---------------------------
Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40%
- --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% $59 $ 89 $119 3.0% $119 $104 $ 89 6/3.0% $178 $193 $208
7% 69 104 139 3.5% 139 121 104 7/3.5% 208 225 243
8% 79 119 159 4.0% 159 139 119 8/4.0% 238 258 277
9% 89 134 178 4.5% 178 156 134 9/4.5% 268 290 312
10% 99 149 198 5.0% 198 173 149 10/5.0% 297 322 347
</TABLE>
<TABLE>
<CAPTION>
- -------------------------
Total
- -------------------------
-------------------------------------------
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------------- -------------------------------------- ----------------------------------------
Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing
Price ------------------------ Price ------------------------- Price ---------------------------
Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40%
- --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% $111 $160 $209 3.0% $285 $261 $237 6/3.0% $396 $421 $446
7% 130 187 244 3.5% 333 305 277 7/3.5% 463 492 521
8% 148 214 279 4.0% 381 349 317 8/4.0% 528 563 595
9% 167 240 313 4.5% 428 392 357 9/4.5% 596 632 670
10% 186 267 348 5.0% 475 435 396 10/5.0% 661 702 744
-------------------------------------------
</TABLE>
The portion of the value to GM of services exposed after the Primary Term which
is allocated to the Class H shareholders is between $3 million and $5 million.
<PAGE>
Impact of Outsourcing After MSA Primary Term (cont'd)
- -------------------------------------------------------------------------------
(dollars in millions)
After-Tax Present Value Impact to GM of a Modification from Limited Outsourcing
to the New MSA
<TABLE>
<CAPTION>
- -------------------------
Years 10 to 20
- -------------------------
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------------- -------------------------------------- ----------------------------------------
Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing
Price ------------------------ Price ------------------------ Price ------------------------
Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40%
- --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% $ 25 $ 44 $ 63 3.0% $126 $117 $108 6/3.0% $151 $161 $171
7% 30 52 74 3.5% 148 138 127 7/3.5% 178 190 201
8% 33 59 84 4.0% 168 156 144 8/4.0% 201 215 228
9% 38 66 95 4.5% 190 176 163 9/4.5% 228 242 258
10% 42 73 105 5.0% 210 195 180 10/5.0% 252 268 285
</TABLE>
<TABLE>
<CAPTION>
- -------------------------
After Year 20
- -------------------------
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------------- -------------------------------------- ----------------------------------------
Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing
Price ------------------------ Price ------------------------ Price ------------------------
Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40%
- --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% $ 39 $ 69 $ 99 3.0% $ 89 $ 74 $ 59 6/3.0% $128 $143 $158
7% 45 80 115 3.5% 103 85 68 7/3.5% 148 165 183
8% 52 92 131 4.0% 118 99 79 8/4.0% 170 191 210
9% 59 104 148 4.5% 133 111 89 9/4.5% 192 215 237
10% 65 114 164 5.0% 147 122 97 10/5.0% 212 236 261
</TABLE>
<TABLE>
<CAPTION>
- -------------------------
Total
- -------------------------
----------------------------------------
Services Outsourced Services Under Retained Contracts Total Services Exposed
- ------------------------------------- -------------------------------------- ----------------------------------------
Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing
Price ------------------------ Price ------------------------ Price ------------------------
Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40%
- --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% $ 64 $113 $162 3.0% $215 $191 $167 6/3.0% $279 $304 $329
7% 75 132 189 3.5% 251 223 195 7/3.5% 326 355 384
8% 85 151 215 4.0% 286 255 223 8/4.0% 371 406 438
9% 97 170 243 4.5% 323 287 252 9/4.5% 420 457 495
10% 107 187 269 5.0% 357 317 277 10/5.0% 464 504 546
----------------------------------------
</TABLE>
The portion of the value to GM of services exposed after the Primary Term which
is allocated to the Class H shareholders is between $2 million and $4 million.
<PAGE>
Impact of Structural Cost Reductions
- --------------------------------------------------------------------------------
The Structural Cost Reductions ("SCRs") contemplated by the New MSA replace an
existing series of cost reduction arrangements in existing sector agreements
referred to as Performance Reduction Requirements ("PRRs"). The current PRR
arrangements include cost/profit sharing between GM and EDS to the extent that
actual cost savings fall short of or exceed the contemplated cost reductions.
The cost reduction targets under the SCRs are greater than under the existing
PRRs and, to the extent that the SCRs reduce GM's costs of IT services beyond
that which would have been incurred without the Split-Off, GM benefits. The
benefits can be of two types: lesser profit sharing with EDS and lower cost for
services. The amounts of these two benefits depend on the conditions that would
have existed in the absence of the Split-Off. The range of future conditions
without the Split-Off that have been considered is:
. Cost Reductions Achieved. Historically, the cost reductions in the sector
agreements have been exceeded, producing benefits to both GM and EDS
under the profit-sharing arrangements. A full range of cost reductions
without the Split-Off has been considered from (i) no savings beyond PRR
targets to (ii) full savings as contemplated in the SCRs.
. Contractual. The existing PRRs may have been modified to include some or
all of the features of the SCRs in the New MSA including changes to the
cost/profit sharing. Therefore, the state of the contractual agreement
without the Split-Off is considered over a spectrum between (i) the
existing PRRs and (ii) the New MSA SCRs.
GM expects to reinvest a substantial portion of the SCR concessions into
additional IT service procurement. Such reinvestments, if any, would result in
GM getting equivalent value in additional IT services from EDS and are therefore
not considered to represent value gains or losses to GM.
Modeling The present value of the after-tax savings to GM of the
differential between (i) the SCRs mandated in the New MSA and
(ii) cost savings mandated in PRRs without the Split-Off is
calculated. Since part of this savings may have been retained
by EDS under existing profit sharing, a range of cost savings
in the absence of the Split-Off is considered.
<PAGE>
Impact of Structural Cost Reductions (cont'd)
- --------------------------------------------------------------------------------
Key Assumptions* . Sector agreements are assumed, even in the absence of the
Split-Off, to be renegotiated as they expire under the
same terms as are included in the SCRs of the New MSA.
. The PRRs which are included in the existing agreements and
the SCRs which would be included in the New MSA are as
follows:
. Under the PRRs, contract sharing with EDS of 33-1/3% on
NAO, 100% on Delphi, 50% on GMAC and 33-1/3% on other
categories.
. Delco is not included in the analyses because the SCRs
are the same as those under existing agreements.
<TABLE>
<CAPTION>
Cost Reductions Included SCRs Under Cumulative
in Existing Agreements New MSA Differential Differential
------------------------ ----------------------- ---------------- ---------------
NAO & NAO & Sharing Sharing
Other Delphi GMAC Other Delphi GMAC Total to EDS Total to EDS
----- ------ ---- ----- ------ ---- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $34m $7m $3m $76m $15m $9m $56m $25m $ 56m $ 25m
1997 34m 7m 3m 76m 15m 9m 56m 25m 112m 50m
1998 54m 7m 3m 76m 15m 9m 36m 18m 148m 68m
----- -------
Present Value $250m $113m
After-Tax PV $163m $ 73m
</TABLE>
- ----------------
* Except if otherwie noted, based on discussions with GM management.
<PAGE>
Impact of Structural Cost Reductions (cont'd)
- --------------------------------------------------------------------------------
After-Tax Value Impact to GM
To the extent that, absent the Split-Off, the MSA would have continued to
operate under the existing PRRs until the expiration of the sector agreements,
the after-tax value impact to GM of the SCRs provisions contained in the New MSA
will be:
Degree of Savings That Would Have Been
Achieved Under Existing Sector Agreements:
-----------------------------------------------
None Above Existing To the Same Extent
Sector Agreement Targets as Under the New MSA
------------------------ --------------------
Value to GM $163m $73m
To the extent that the MSA would have been modified to incorporate the SCRs
contemplated in the New MSA even without the Split-Off, the relative value
impact of the New MSA will be less. If, in the extreme, the MSA treatment of
PRRs/SCRs in the absence of the Split-Off were the same as under the New MSA,
there would be no value impact as a result of the Split-Off.
<PAGE>
UPR Cost Reductions
- --------------------------------------------------------------------------------
. The prices under the existing UPR sector agreements are currently reviewed
annually to reflect prevailing market conditions including annual price
adjustments to reflect market prices.
. The New MSA incorporates price-reduction commitments over the next five
years for Information Processing Activity Charges (IPACS) and the next
three years for U.S. Communications.
. Prospectively, the change from spot pricing to longer-term pricing may be
either a positive or a negative for GM; the change was therefore not
quantified.
<PAGE>
Impact of Changes in Terms of Payment
- --------------------------------------------------------------------------------
The changes in the payment terms under the New MSA may result in a transfer of
value between EDS and GM, the degree of which depends on what would happen to
such terms of payment were there to be no Split-Off of EDS.
Modeling . An increase in days payable allows GM to retain cash that
otherwise would be paid to EDS. Increases in accounts
payable (as a result of increased IT spending) at a
constant number of days payable similarly allows GM to
retain additional cash. Conversely, a decline in days
payable or revenues, relative to that which would occur in
the absence of the Split-Off, will reduce the retained
cash.
. The benefit of the positive cash flows from increased days
receivable and growing revenue, as well as a reversal of
those cash flows if the terms of payment are assumed to
have conformed to the New MSA in the future even in the
absence of the Split-Off, can be valued by using standard
present value techniques at the assumed rate of displaced
GM funding.
The portion of the benefits of the changed terms of payment
allocated to Class H shareholders were determined based on
the specific changes to Hughes (Delco) payables and projected
Hughes (Delco) revenues.
Key Assumptions* . Under the New MSA, payable terms will be lengthened on
major sector agreements (accounting for 71% of revenues
under the New MSA), relative to those under the Current
MSA, resulting in the averages specified below at the
beginning of the indicated years.
1996 No change
1997 15 additional days
1998 19.3 additional days
1999 to 2005 35 additional days
- ------------------------
* Except if otherwise noted, based on discussions with GM management.
<PAGE>
Impact of Changes in Terms of Payment (cont'd)
- --------------------------------------------------------------------------------
Key Assumptions* . MSA revenues are modeled as under the "Impact of
(cont'd) Outsourcing" analysis.
. The terms of payment in the absence of the Split-Off
are assumed to eventually conform to those in the New
MSA. The range of delay until conformity that is
considered ranges from immediately to the end of the
Primary Term of the New MSA (10 years).
. A long-term increase in GM payables will reduce the
future need for GM to access the debt and possibly the
equity markets, saving GM after-tax funding at a cost
of 4% to 12%.
After-Tax Value Impact to GM
To the extent that, absent the Split-Off, the MSA would have continued to
operate under the existing terms of payment until ten years from now, the
after-tax value impact to GM of the terms of payment provisions contained in the
New MSA will be:
Displaced After-Tax Funding Rate
------------------------------------------------------------
4% 6% 8% 10% 12%
----------- ----------- ----------- ------------ -----------
After-Tax
Value ($ millions) $64 $86 $102 $114 $123
The portion of the value to GM of extended payment terms which is allocated to
Class H shareholders is about $1 million.
To the extent that the Current MSA would have been modified to incorporate the
terms of payment anticipated in the New MSA during the Primary Term, even
without the Split-Off, the relative value impact of the New MSA will be less.
If, in the extreme, the Current MSA treatment of terms of payment were to
immediately be the same as under the New MSA, there would be no value impact as
a result of the Split-Off.
- ---------------
* Except if otherwise noted, based on discussions with GM management.
<PAGE>
- --------------------------------------------------------------------------------
Impact of Increased Price of EDS Stock
Held by the GM Pension Plans
- --------------------------------------------------------------------------------
<PAGE>
Impact of Increased Price of EDS Stock Held by the GM Pension Plans
- --------------------------------------------------------------------------------
Price/Earnings-to-Future Growth Framework
Because GM's pension plans (the "Plans") own approximately 32% of the Class E
Common Stock and because any relative increase in the market price of this
security will cause a decrease in GM's future pension expense and unfunded
pension liability, an increase in the market price of the EDS/Class E Common
Stock resulting from the Split-Off provides financial benefits to GM.
Much of the benefit to EDS from the Split-Off is expected to accrue from EDS'
increased ability to pursue new customer opportunities (customers who were
otherwise conflicted by GM's ownership of EDS and Hughes) and strategic
opportunities. Equity analysts have estimated that EDS' long-term growth rate
will increase by as many as 4 percentage points as a result of these
opportunities.
EDS' current A1/A credit rating is expected to remain at this rating taking into
account the pro forma impact of the Split-Off.
Modeling . The value of Class E Common Stock or EDS Common Stock in the
equity market can be modeled using the Price/Earnings-to-Growth
Rate framework summarized below.
P/E Ratio
Price = ------------- X (Future Growth) X (Earnings)
Future Growth
. The above relationship is applied to two principal scenarios: one
in which the Split-Off occurs and one in which it does not. The
difference between the stock prices under the two principal
scenarios is applied to the Plans' holdings to measure potential
financial benefit to GM on an after-tax basis. A wide range of
post-Split-Off possibilities is considered including a range of
impacts from the MSA changes.
<PAGE>
Impact of Increased Price of EDS Stock held by the GM Pension Plans (cont'd)
- --------------------------------------------------------------------------------
Price/Earnings to Future Growth Framework
Key Assumptions* . Absent the Split-Off, EDS would earn $2.27 in 1996 and
earnings would grow by 15% per year for the following
five years(a). Margins would be constant across GM and
non-GM revenues and across all future years. Non-GM
revenues in 1996 would be $9,871 million(b). GM IT
spending is modeled as under the "Impact of Outsourcing"
analysis.
. The proposed Split-Off is assumed to have the following
impact on the three model components of the valuation
model:
. Ratio of Price/Earnings-to-Future Growth: From no
change to an increase of 2%, resulting from the
expected inclusion of EDS Common Stock into the S&P
500 Index. Inclusion of stock into the S&P 500 Index
typically results in a 1 to 3% increase.
. Earnings Growth:
- reduction in the growth of EDS' GM operating income
as a result of losses to outsourcing, as modeled
under the "Impact of Outsourcing" analyses.
- increase in the growth of EDS' non-GM operating
income resulting from EDS' ability to pursue
additional business and strategic opportunities not
currently available (additional growth range in non-
GM business of 0 to 4 percentage points).
- Structural Cost Reductions are expected to be
neutral to EDS' operating income growth because the
cost reductions would have been incorporated by
1999, even in the absence of the Split-Off.
- the increased probability (from 70% to 100%) of EDS
being awarded the plant floor service contracts as a
result of the incorporation of plant floor services
as in scope under the New MSA.
- --------------------
* Except if otherwise noted, based on discussions with GM management.
(a) Based on analyst expectations as compiled by I/B/E/S, February 1996.
(b) Merrill Lynch Research, November 17, 1995.
<PAGE>
Impact of Increased Price of EDS Stock Held by the GM Pension Plans (cont'd)
- --------------------------------------------------------------------------------
Price/Earnings to Future Growth Framework
Key Assumptions* . Earnings (using a 36% marginal EDS tax rate):
(cont'd) - reduction in earnings as a result of revenue lost to
outsourcing, as modeled under the "Impact of
Outsourcing" analyses (assuming a constant pretax margin
of 14%).
- increase in EDS' non-GM earnings resulting from EDS'
ability to pursue additional business and strategic
opportunities (assuming a constant pretax margin of
14%) (additional growth range in non-GM business of 0 to
4 percentage points).
- increase in interest expense (6% pretax) as a result of
the $500 million Special Inter-Company Payment and up to
35 additional days of receivables from GM ($242
million). This additional borrowing is not expected to
affect EDS' overall cost of debt.
- the increased probability (from 70% to 100%) of EDS
being awarded the plant floor service contracts as a
result of the incorporation of plant floor services as
in-scope under the New MSA (assuming pre-tax margin of
14%).
- lost profit sharing from cost reductions in excess of
those contemplated under existing sector agreements
(from $0 to $25 million as discussed under "Impact of
Structural Cost Reductions").
- the possible non-recurring charge being evaluated by EDS
has not been included in this analysis because its
incurrence will be independent of the Split-Off.
. Increases in EDS' stock price would benefit GM through the
156 million shares held by the Hourly and Salaried Pension
Plans. Such increases would reduce the need for future
funding by GM. Reduction in GM's future pension funding
reduces GM's future tax benefits at a marginal rate of 35%.
GM's after-tax cost of capital is equal to the investment
return of the GM Plans.
- ----------------
* Except if otherwise noted, based on discussions with GM management.
<PAGE>
Impact of Increased Price of EDS Stock Held by the GM Pension Plans (cont'd)
================================================================================
After-Tax Value Impacts
Note: Ranges indicate a range of (P/E)/Growth between no increase and a 2%
expansion as a result of an S&P 500 addition.
<TABLE>
<CAPTION>
Increase in Non-GM Revenue Growth as a Result of the Split-Off
-------------------------------------------------------------------------------------------------
----------------------------------
0% 1% 2% 3% 4%
----------------- --------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Least MSA Impact on GM (a) ---------------
Increase in EDS Stock Price ($0.98) to $0.12 $2.51 to $3.68 $6.06 to $7.30 $ 9.68 to $10.99 $13.36 to $14.75
Increase in Value of Shares
in Plans ($153)m to $19m $392m to $574m $946m to $1,139m $1,510m to $1,715m $2,085m to $2,301m
After-Tax Pension Savings
to GM ($99)m to $12m $255m to $373m $615m to $740m $ 982m to $1,115m $1,355m to $1,495m
---------------
Greatest MSA Impact on GM (b) --------------
Increase in EDS Stock Price ($2.71) to ($1.64) $0.71 to $1.85 $4.20 to $5.40 $7.75 to $9.02 $11.36 to $12.70
Increase in Value of Shares
in Plans ($422)m to ($256)m $112m to $288m $655m to $842m $1,209m to $1,407m $1,772m to $1,982m
After-Tax Pension Savings
to GM ($274)m to ($166)m $72m to $187m $426m to $548m $786m to $915m $1,152m to $1,288m
--------------
-----------------------------------
</TABLE>
- ------------------------------
(a) Based on assumptions consistent with the least amount of direct MSA benefits
to GM, as summarized under Summary of Financial Implications of Transaction
Benefits to General Motors.
(b) Based on assumptions consistent with the greatest amount of direct MSA
benefits to GM, as summarized under Summary of Financial Implications of
Transaction Benefits to General Motors.
<PAGE>
Impact of Increased Price of EDS Stock Held by the GM Pension Plans (cont'd)
- --------------------------------------------------------------------------------
Empirical Evidence
The results from the Price/Earnings-to-Future Growth Framework can be compared
to Class E price changes observed to date.
Approach . A portion of the financial benefits to EDS from the Split-Off
can be measured by observing the price response of Class E
Common Stock to announcements regarding the proposed
transaction.
. The announcement that the GM Board had authorized the
pursuit of the Split-Off was followed by a Class E Common
Stock price increase of about $2.75 relative to comparable
companies. This response is particularly strong in light of
the pre-existing expectation that the Split-Off was a
possibility.
. The announcement that GM had received a favorable ruling
from the Internal Revenue Service was followed by a Class E
Common Stock price increase of about $1.50 relative to
comparable companies.
. Since these two announcements only contained partial
incremental information about the probability of the Split-
Off, the sum of the values mentioned above likely reflects
less than all of the financial benefits from the Split-Off to
Class E holders perceived by the market.
. Such a large increase in value of new opportunities is
consistent with an estimate prepared by EDS indicating
synergies with values in excess of $4.8 billion available from
a contemplated strategic combination. Such a strategic
combination did not, however, materialize.
Market Price Impact
<TABLE>
<CAPTION>
Increase in Class E Price
---------------------------------------------------
$3 $4 $5 $6 $7
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Increase in Market Price of Class E $1,449m $1,932m $2,415m $2,898m $3,381m
After-Tax Pension Savings to GM $304m $406m $507m $608m $710m
</TABLE>
<PAGE>
Increased Price of Class E
- --------------------------------------------------------------------------------
Daily Closing Price Performance
From 7/25/95 to 8/22/95
[GRAPH APPEARS HERE REFLECTING INFORMATION DESCRIBED IN TABULAR FORM BELOW]
<TABLE>
<CAPTION>
Data Services Index (a)
Date GME Stock Price (Relative to GME)
-------- --------------- -----------------------
<S> <C> <C>
7/25/95 $43.00 $42.98
7/26/95 43.00 43.54
7/27/95 44.00 43.92
7/28/95 43.88 44.02
7/31/95 44.00 44.14
8/01/95 43.13 43.76
8/02/95 43.13 43.62
8/03/95 43.13 43.65
8/04/95 43.63 43.63
8/07/95 46.13 43.44
8/08/95 46.50 43.04
8/09/95 45.88 43.29
8/10/95 46.38 43.28
8/11/95 46.25 43.37
8/14/95 45.88 43.34
8/15/95 45.63 43.06
8/16/95 46.00 43.08
8/17/95 46.13 43.38
8/18/95 46.00 43.39
8/21/95 46.00 43.37
8/22/95 46.13 43.33
</TABLE>
- ------------
(a) Data Services Index: AUD, CSC, FDC, FISV, PMS, SMED, SNDT. The composite is
indexed to $43.63 on 8/4/95.
<PAGE>
Increased Price of Class E
- --------------------------------------------------------------------------------
Daily Closing Price Performance
From 12/15/95 to 1/12/96
[GRAPH APPEARS HERE REFLECTING INFORMATION DESCRIBED IN TABULAR FORM BELOW]
<TABLE>
<CAPTION>
Data Services Index (a)
Date GME Stock Price (Relative to GME)
-------- --------------- -----------------------
<S> <C> <C>
12/15/95 $50.75 $51.67
12/18/95 49.50 50.14
12/19/95 50.00 50.01
12/20/95 50.13 50.25
12/21/95 50.63 51.83
12/22/95 50.25 51.77
12/26/95 51.25 52.14
12/27/95 52.00 51.78
12/28/95 52.00 52.52
12/29/95 52.00 52.00
01/02/96 53.25 51.64
01/03/96 54.50 51.38
01/04/96 54.00 51.18
01/05/96 53.25 50.91
01/08/96 53.50 51.17
01/09/96 51.75 50.33
01/10/96 51.25 49.88
01/11/96 52.63 51.05
01/12/96 51.63 50.28
</TABLE>
- ------------
(a) Data Services Index: AUD, CSC, FDC, FISV, PMS, SMED, SNDT. The composite is
indexed to $52.00 on 12/29/95.
<PAGE>
- --------------------------------------------------------------------------------
Benefits Foregone as a Result of the Transaction
- --------------------------------------------------------------------------------
<PAGE>
Benefits Foregone as a Result of the Transaction
- --------------------------------------------------------------------------------
The conversion of Class E Common Stock to EDS Common Stock in the Merger will
result in GM foregoing certain financial benefits as a result of:
(1) the transfer of control of EDS to the Class E holders from GM,
(2) relinquishment by GM of potential credit and liquidation benefits from
EDS ownership, and
(3) relinquishment by GM of the right to recapitalize the Class E Common
Stock.
To analyze the value of the transfer of control, Merrill Lynch reviewed selected
recapitalization and acquisition transactions in which control shareholders
obtained or planned to obtain a premium as compared to non-controlling or public
shareholders.
GM has informed us that it has no business plan either to realize the
liquidation value of EDS or to capture and retain any dividends paid by EDS to
GM for distribution to the Class E shareholders. The credit and liquidation
benefits would most likely only be pursued in the remote event of the near
insolvency of GM, when no other sources of capital are available to GM. Because
of the low probability of this event, the financial value of the potential
credit and liquidation benefits has not been quantified.
The use of GM's right to recapitalize the Class E Common Stock with Class
$1-2/3 Common Stock, under current market conditions, is of little practical
importance because of the very significant dilution to the Class $1-2/3
shareholders its use would cause; thus, the right has little financial value.
<PAGE>
<TABLE>
<CAPTION>
Benefits Foregone as a Result of the Transaction (cont'd)
=================================================================================================================================
Analysis of Additional Premiums Paid for Control Stakes in Selected Transactions (a)
(dollars in millions, except per share)
Consideration Per Share
------------------------
Announcement High Low %
Date Acquiror Target Vote Vote Premium
- ------------------------ -------------------------- --------------------------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Recapitalizations
09/30/93 Fischer & Porter Recapitalization $11.04 $8.63 28.0%
12/22/88 Bergen Brunswig Corp. Recapitalization 216.77 22.75 852.9%
-----------------------------------------------------
Mean 440.4%
-----------------------------------------------------
Competitive Acquisitions
11/15/88 The Merv Griffin Company Resorts International Inc. $135.00 $36.00 275.0%
04/21/86 CSX Sealand 33.44 28.00 19.4%
-----------------------------------------------------
Mean 147.2%
-----------------------------------------------------
Negotiated Acquisitions
11/27/95(b) Silver King Communications Home Shopping Network, Inc. $9.35 $8.50 10.0%
10/11/93(d) Bell Atlantic Tele-Communications, Inc. 33.00 30.00 10.0%
11/04/92(d) AT&T McCaw Cellular 53.44 42.00 27.2%
09/10/90 Premark International Inc. Sikes Corporation 26.78 16.40 63.3%
09/03/84 Trumps Pay 'n Save 25.00 23.50 6.4%
-----------------------------------------------------
Maximum 63.3%
Mean 23.4%
Median 10.0%
Minimum 6.4%
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Voting Interest Economic Interest
--------------- -----------------
Announcement High Low High Low
Date Acquiror Target Vote Vote Vote Vote
- ------------------------ -------------------------- --------------------------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Recapitalizations
09/30/93 Fischer & Porter Recapitalization 70.8% 29.2% 10.8% 89.2%
12/22/88 Bergen Brunswig Corp. Recapitalization 51.0% 49.0% 1.6% 98.4%
---------------------------------------------------------------
Mean
---------------------------------------------------------------
Competitive Acquisitions
11/15/88 The Merv Griffin Company Resorts International Inc. 57.0% 43.0% 11.7% 88.3%
04/21/86 CSX Sealand 39.2% 60.8% 39.2% 60.8%
---------------------------------------------------------------
Mean
---------------------------------------------------------------
Negotiated Acquisitions
11/27/95(b) Silver King Communications Home Shopping Network, Inc. 73.9% 26.1% 22.1% 77.9%
10/11/93(d) Bell Atlantic Tele-Communications, Inc. 62.3% 37.7% 14.2% 85.8%
11/04/92(d) AT&T McCaw Cellular 74.6% 25.4% 22.7% 77.3%
09/10/90 Premark International Inc. Sikes Corporation 51.0% 49.0% 7.5% 92.5%
09/03/84 Trumps Pay 'n Save 18.4% 81.6% 18.4% 81.6%
---------------------------------------------------------------
Maximum
Mean
Median
Minimum
---------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregate Premium Paid
to High Vote Stake
------------------------
Announcement As a % of Total Dollars
Date Acquiror Target Consideration (in mm)
- ------------------------ -------------------------- --------------------------- --------------- -------
<S> <C> <C> <C> <C>
Recapitalizations
09/30/93 Fischer & Porter Recapitalization 2.9% $1.4
12/22/88 Bergen Brunswig Corp. Recapitalization 11.6% 65.4
-----------------------------------------------------
Mean 7.3%
-----------------------------------------------------
Competitive Acquisitions
11/15/88 The Merv Griffin Company Resorts International Inc. 23.1% $70.6
04/21/86 CSX Sealand 7.1% 49.9
-----------------------------------------------------
Mean 15.1%
-----------------------------------------------------
Negotiated Acquisitions
11/27/95(b) Silver King Communications Home Shopping Network, Inc. 2.2%(c) $17.0
10/11/93(d) Bell Atlantic Tele-Communications, Inc. 1.4% 263.4
11/04/92(d) AT&T McCaw Cellular 5.8% 700.0
09/10/90 Premark International Inc. Sikes Corporation 4.5% 8.9
09/03/84 Trumps Pay 'n Save 1.2% 4.2
-----------------------------------------------------
Maximum 5.8%
Mean 3.0%
Median 2.2%
Minimum 1.2%
-----------------------------------------------------
</TABLE>
- ----------------------------
(a) This analysis takes into account solely the purchase price paid for the
equity interest in the target company and does not take into account any
value or detriment inherent in any strategic arrangements or other
agreements that may have been entered into in connection with the
transactions.
(b) Stock price of Silver King Communications on 11/22/95 (before the release of
any news reports on the pending acquisition) was used in calculating
consideration per share.
(c) Calculated on the basis of implied value for the whole company. If
calculated based on actual consideration paid only, the aggregate premium is
5.1%.
(d) Not consummated.
<PAGE>
Exhibit b(5)
GENERAL MOTORS CORPORATION
==============================================================================
==============================================================================
PRESENTATION TO THE BOARD OF DIRECTORS
CONCERNING THE SPLIT-OFF OF EDS
MARCH 31, 1996
MORGAN STANLEY & CO.
Incorporated LEHMAN BROTHERS
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Table of Contents
SECTION I INTRODUCTION
SECTION II BENEFITS/DETRIMENTS ANALYSIS
SECTION III EPS AND P/E MULTIPLES ANALYSES
SECTION IV DCF ANALYSES
SECTION V OPINIONS OF FINANCIAL ADVISORS
(2)
<PAGE>
==============================================================================
SECTION I
==============================================================================
(3)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Summary of Transaction
. Merger to accomplish a tax-free split-off of Electronic Data
Systems Holding Corporation
- Each share of Class E Common Stock to be converted into one share of EDS
Common Stock
- Shareholder Rights Plan ("pill") adopted
. Special Inter-Company Payment of $500MM
. New Master Services Agreement for an initial term of 10 years
. Separation Agreement and certain related agreements to address business,
benefits, insurance, legal, tax and regulatory issues resulting from the
Split-Off
(4)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Financial Advisors' Role and Fairness Opinion
. Morgan Stanley and Lehman Brothers were retained by the Board of General
Motors to act as financial advisors to EDS Team in connection with the
Split-Off Transactions
- Provided financial advice to EDS Team
- Providing fairness opinion to General Motors Board
. Fairness Opinion
- Based on and subject to the assumptions, limitations and other matters
described in the written opinion, the financial effect of the Split-Off
Transaction taken as a whole is fair, from a financial point of view, to
the holders of Class E Common Stock
(5)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Information Considered by Financial Advisors
. Reviewed information and documents (both public and non-public), including
- Historical and projected financial information of EDS
- Selected trading data for Class E Common Stock and the common stocks of
selected comparable companies
- Certain documents relating to the Split-Off: the Rights Plan Agreement;
the Registration Rights Agreement; the Certificate of Incorporation of
General Motors relating to the Class E Stock and of EDS relating to the
EDS Common Stock; draft Solicitation Statement; MSA Term Sheet; and the
IRS Private Letter Ruling
. Held discussions with management of EDS (and of General Motors, on selected
topics)
- EDS operations, financial condition, and plans
- Financial projections prepared by EDS management
- Benefits and detriments of the Split-Off Transactions to Class E
Stockholders
- Expected financial impact of the Split-Off
. Expected New Market Opportunities which would become available to EDS
after the Split-Off
. Potential Strategic Opportunities which would become available to EDS
after Split-Off
- Certain terms of the MSA and the Existing MSA/(1)/, the Separation
Agreement, the GM-PBGC Agreement and the impact thereof on EDS
(including the EDS/GM relationship)
Note: (1) The Financial Advisors have not reviewed the Master Services
Agreement or the related service agreements.
(6)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Methodologies Employed
. Financial Advisors performed analysis under various approaches. These
included:
- BENEFITS/DETRIMENTS APPROACH
. Assesses value range of each selected potential benefit and detriment
resulting from the Split-Off
- EPS APPROACH
. Pro forma actual and estimated earnings per share and price-to-
earnings multiple analyses
- Comparison of hypothetical non-Split-Off ("Base Case") earnings
per share with Split-Off earnings per share
- Application of assumed "Split-Off Case" multiples
- DISCOUNTED CASH FLOW APPROACH
. Comparison of consolidated EDS projected cash flows of hypothetical
Base Case with "Split-Off Case"
(7)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Principal Assumptions or Bases of Opinion
In connection with our opinion, we assumed or relied upon, among other things,
the following:
. Financial projections prepared by EDS management including two principal
cases
- Assuming a Split-Off ("Split-Off Case")
- Assuming no Split-Off
. EDS Management's view of the financial impact of the changes to the MSA
which would have been made even in the absence of a Split-Off ("Base Case")
. EDS Management's view of the financial impact of New Market Opportunities
which could become available to EDS after a Split-Off as included in the
projections
. EDS Management's view of the value of New Strategic Opportunities
associated with the Split-Off
. Split-Off will be tax free pursuant to IRS ruling
. No recapitalization would have been undertaken by GM to trigger the 120%
redemption provision
. No net payments to be made by EDS under the Separation Agreement (assuming
no contingent liabilities)
. In addition, we performed our analyses on the basis that, following the
split-off, the EDS Common Stock will be included in the S&P 500 Index,
which we believe is very likely
(8)
<PAGE>
==============================================================================
SECTION II
==============================================================================
(9)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Benefits/Detriments Approach: Summary of Selected Potential
Benefits and Detriments
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
POTENTIAL SPLIT-OFF BENEFITS POTENTIAL SPLIT-OFF DETRIMENTS
TO CLASS E STOCKHOLDERS TO CLASS E STOCKHOLDERS
- ------------------------------------------------------------------------------------
<S> <C>
. Derivative Stock Differential . New MSA with defined term, revised
payment terms and economics/(2)/
. New Market Opportunities (Automotive,
Capital Services, Aerospace) . GM non-MIS business
. Inclusion in the S&P 500/(1)/ . Special Intercompany Payment to GM
. New Strategic Opportunities . Give up 20% redemption premium
. Opportunity to receive full takeover . Transaction costs
premium
. More flexible access to capital markets
and potentially lower cost of capital
. Reduction of obligations under
Separation Agreement and certain related
agreements
</TABLE>
Notes: (1) There is no guarantee that EDS will be included in the S&P 500 post-
Split-Off; however, the Financial Advisors believe inclusion is very
likely.
(2) Hypothetical starting point used for analysis, viz. assumes
significant changes in MSA absent the Split-Off Transaction.
(10)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Benefits/Detriments Approach: Summary Valuation Ranges
<TABLE>
<CAPTION>
MOST MOST
SELECTED BENEFITS ADVERSE FAVORABLE
- ----------------- ------------- ---------
($ millions)
<S> <C> <C>
Derivative Stock Differential $ 0 - $ 172
New Market Opportunities/(1)/ 769 - 1,121
Inclusion in S&P 500 417 - 695
Separation Agreement/(2)/ 40 - 50
-------- --------
Subtotal - Selected Benefits $ 1,226 - $ 2,038
-------- --------
SELECTED DETRIMENTS
- -------------------
New MSA/(1)/ $ (654) - $ (517)
Non-MIS GM Business/(1)/ (167) - (133)
Inter-Company Payment (500) - (500)
Transaction Costs (38) - (25)
-------- --------
Subtotal - Selected Detriments $(1,359) - $(1,175)
-------- --------
Total - Net Benefits/(Detriments) $ (133) - $ 863
======== ========
NEW STRATEGIC OPPORTUNITIES ....AT LEAST $500....
</TABLE>
Note: (1) Based on 11%-13% range of discount rates. Table reflects the most
adverse and most favorable cases.
(2) Assumed reduction of obligations under the Separation Agreement
currently valued at $40MM ; GM has agreed to fund up to $10MM NPV of
additional separation costs over the next two years.
(11)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Derivative Stock Differential (DSD)
(continued)
. The value of EDS Common Stock may exceed the value of Class E Stock due to
enhanced rights
<TABLE>
<CAPTION>
CLASS E STOCK EDS CAPITAL STOCK
- ---------------------------------------------------------------------------------------
<S> <C>
. Right to dividends from EDS separate . Right to dividends from EDS earnings
consolidated net income and surplus
. Vote with GM stockholders on corporate . Vote directly on EDS corporate matters
matters (reduced vote) (election of EDS Board)
- Separate class vote on matters adverse
to class
. Liquidation rights on GM as a whole
(including EDS and Hughes assets) . Liquidation value of EDS
- Potential for dividend entrapment
. 20% redemption premium . No redemption feature/entire control
premium
- ---------------------------------------------------------------------------------------
</TABLE>
(12)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Derivative Stock Differential (DSD)
(continued)
. Financial Advisors estimated DSD employing selected analyses and precedents
relating to voting, liquidation and redemption rights
. DSD discount range estimated between 0% - 0.75% of EDS market value
. DSD discount assessed at $0-$172 million/(1)/
Note: (1) Based on 484.3MM shares outstanding and a market price of $57
(closing price 3/29/96). The market capitalization equals $27.6
billion; at an implied 0.75% discount, the DSD would be $209
million. Further adjusted for rights held by Class E stockholders in
GM $1-2/3 and Class H stocks (adjustment reduces upper end of DSD
value by $37 million).
(13)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
New Market Opportunities
. EDS management identified new market opportunities which are not currently
available to it because of its affiliation with GM and Hughes in three
areas:
- Automotive
- Commercial finance (due to GMAC)
- Aerospace/defense
. EDS management provided Financial Advisors with ten-year forecasts which
quantify the earnings and cash flow impact achievable from these
opportunities
. Net present value of these probability-weighted cash flows was calculated
by the Financial Advisors to be in the $769 million to $1,121 million
range/(1)/
Note: (1) Assumes discount rates of 11%-13% and terminal value P/E multiples
of 25x - 29x applied to 2005 net income.
(14)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
S&P 500 Inclusion
. Financial Advisors believe it is very likely that EDS will be included in
the S&P 500 Index and performed their analyses on that basis
. Currently, GM Class E is by far the largest security (by market
capitalization) not included in Index and if included would be ranked in
the top 50 companies by market capitalization
. Criteria that currently appear to be forestalling inclusion:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
CRITERIA IMPACT OF SPLIT-OFF
- ------------------------------------------------------------------------------
<S> <C>
. Subsidiary status . Resolved
. Trading liquidity . Will slightly improve
. Percent holdings of largest shareholder . Will improve with future offerings
- -----------------------------------------------------------------------------------
</TABLE>
. EDS has been informed by S&P that the principal impediment to Index
inclusion is EDS' subsidiary status
. Median sustainable price impact of S&P 500 Index inclusions (since January
1993) is 2.1% (day before S&P announcement to one month after inclusion)
. Financial Advisors believe range of sustainable impact is $417 - $695
million (1.5% - 2.5% of EDS' market capitalization)/(1)/
Note: (1) After first adjusting for the Derivative Stock Differential
discount.
(15)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
New Master Services Agreement
<TABLE>
<CAPTION>
"BASE CASE" "SPLIT-OFF CASE"
NON-SPLIT-OFF WITH HYPOTHETICAL SPLIT-OFF WITH CHANGES
CHANGES TO THE MSA/(1)/ NEGOTIATED TO THE MSA/(2)/
------------------------------------------------------------------
<S> <C> <C>
MSA IMPACT ONLY
1. Term Perpetual 16.5 yrs with 2.4-year "tail"
2. Service Agreement Margins Slightly reduced from current Reduced further
3. Market Testing Resourcing None New standard
4. Resale of Structural Cost Resell - 100% Resell - 50%
Reduction
5. UPR Rates Weighted historic and reduced rate Reduced rates
6. Plant Floor - incremental None Included in scope
7. Payment Terms Weighted probability of extension Lengthened term
8. Service Agreements No change from existing contract Extended
</TABLE>
Notes: (1) Weighted average of two scenarios developed by EDS management with
assumptions ranging from more to less optimistic across the
respective scenarios, probability-weighted at 60% and 40%,
respectively.
(2) Weighted average of three scenarios developed by EDS management
with assumptions ranging from more to less optimistic across the
respective scenarios probability-weighted at 40%, 50% and 10%,
respectively.
(16)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
New Master Services Agreement
(continued)
The table below summarizes the NPV difference between the hypothetical MSA which
would have been implemented in the absence of a split-off/(1)/ ("Base Case") and
the weighted average composite scenario/(2)/ reflecting the terms of the new MSA
("Split-Off Case").
<TABLE>
<CAPTION>
("BASE CASE" MINUS "SPLIT-OFF CASE" NPV VARIANCE)
--------------------------------------------------
MSA CONTRACT NON-MIS
--------------------------------------------------
($ millions) ($ millions)
<S> <C> <C>
DISCOUNT RATES
11% ($654) ($167)
12% (578) (149)
13% (517) (133)
</TABLE>
Notes: (1) Based on a weighted average of two scenarios, developed by EDS
management with assumptions ranging from more to less optimistic,
probability-weighted at 60% and 40% respectively.
(2) Based on weighted average of three scenarios, developed by EDS
management with assumptions ranging from more to less optimistic,
probability-weighted at 40%, 50%, and 10% respectively.
(17)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Summary Benefits/Detriments Approach
<TABLE>
<CAPTION>
MOST MOST
ADVERSE FAVORABLE
------------- -----------
($ millions)
SELECTED BENEFITS
- -----------------
<S> <C> <C>
Derivative Stock Differential $ 0 $ 172
New Market Opportunities/(1)/ 769 1,121
Inclusion in S&P 500 417 695
Separation Agreement/(2)/ 40 50
-------- --------
Subtotal - Selected Benefits $ 1,226 $ 2,038
-------- --------
SELECTED DETRIMENTS
- -------------------
New MSA/(1)/ $ (654) $ (517)
Non-MIS GM Business/(1)/ (167) (133)
Inter-Company Payment (500) (500)
Transaction Costs (38) (25)
-------- --------
Subtotal - Selected Detriments (1,359) (1,175)
-------- --------
Total - Net Benefits/(Detriments) $ (133) $ 863
======== ========
NEW STRATEGIC OPPORTUNITIES ....AT LEAST $500....
</TABLE>
. Additional factors which add value but could not be quantified by the
financial advisors include:
- Greater flexibility in accessing capital markets and potentially reduced
cost of capital
- Potential ability of EDS shareholders to realize a takeover premium in a
change of control transaction
Notes: (1) Based on 11%-13% range of discount rates. Table reflects the most
adverse and most favorable cases.
(2) Assumed reduction of obligations under the Separation Agreement
currently valued at $40MM; GM has agreed to fund up to $10MM of NPV
of additional separation costs over the next two years.
(18)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
New Strategic Opportunities
. New strategic opportunities represent the value to stockholders which
results from EDS' enhanced ability to consummate large strategic alliances
as a result of the split-off
. Potential realizable benefits include
- REDUCTION of overhead
- OPERATIONAL cost savings
- CROSS-SELLING of product/service offerings
- NEW IT contracts
- DEVELOPMENT of new products or services
. EDS management estimates the incremental value of new strategic
opportunities to be at least $500MM
(19)
<PAGE>
==============================================================================
SECTION III
==============================================================================
(20)
<PAGE>
GENERAL MOTORS CORPORATION
==============================================================================
Consolidated Company Methodologies
. EPS and Multiples Approaches
. Discounted Cash Flow Approach
. Analyses compare management projections assuming non-Split-Off scenario
("Base Case") and Split-Off scenario ("Split-Off Case")
(21)
<PAGE>
GENERAL MOTORS CORPORATION
===============================================================================
Underlying Financial Assumptions for DCF and EPS Approaches
<TABLE>
<CAPTION>
"BASE CASE" "SPLIT-OFF CASE"
NON-SPLIT-OFF SPLIT-OFF WITH CHANGES
WITH HYPOTHETICAL CHANGES/(1)/ NEGOTIATED TO THE MSA/(2)/
-------------------------------- ----------------------------
<S> <C> <C>
MSA IMPACT ONLY
1. Term Perpetual 16.5 years with 2.4-year "tail"
2. Service Agreement Margins Slightly reduced from current Reduced further
3. Market Testing Resourcing None New standard
4. Resale of Structural
Cost Reduction Resell--100% Resell--50%
5. UPR Rates Weighted historic and reduced rate Reduced rates
6. Plant Floor - incremental None Included in scope
7. Payment Terms Weighted probability of extension Lengthened term
8. Service Agreements No change from existing contract Extended
OTHER GM BUSINESS AND BASE BUSINESS
1. GM Non-MIS Slightly reduced from current Reduced
2. Base Business Assumptions Same as Split-Off Case Same as non-Split-Off Case
3. Non-Recurring Charge/(3)/ Yes Yes
4. Special Inter-Company
Payment Not applicable Yes
5. New Market Opportunities Not applicable Yes
6. Incremental Efficiencies Included Included
7. New Strategic
Opportunities Not applicable Not modeled
Notes: (1) Based on weighted average composite of two financial cases
developed by EDS management.
(2) Based on weighted average composite of three financial cases
developed by EDS management.
(3) Excluded from pro forma EPS data.
(22)
</TABLE>
<PAGE>
GENERAL MOTORS CORPORATION
================================================================================
EPS and Multiples Approach
. Consolidated financial projections provided by EDS Management were used to
develop EPS for 1996 and 1997 on a per share basis
. EDS Management developed pro forma 1995 EPS data and pro forma projected
1996 EPS data assuming the Split-Off occurred at the beginning of each year
. EPS data exclude the impact of a potential non-recurring charge
. Compared EPS data assuming no Split-Off (with hypothetical changes to MSA)
("Base Case") to pro forma EPS data assuming the Split-Off ("Split-Off
Case")
. Reviewed historical and estimated GME and comparable company P/E multiples
and applied these multiples to: (i) "Base Case" EPS data and (ii) "Split-
Off Case" EPS data.
. Calculated the expanded P/E multiple necessary to maintain the current GME
share price utilizing pro forma EPS data
. Because New Strategic Opportunities are not included in the management
projections, EPS approach does not separately consider the EPS impact and
therefore the value of New Strategic Opportunities
(23)
<PAGE>
<TABLE>
<CAPTION>
GENERAL MOTORS CORPORATION
- -----------------------------------------------------------------------------------------------------------------------------------
Comparable Company: Multiples Considered
MARKET VALUE AS A MULTIPLE ENTERPRISE VALUE AS A
CURRENT OF NET INCOME/(2)/ MULTIPLE OF 1995/(3)/
STOCK ------------------------------------------- -----------------------------
PRICE/(1)/ LTM 1996E 1997E EBIT EBITDA
------------------ ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Automatic Data Processing Corp. $39.375 26.4x 23.0x 20.0x 18.0x 13.7x
Computer Sciences Corp. 70.375 29.1 25.5 21.6 17.9 9.3
First Data Corporation/(4)/ 70.500 36.6 25.8 21.0 19.6 14.7
----------------------------------------------------------------------------------------------------------------------
| Mean 30.7x 24.8x 20.9x 18.5x 12.5x |
| |
| Median 29.1 25.5 21.0 18.0 13.7 |
----------------------------------------------------------------------------------------------------------------------
GM Class E/(5)/ $57.000 29.1x 25.2x 21.8x 19.0x 11.0x
Notes: (1) Closing stock prices as of March 29, 1996.
(2) Based on I/B/E/S earnings estimates as of March 23, 1996 and market values calculated based on March 29, 1996 closing
stock prices.
(3) Based on LTM publicly available financial data.
(4) Incorporates pro forma adjustments for acquisition of First Financial Management.
(5) Forward multiples based on I/B/E/S median EPS estimates of $2.26 and $2.61 for 1996 and 1997, respectively.
</TABLE>
(24)
<PAGE>
GENERAL MOTORS CORPORATION
- -------------------------------------------------------------------------------
Value Implication of EPS Impact of the Split-Off
. Comparing the Base Case and Split-Off Case in 1995 and 1996 (pro forma for a
full-year effect) the Split-Off would result in a decrease in earnings per
share of $0.10 in each year
. If current EPS multiples remain unchanged, this would imply a value decline
in the range of approximately $2.60-$3.00 per share; however, we believe it
is likely that after the Split-Off, there would be an increase in earnings
multiples reflecting elimination of the DSD, inclusion in the S&P 500 and
additional growth due to new market and strategic opportunities
. The figures below reflect the increase in earnings multiples which would have
to be achieved to maintain pre-split-off value ("expanded multiples")
<TABLE>
<CAPTION>
CURRENT STOCK PRICE IMPLIED EARNINGS MULTIPLES
- -----------------------------------------------------------------------------------------------------
1995 1996
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
PROFORMA PROFORMA
STOCK PRICE PROFORMA "SPLIT-OFF PROFORMA "SPLIT-OFF
(3/29/96) "BASE CASE" CASE" "BASE CASE" CASE"
- ------------------- ------------------- ------------------ ------------------- ------------------
$57.000 29.8x 31.5x 25.7x 26.9x
</TABLE>
(25)
<PAGE>
GENERAL MOTORS CORPORATION
- --------------------------------------------------------------------------------
EPS Impact of Split-Off as Compared to Street Analyst Projections
. The Split-Off would result in EDS reporting $0.11 and $0.13 per share lower
1996 and 1997 earnings than research analysts/(1)/ currently anticipate
. The figures below reflect the increase in earnings multiples which would have
to be achieved to maintain the current stock price ("expanded multiples")
- If multiples do not change, this would imply a value decline in the range of
approximately $2.70-$2.90 per share
<TABLE>
<CAPTION>
1996 1997
--------------------------- --------------------------
STOCK PRICE ANALYST "SPLIT-OFF ANALYST "SPLIT-OFF
(3/29/96) CONSENSUS CASE" CONSENSUS CASE"
- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
$57.000 25.2x 26.5x 21.8x 23.0x
</TABLE>
Note: (1) March 23 I/B/E/S median 1996 estimate of $2.26 and median 1997
estimate of $2.61.
(26)
<PAGE>
GENERAL MOTORS CORPORATION
- --------------------------------------------------------------------------------
P/E Multiple Considerations
. P/E multiple expansion may potentially be derived from four sources
- Elimination of the DSD
- Inclusion in the S&P 500
- An enhanced growth rate from New Market Opportunities
- An enhanced growth rate from New Strategic Opportunities
. Some of these factors may already be incorporated in the stock price and,
therefore, the current multiple may reflect many of these factors
(27)
<PAGE>
==============================================================================
SECTION IV
==============================================================================
(28)
<PAGE>
GENERAL MOTORS CORPORATION
- --------------------------------------------------------------------------------
Consolidated Company DCF Approach
. Utilizing 10-year probability adjusted financial projections developed by EDS
Management, the Financial Advisors calculated a net present value of the free
cash flows
. Free cash flows defined as the sum of (i) net income, (ii) after-tax interest
expense and (iii) non-cash expenses, less (i) capital expenditures including
certain other long-term assets, (ii) increases in working capital, and (iii)
changes in certain other assets and liabilities
. Split-Off projections include New Market Opportunities
. Terminal value multiples of 25x-29x applied to 2005 net income to assess
terminal values
. Free cash flows and terminal values were discounted using a discount range of
11% to 13% based on weighted average cost of capital models
. Projections do not include (and therefore DCF approach does not separately
consider) the cash flow contribution of the New Strategic Opportunities
(29)
<PAGE>
GENERAL MOTORS CORPORATION
- --------------------------------------------------------------------------------
Summary: Consolidated Company DCF Valuation Analysis
. The present value of cash flows under the Split-Off case is approximately
$0.8Bn to $0.9Bn less than under the Base Case, employing the same discount
rate and terminal multiple across scenarios
. The above range may overstate the actual differential
- Analysis does not include New Strategic Opportunities in the Split-Off Case
- Certain valuation discrepancies arise from differences between Discounted
Cash Flow and Benefits/Detriments methodologies
- Does not reflect benefit of potential multiple expansion from elimination
of DSD and inclusion in S&P 500 index
. If the terminal multiple applied to the Split-Off Case were one point higher
than that applied to the Base, the value of the Split-Off case would increase
by approximately $1.0Bn to $1.2Bn at the range of discount rates utilized
(30)
<PAGE>
==============================================================================
SECTION V
==============================================================================
(31)
<PAGE>
Form of Morgan Stanley Fairness Opinion
March 31, 1996
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202
Attention: Board of Directors
Members of the Board:
We understand that the Board of Directors (the "General Motors Board") of
General Motors Corporation ("General Motors") is considering a tax-free split-
off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic
Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split-Off
will be accomplished through a merger (the "Merger") of GM Mergeco Corporation
("Mergeco") with and into General Motors pursuant to the proposed Agreement and
Plan of Merger to be entered into between General Motors and Mergeco (the
"Merger Agreement"), with General Motors as the surviving corporation in the
Merger. Mergeco is an indirectly wholly owned subsidiary of EDS organized for
the purpose of effecting the Split-Off. In the Merger, each outstanding share of
Class E Common Stock, $.10 par value per share, of General Motors ("Class E
Common Stock") will be converted into one share of EDS common stock, $0.01 par
value per share (the "EDS Common Stock"). There will be attached to each share
of EDS Common Stock a purchase right for EDS Series A Junior Participating
Preferred Stock. As a result of the Split-Off, EDS will become an independent,
publicly held company, holders of the Class E Common Stock will become
stockholders of EDS rather than of General Motors, and the Class E Common Stock
will cease to exist. The terms and conditions of the proposed Split-Off
<PAGE>
General Motors Corporation
March 31, 1996
Page 2
are set forth in more detail in the draft, dated March 27, 1996, of the joint
Solicitation Statement/Prospectus of General Motors and EDS (the "Statement").
Immediately prior to and as a condition of the consummation of the Merger,
EDS will contribute to Mergeco $500 million in cash (the "Special Inter-Company
Payment"). As a result of the Merger, all of the assets of Mergeco, which will
consist entirely of the cash contributed by EDS, will become assets of General
Motors. Immediately before the Merger, General Motors and EDS will enter into a
new master services agreement (the "Master Services Agreement") pursuant to
which EDS will continue to serve as General Motors' principal supplier of
information technology services for an initial term of ten years following the
Split-Off which may be extended by agreement of the parties. The information
technology and other services to be provided by EDS under the Master Services
Agreement will generally be similar to those provided to General Motors under an
existing master agreement between General Motors and EDS (the "Existing Master
Services Agreement"). However, the Master Services Agreement will reflect
certain significant changes to the pricing and terms under which such services
are to be provided by EDS. Additionally, General Motors and EDS will enter into
a Separation Agreement and certain related agreements, including a Tax
Allocation Agreement (collectively, the "Separation Agreement"), establishing
certain arrangements between General Motors and EDS deemed necessary by General
Motors and EDS in order to address various business, legal and regulatory issues
resulting from the Split-Off. The Merger and the related transactions, including
the Special Inter-Company Payment, the Split-Off Changes (as defined below)
effected pursuant to the execution and delivery of the Master Services Agreement
and the execution and delivery of the Separation Agreement are collectively
referred to as the "Split-Off Transactions".
We have been engaged by General Motors to act as financial advisor to a
team appointed by the General Motors Board (the "E Team") which has been charged
with negotiating the terms and conditions of the proposed Split-Off from the
perspective of the holders of the Class E Common Stock. We have been requested
to render to the General Motors Board our opinion with respect to the fairness,
from a financial point of view, to the holders of Class E Common Stock, of the
financial effect of the Split-Off Transactions taken as a whole and in
connection with such opinion to provide our financial advice to General Motors
and its Board of Directors. We have not been requested to opine as to, and our
opinion does not in any manner address, General Motors'
<PAGE>
General Motors Corporation
March 31, 1996
Page 3
or EDS' underlying business decision to proceed with or effect the proposed
Split-Off Transactions.
In arriving at our opinion, we reviewed, among other things, (1) historical
financial statements of EDS and certain other historical financial and operating
data of EDS, (2) historical financial statements of General Motors, (3) certain
publicly available information with respect to EDS and General Motors, (4)
certain projected financial data with respect to EDS, both with and without
giving effect to the Split-Off, prepared by EDS management, (5) reported prices
and trading activity for the Class E Common Stock, (6) drafts of the Statement,
(7) the terms of the Class E Common Stock as set forth in General Motors'
certificate of incorporation as currently in effect, (8) the terms of the EDS
Common Stock as set forth in EDS' certificate of incorporation as currently in
effect, (9) the private letter ruling received by General Motors from the IRS
with respect to the tax-free nature of the Split-Off, (10) a summary of terms
for the Master Services Agreement provided to the General Motors Board in
connection with its March 31, 1996 meeting, (11) the Registration Rights
Agreement, dated March 12, 1995 between General Motors and the Trustees of the
General Motors Hourly Plan Pension Trust and (12) the Shareholder Rights
Agreement between EDS and Bank of New York dated as of March 12, 1996. In
addition, we have held discussions with management of EDS, and in certain cases
management of General Motors, with respect to, among other things, (1) the
operations and financial condition of EDS and the plans of EDS management with
respect to the business and affairs of EDS both prior to and after the
Split-Off, (2) the projected financial data for EDS prepared by EDS management,
(3) the benefits and detriments to EDS of ownership by General Motors, (4) the
expected impact of the Split-Off Transactions on EDS' operations and the
financial and strategic flexibility of EDS, and the new business opportunities
available to EDS, after the Split-Off, (5) certain terms of (A) the Agreement,
dated March 3, 1995, between General Motors and the Pension Benefit Guaranty
Corporation (the "GM-PBGC Agreement"), (B) the Existing Master Services
Agreement and the proposed Master Services Agreement, and certain other
information technology services agreements to be entered into in connection with
the Master Services Agreement, and (C) the proposed Separation Agreement, and
(6) the effect of the Master Services Agreement (including the related changes
to the terms of the underlying services agreements, and certain other
information technology services agreements to be entered into in connection
with the Master Services Agreement, to the extent that they relate to the
financial effect of the Master Services Agreement as projected by EDS
management) and the Separation
<PAGE>
General Motors Corporation
March 31, 1996
Page 4
Agreement on the business, results of operations and financial condition of EDS
and on the business relationship between General Motors and EDS (including, but
not limited to, their relationship as customer and vendor, respectively). In
addition, we undertook such other studies, analyses and investigations as we
deemed appropriate for purposes of rendering our opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information used by us
without assuming any responsibility for independent verification of such
information and have further relied upon the assurances of management of EDS and
General Motors that they are not aware of any facts that would make such
information inaccurate or misleading. With respect to the projected financial
data of EDS prepared by EDS management (which reflect, among other things, with
respect to periods following the Split-Off, estimates of the expected value of
certain benefits to be derived by EDS from the Split-Off), upon the advice of
EDS management and with your consent we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of EDS management as to the expected future prospects
and financial performance of EDS, and we have relied on such projections in
rendering our opinion. With respect to the estimates prepared by EDS management
of the value of certain benefits and detriments of the Split-Off to EDS, with
your consent, we have relied on such estimates and assumed that they were
reasonably prepared and reflected the best currently available judgments of EDS
management as to such benefits and detriments. We also took into account and
considered your determination, as described in the Statement, that a split-off
of EDS would be proposed only in a transaction that would not result in the
recapitalization of shares of Class E Common Stock into Common Stock, $1-2/3 par
value, of General Motors at a 120% exchange ratio as provided for under certain
circumstances under the terms of General Motors' certificate of incorporation.
Furthermore, we believe that following the Split-Off, the EDS Common Stock would
very likely be included in the Standard and Poor's 500 Index, and we have
rendered our opinion on that basis. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of EDS and have
not made or obtained any evaluations or appraisals of the assets or liabilities
of EDS. You have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the purchase of all
or a part of EDS, its business or the Class E Common Stock. We have not been
asked to, and we do not, express an opinion as to the prices at which EDS
Common Stock will actually trade
<PAGE>
General Motors Corporation
March 31, 1996
Page 5
following the Merger and we can provide no assurance that the trading price of a
share of EDS Common Stock following the Split-Off will be equal to or in excess
of the trading price of a share of Class E Common Stock prior to the Split-Off.
Our opinion necessarily is based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this letter.
In connection with the review of the financial effect on EDS of the Master
Services Agreement, both EDS management and General Motors management advised us
that certain changes would have been made to the Existing Master Services
Agreement commencing in 1996 even in the absence of the Split-Off. EDS
management identified to us those changes that EDS management believed would
have been made to the Existing Master Services Agreement commencing in 1996 even
in the absence of the Split-Off, the financial effect of which, as projected by
EDS management, would begin to impact EDS in 1996 and continue over time. The
changes to the Existing Master Services Agreement which would have been made in
the absence of the Split-Off are referred to herein as the "Base Changes." Under
different base cases identified by EDS management, the Base Changes assumed to
occur vary to the extent they reflect different assumptions regarding certain
rate reductions and changes in payment terms. General Motors management advised
us that General Motors management believed that changes that differ from or are
in addition to the Base Changes identified by EDS management, which changes,
taken as a whole, would have been more favorable to General Motors and less
favorable to EDS than the Base Changes identified by EDS management, would have
been made to the Existing Master Services Agreement even in the absence of the
Split-Off. No assurances can be given as to exactly which changes to the
Existing Master Services Agreement would have been implemented absent the Split-
Off or which changes might be implemented in the future if the Split-Off is not
consummated.
In considering the fairness, from a financial point of view, to holders of
Class E Common Stock of the financial effect of the Split-Off Transactions
taken as a whole, we have considered, among other things, (1) the $500 million
Special Inter-Company Payment which was recommended to the General Motors Board
by the Capital Stock Committee on March 22, 1996 and is proposed to be approved
as of the date hereof in connection with the Split-Off Transactions, (2) the
allowance of $50 million provided to EDS under the Separation Agreement (and in
rendering our opinion, with your consent, we assumed that a substantial amount
of such allowance will be used for
<PAGE>
General Motors Corporation
March 31, 1996
Page 6
the benefit of EDS under the Separation Agreement), (3) that EDS management has
estimated that, as a result of the allowance identified in the immediately
preceding clause, there will be no net payments made by EDS to General Motors
under the terms of the Separation Agreement (other than payments, if any, to be
made under the provisions thereof with respect to indemnification obligations or
the allocation of contingent liabilities, to which we gave no effect in
rendering this opinion), (4) the financial effect on EDS, as projected by EDS
management, of the changes other than the Base Changes (such changes being
referred to herein as the "Split-Off Changes") effected pursuant to the Master
Services Agreement, (5) the financial effect, as projected by EDS management, of
projected declines following the Split-Off in sales of certain goods and
services provided by EDS to General Motors and its affiliates other than under
the Existing Master Services Agreement or the Master Services Agreement, as the
case may be, (6) transaction costs, estimated by EDS management and (7) certain
estimated benefits of the Split-Off to EDS or holders of Class E Common Stock,
including (A) the Derivative Stock Differential (as defined in the Statement),
(B) the value of the inclusion of the EDS Common Stock in the Standard & Poor's
500 Index, (C) the value to EDS of the removal of certain limitations on EDS'
ability to participate in major strategic alliances (including among others,
mergers and acquisitions which can be effected using EDS Common Stock), which
was estimated by EDS management to be at least $500 million and (D) the present
value to EDS of projected new business growth and customer relationships, which
was estimated by EDS management. Accordingly, to the extent described herein, we
took into account and considered certain benefits as estimated by EDS management
that may be realized by EDS as a result of the opportunity to pursue the
business purposes of the Split-Off.
At the request of the E Team, and with your consent, we have assumed that
the Base Changes would have been made to the Existing Master Services Agreement
in 1996 even in the absence of the Split-Off (or any other change in the nature
of General Motors' ownership of EDS), and that the financial effect thereof
would begin in 1996 and continue over time as reflected in the projections
prepared by EDS management and therefore, in performing our analyses in
connection with rendering this opinion, at the request of the E Team and with
your consent, we did not address, and gave no effect to, the financial effect on
EDS or holders of Class E Common Stock of the Base Changes effected pursuant to
the Master Services Agreement. Based on information regarding the historical
financial and operating results of EDS and discussions with EDS management, if
neither the Base Changes nor any other significant
<PAGE>
General Motors Corporation
March 31, 1996
Page 7
modifications to the terms of the Existing Master Services Agreement would have
been made in the absence of a Split-Off, then the decrement in the present value
of cash flows attributable to goods and services projected by EDS management to
be provided to General Motors and its affiliates in accordance with the terms of
the Existing Master Services Agreement (both under analyses performed on a
consolidated company basis for EDS (including goods and services provided to
General Motors and its affiliates and to all other customers) and under analyses
performed on a basis reflecting only goods and services provided to General
Motors and affiliates under the terms of the Existing Master Services Agreement)
resulting from changes to the Existing Master Services Agreement arising as a
result of the Split-Off would have been significantly larger than under the
analyses we have conducted. At the request of the E Team and with your consent,
we did not consider, and gave no effect to, contingent liabilities or
indemnification obligations of EDS arising under the Separation Agreement or
otherwise in connection with the Split-Off. At the request of the E Team, upon
the advice of General Motors management and its legal and accounting advisors,
and with your consent, we also assumed that the proposed Merger would be tax
free to the holders of Class E Common Stock receiving EDS Common Stock in the
Merger and that the Unconditional Releases under the GM-PBGC Agreement would
become effective as of the effectiveness of the Merger.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, the financial effect of the Split-Off Transactions taken as
a whole is fair, from a financial point of view, to the holders of Class E
Common Stock.
We have been engaged by General Motors to act as financial advisor to the E
Team in connection with the Split-Off. We have been advised by you that it is
intended that our fee will be paid by EDS. A significant portion of our fee is
contingent on consummation of the Split-Off. In addition, General Motors has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. In addition, certain senior personnel providing
financial advice to the E Team and involved in rendering this opinion
represented General Motors in connection with its acquisition of EDS and the
related creation and issuance of the Class E Common Stock. In March 1996, two of
the senior investment bankers actively involved in the transaction for Lehman
Brothers in its capacity as financial advisor to the E Team joined Morgan
Stanley, at which time Morgan Stanley also began advising the E Team. Since such
time as Morgan Stanley also began acting in this capacity, it and Lehman
Brothers have
<PAGE>
General Motors Corporation
March 31, 1996
Page 8
performed their services in cooperation, both relying to a significant degree on
the work performed by the same individuals. However, we have performed our own
independent internal review and analysis in arriving at this opinion.
In the ordinary course of our business, we actively trade in the debt and
equity securities of General Motors, including the Class E Common Stock, for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of
General Motors, the Capital Stock Committee of the Board of Directors of General
Motors, the E Team and the Board of Directors of EDS and is rendered to the
General Motors Board in connection with its consideration of the Split-Off
Transactions. This opinion is not intended to be and does not constitute a
recommendation to any holder of Class E Common Stock, or any other class of
capital stock of General Motors, as to whether such stockholder should consent
to the Transactions (as defined in the Statement).
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
By: _________________________________
Managing Director
<PAGE>
LEHMAN BROTHERS
March 31, 1996
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202
Attention: Board of Directors
Members of the Board:
We understand that the Board of Directors (the "General Motors Board") of
General Motors Corporation ("General Motors") is considering a tax-free
split-off (the "Split-Off") of General Motors' wholly owned subsidiary,
Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"). The
Split-Off will be accomplished through a merger (the "Merger") of GM Mergeco
Corporation ("Mergeco") with and into General Motors pursuant to the proposed
Agreement and Plan of Merger to be entered into between General Motors and
Mergeco (the "Merger Agreement"), with General Motors as the surviving
corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of
EDS organized for the purpose of effecting the Split-Off. In the Merger, each
outstanding share of Class E Common Stock, $0.10 par value per share, of General
Motors ("Class E Common Stock") will be converted into one share of EDS common
stock, $0.01 par value per share (the "EDS Common Stock"). There will be
attached to each share of EDS Common Stock a purchase right for EDS Series A
Junior Participating Preferred Stock. As a result of the Split-Off, EDS will
become an independent, publicly held company, holders of the Class E Common
Stock will become stockholders of EDS rather than of General Motors, and the
Class E Common Stock will cease to exist. The terms and conditions of the
proposed Split-Off are set forth in more detail in the draft, dated March 27,
1996, of the joint Solicitation Statement/Prospectus of General Motors and EDS
(the "Statement").
Immediately prior to and as a condition of the consummation of the Merger,
EDS will contribute to Mergeco $500 million in cash (the "Special Inter-Company
Payment"). As a result of the Merger, all of the assets of Mergeco, which will
consist entirely of the cash contributed by EDS, will become assets of General
Motors. Immediately before the Merger, General Motors and EDS will enter into a
new master services agreement (the "Master Services Agreement") pursuant to
which EDS will continue to serve as General Motors' principal supplier of
information technology services for an initial term of ten years following the
Split-Off, which may be extended by agreement of the parties. The information
technology and other services to be provided by EDS under the Master Services
Agreement will generally be similar to those provided to General Motors under an
existing master agreement between General Motors and EDS (the "Existing Master
Services Agreement"). However, the Master Services Agreement will reflect
certain significant changes to the pricing and terms under which such services
are to
LEHMAN BROTHERS INC
3 WORLD FINANCIAL CENTER NEW YORK, NY 10285-1000
<PAGE>
General Motors Corporation
March 31, 1996
Page 2
be provided by EDS. Additionally, General Motors and EDS will enter into a
Separation Agreement and certain related agreements, including a Tax Allocation
Agreement (collectively, the "Separation Agreement"), establishing certain
arrangements between General Motors and EDS deemed necessary by General Motors
and EDS in order to address various business, legal and regulatory issues
resulting from the Split-Off. The Merger and the related transactions, including
the Special Inter-Company Payment, the Split-Off Changes (as defined below)
effected pursuant to the execution and delivery of the Master Services Agreement
and the execution and delivery of the Separation Agreement are collectively
referred to as the "Split-Off Transactions".
We have been engaged by General Motors to act as financial advisor to a
team appointed by the General Motors Board (the "E Team") which has been charged
with negotiating the terms and conditions of the proposed Split-Off from the
perspective of the holders of the Class E Common Stock. We have been requested
to render to the General Motors Board our opinion with respect to the fairness,
from a financial point of view, to the holders of Class E Common Stock, of the
financial effect of the Split-Off Transactions taken as a whole and in
connection with such opinion to provide our financial advice to General Motors
and its Board of Directors. We have not been requested to opine as to, and our
opinion does not in any manner address, General Motors' or EDS' underlying
business decision to proceed with or effect the proposed Split-Off Transactions.
In arriving at our opinion, we reviewed, among other things, (1) historical
financial statements of EDS and certain other historical financial and operating
data of EDS, (2) historical financial statements of General Motors, (3) certain
publicly available information with respect to EDS and General Motors, (4)
certain projected financial data with respect to EDS, both with and without
giving effect to the Split-Off, prepared by EDS management, (5) reported prices
and trading activity for the Class E Common Stock, (6) drafts of the Statement,
(7) the terms of the Class E Common Stock as set forth in General Motors'
certificate of incorporation as currently in effect, (8) the terms of the EDS
Common Stock as set forth in EDS' certificate of incorporation as currently in
effect, (9) the private letter ruling received by General Motors from the IRS
with respect to the tax-free nature of the Split-Off, (10) a summary of terms
for the Master Services Agreement provided to the General Motors Board in
connection with its March 31, 1996 meeting, (11) the Registration Rights
Agreement, dated March 12, 1995 between General Motors and the Trustees of the
General Motors Hourly Plan Pension Trust and (12) the Shareholder Rights
Agreement between EDS and Bank of New York dated as of March 12, 1996. In
addition, we have held discussions with management of EDS, and in certain cases
management of General Motors, with respect to, among other things, (1) the
operations and financial condition of EDS and the plans of EDS management with
respect to the business and affairs of EDS both prior to and after the
Split-Off, (2) the projected financial data for EDS prepared by EDS management,
(3) the benefits and detriments to EDS of ownership by General Motors, (4) the
expected impact of the Split-Off Transactions on EDS' operations and the
financial and strategic flexibility of EDS, and the new business opportunities
available to EDS, after the Split-Off, (5) certain terms of (A) the Agreement,
dated March 3, 1995, between General Motors and the Pension Benefit Guaranty
Corporation (the "GM-PBGC Agreement"), (B) the Existing Master Services
Agreement and the proposed Master Services Agreement, and certain other
information
<PAGE>
General Motors Corporation
March 31, 1996
Page 3
technology services agreements to be entered into in connection with the Master
Services Agreement, and (C) the proposed Separation Agreement, and (6) the
effect of the Master Services Agreement (including the related changes to the
terms of the underlying services agreements, and certain other information
technology services agreements to be entered into in connection with the Master
Services Agreement, to the extent that they relate to the financial effect of
the Master Services Agreement as projected by EDS management) and the Separation
Agreement on the business, results of operations and financial condition of EDS
and on the business relationship between General Motors and EDS (including, but
not limited to, their relationship as customer and vendor, respectively). In
addition, we undertook such other studies, analyses and investigations as we
deemed appropriate for purposes of rendering our opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information used by us
without assuming any responsibility for independent verification of such
information and have further relied upon the assurances of management of EDS and
General Motors that they are not aware of any facts that would make such
information inaccurate or misleading. With respect to the projected financial
data of EDS prepared by EDS management (which reflect, among other things, with
respect to periods following the Split-Off, estimates of the expected value of
certain benefits to be derived by EDS from the Split-Off), upon the advice of
EDS management and with your consent we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of EDS management as to the expected future prospects
and financial performance of EDS, and we have relied on such projections in
rendering our opinion. With respect to the estimates prepared by EDS management
of the value of certain benefits and detriments of the Split-Off to EDS, with
your consent, we have relied on such estimates and assumed that they were
reasonably prepared and reflected the best currently available judgments of EDS
management as to such benefits and detriments. We also took into account and
considered your determination, as described in the Statement, that a split-off
of EDS would be proposed only in a transaction that would not result in the
recapitalization of shares of Class E Common Stock into Common Stock, $1-2/3 par
value, of General Motors at a 120% exchange ratio as provided for under certain
circumstances under the terms of General Motors' certificate of incorporation.
Furthermore, we believe that following the Split-Off, the EDS Common Stock would
very likely be included in the Standard and Poor's 500 Index, and we have
rendered our opinion on that basis. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of EDS and have
not made or obtained any evaluations or appraisals of the assets or liabilities
of EDS. You have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the purchase of all
or a part of EDS, its business or the Class E Common Stock. We have not been
asked to, and we do not, express an opinion as to the prices at which EDS Common
Stock will actually trade following the Merger and we can provide no assurance
that the trading price of a share of EDS Common Stock following the Split-Off
will be equal to or in excess of the trading price of a share of Class E Common
Stock prior to the Split-Off. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
<PAGE>
General Motors Corporation
March 31, 1996
Page 4
In connection with the review of the financial effect on EDS of the Master
Services Agreement, both EDS management and General Motors management advised us
that certain changes would have been made to the Existing Master Services
Agreement commencing in 1996 even in the absence of the Split-Off. EDS
management identified to us those changes that EDS management believed would
have been made to the Existing Master Services Agreement commencing in 1996 even
in the absence of the Split-Off, the financial effect of which, as projected by
EDS management, would begin to impact EDS in 1996 and continue over time. The
changes to the Existing Master Services Agreement which would have been made in
the absence of the Split-Off are referred to herein as the "Base Changes." Under
different base cases identified by EDS management, the Base Changes assumed to
occur vary to the extent they reflect different assumptions regarding certain
rate reductions and changes in payment terms. General Motors management advised
us that General Motors management believed that changes that differ from or are
in addition to the Base Changes identified by EDS management, which changes,
taken as a whole, would have been more favorable to General Motors and less
favorable to EDS than the Base Changes identified by EDS management, would have
been made to the Existing Master Services Agreement even in the absence of the
Split-Off. No assurances can be given as to exactly which changes to the
Existing Master Services Agreement would have been implemented absent the
Split-Off or which changes might be implemented in the future if the Split-Off
is not consummated.
In considering the fairness, from a financial point of view, to holders of
Class E Common Stock of the financial effect of the Split-Off Transactions taken
as a whole, we have considered, among other things, (1) the $500 million Special
Inter-Company Payment which was recommended to the General Motors Board by the
Capital Stock Committee on March 22, 1996 and is proposed to be approved as of
the date hereof in connection with the Split-Off Transactions, (2) the
allowances of $50 million provided to EDS under the Separation Agreement (and in
rendering our opinion, with your consent, we assumed that a substantial amount
of such allowance will be used for the benefit of EDS under the Separation
Agreement), (3) that EDS management has estimated that, as a result of the
allowance identified in the immediately preceding clause, there will be no net
payments made by EDS to General Motors under the terms of the Separation
Agreement (other than payments, if any, to be made under the provisions thereof
with respect to indemnification obligations or the allocation of contingent
liabilities, to which we gave no effect in rendering this opinion), (4) the
financial effect on EDS, as projected by EDS management, of the changes other
than the Base Changes (such changes being referred to herein as the "Split-Off
Changes") effected pursuant to the Master Services Agreement, (5) the financial
effect, as projected by EDS management, of projected declines following the
Split-Off in sales of certain goods and services provided by EDS to General
Motors and its affiliates other than under the Existing Master Services
Agreement or the Master Services Agreement, as the case may be, (6) transaction
costs, estimated by EDS management and (7) certain estimated benefits of the
Split-Off to EDS or holders of Class E Common Stock, including (A) the
Derivative Stock Differential (as defined in the Statement), (B) the value of
the inclusion of the EDS Common Stock in the Standard & Poor's 500 Index, (C)
the value to EDS of the removal of certain limitations on EDS' ability to
participate in major strategic alliances (including among
<PAGE>
General Motors Corporation
March 31, 1996
Page 5
other, mergers and acquisitions which can be effected using EDS Common Stock),
which was estimated by EDS management to be at least $500 million and (D) the
present value to EDS of projected new business growth and customer
relationships, which was estimated by EDS management. Accordingly, to the extent
described herein, we took into account and considered certain benefits as
estimated by EDS management that may be realized by EDS as a result of the
opportunity to pursue the business purposes of the Split-Off.
At the request of the E Team, and with your consent, we have assumed that
the Base Changes would have been made to the Existing Master Services Agreement
in 1996 even in the absence of the Split-Off (or any other change in the nature
of General Motors' ownership of EDS), and that the financial effect thereof
would begin in 1996 and continue over time as reflected in the projections
prepared by EDS management and therefore, in performing our analyses in
connection with rendering this opinion, at the request of the E Team and with
your consent, we did not address, and gave no effect to, the financial effect
on EDS or holders of Class E Common Stock of the Base Changes effected pursuant
to the Master Services Agreement. Based on information regarding the historical
financial and operating results of EDS and discussions with EDS management, if
neither the Base Changes nor any other significant modifications to the terms of
the Existing Master Services Agreement would have been made in the absence of a
Split-Off, then the decrement in the present value of cash flows attributable to
goods and services projected by EDS management to be provided to General Motors
and its affiliates in accordance with the terms of the Existing Master Services
Agreement (both under analyses performed on a consolidated company basis for EDS
(including goods and services provided to General Motors and its affiliates and
to all other customers) and under analyses performed on a basis reflecting only
goods and services provided to General Motors and affiliates under the terms of
the Existing Master Services Agreement) resulting from changes to the Existing
Master Services Agreement arising as a result of the Split-Off would have been
significantly larger than under the analyses we have conducted. At the request
of the E Team and with your consent, we did not consider, and gave no effect to,
contingent liabilities or indemnification obligations of EDS arising under the
Separation Agreement or otherwise in connection with the Split-Off. At the
request of the E Team, upon the advice of General Motors management and its
legal and accounting advisors, and with your consent, we also assumed that the
proposed Merger would be tax free to the holders of Class E Common Stock
receiving EDS Common Stock in the Merger and that the Unconditional Releases
under the GM-PBGC Agreement would become effective as of the effectiveness of
the Merger.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, the financial effect of the Split-Off Transactions taken as a
whole is fair, from a financial point of view, to the holders of Class E Common
Stock.
We have been engaged by General Motors to act as financial advisor to the E
Team in connection with the Split-Off. We have been advised by you that it is
intended that our fee will be paid by EDS. A significant portion of our fee is
contingent on consummation of the Split-Off. In addition, General Motors has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
<PAGE>
General Motors Corporation
March 31, 1996
Page 6
services for each of General Motors and EDS in the past (including
representation of General Motors and EDS in connection with the 1995
contribution by General Motors of approximately 173 million shares of Class E
Common Stock to the General Motors Hourly Plan Special Trust) and have received
customary fees for such services. In March 1996, two of the senior investment
bankers actively involved in the transaction for Lehman Brothers in its capacity
as financial advisor to the E Team joined Morgan Stanley, at which time Morgan
Stanley also began advising the E Team. Since such time, Lehman Brothers and
Morgan Stanley have performed their services in cooperation, both relying to a
significant degree on the due diligence of those two individuals. However,
Lehman Brothers has performed its own independent internal review and analysis
in arriving at this opinion.
In the ordinary course of our business, we actively trade in the debt and
equity securities of General Motors, including the Class E Common Stock, for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of
General Motors, the Capital Stock Committee of the Board of Directors of General
Motors, the E Team and the Board of Directors of EDS and is rendered to the
General Motors Board in connection with its consideration of the Split-Off
Transactions. This opinion is not intended to be and does not constitute a
recommendation to any holder of Class E Common Stock, or any other class of
capital stock of General Motors, as to whether such stockholder should consent
to the Transactions (as defined in the Statement).
Very truly yours,
LEHMAN BROTHERS
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE 75-2548221 7374
(STATE OR OTHER (I.R.S. EMPLOYER IDENTIFICATION NO.)
JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
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 HOLDING 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:
WARREN G. ANDERSEN ANDREW M. D. GILBERT ROBERT S. OSBORNE,
GENERAL MOTORS BAKER FRIEDLANDER P.C.
CORPORATION BAKER & BOTTS, ELECTRONIC DATA KIRKLAND & ELLIS
3031 WEST GRAND L.L.P. SYSTEMS 200 EAST RANDOLPH
BOULEVARD 2001 ROSS HOLDING DRIVE
DETROIT, MICHIGAN AVENUE CORPORATION CHICAGO, ILLINOIS
48202-3091 DALLAS, TEXAS 5400 LEGACY 60601-6636
75201-2916 DRIVE
PLANO, TEXAS
75024-3105
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the requisite consents are obtained pursuant to the
solicitation by General Motors Corporation referred to in this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share(1) 485,732,594 shares $52.875(2) $25,683,110,907.75(2) $8,856,245.14
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(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 the shares of Common Stock
registered hereby.
(2) Estimated in accordance with Rule 457(c) and (f), solely for the purpose
of determining the registration fee, on the basis of the average of the
high and low prices reported on the New York Stock Exchange Composite Tape
on April 12, 1996 for Class E Common Stock of General Motors Corporation,
which will be converted into Common Stock of Electronic Data Systems
Holding Corporation on a one-for-one basis pursuant to the merger
described in this Registration Statement.
---------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF
FORM S-4.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
A. INFORMATION ABOUT THE TRANSACTION
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page; Table of Contents;
Outside Back Cover Page
3.Risk Factors, Ratio of Earnings
to Fixed Charges and Other Summary; Risk Factors Regarding EDS after
Information................... the Split-Off; Risk Factors Regarding
General Motors after the Split-Off; Risk
Factors Regarding Non-Consummation of the
Split-Off
4.Terms of the Transaction........ Special Factors; The Split-Off; EDS Capital
Stock; Comparison of Class E Common Stock
and EDS Common Stock
5.Pro Forma Financial Information. General Motors Unaudited Pro Forma
Condensed Consolidated Financial
Statements; EDS Unaudited Pro Forma
Condensed Consolidated Financial
Statements
6.Material Contacts with the
Company Being Acquired........ Special Factors; Relationship Between
General Motors and EDS
7.Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters.................. Not Applicable
8.Interests of Named Experts and
Counsel....................... Not Applicable
9.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10.Information with Respect to S-3
Registrants................... Not Applicable
11.Incorporation of Certain
Information by Reference...... Not Applicable
12.Information with Respect to S-2
or S-3 Registrants............ Not Applicable
13.Incorporation of Certain
Information by Reference...... Not Applicable
14.Information with Respect to
Registrants other Than S-2 or Outside Front Cover Page; Summary; Plans
S-3 Registrants............... and Proposals of EDS; EDS Selected
Consolidated Financial Information; EDS
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business of EDS; Appendix C:
EDS Consolidated Financial Statements
</TABLE>
i
<PAGE>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
<TABLE>
<S> <C>
15.Information with Respect to S-3 Incorporation of Certain Documents by
Companies...................... Reference; Summary; Class E Common Stock
16.Information with Respect to S-2
or S-3 Companies............... Not Applicable
17.Information with Respect to
Companies Other Than S-2 or S-3
Companies...................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18.Information if Proxies, Consents
or Authorizations are to be Outside Front Cover Page; Summary; EDS
Solicited...................... Management and Executive Compensation;
Solicitation of Written Consent of General
Motors Common Stockholders; Security
Ownership of Certain Beneficial Owners and
Management of General Motors and EDS
19.Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer.......................... Not Applicable
</TABLE>
ii
<PAGE>
GENERAL MOTORS CORPORATION
April , 1996
To Our Common Stockholders:
The enclosed materials seek your approval of a proposal to split off
Electronic Data Systems Holding Corporation ("EDS") from General Motors
Corporation ("General Motors" or "GM") on a tax-free basis for U.S. federal
income tax purposes. EDS is currently a wholly owned subsidiary of General
Motors that indirectly holds all of the capital stock of Electronic Data
Systems Corporation. As part of the split-off of EDS from General Motors (the
"Split-Off"), each outstanding share of General Motors Class E Common Stock
will be converted into one share of EDS Common Stock. Following the Split-Off,
EDS will be an independent, publicly held company, with approximately 485
million shares of its Common Stock traded on the New York Stock Exchange. All
other shares of General Motors capital stock will remain outstanding, and the
terms of such stock will remain essentially unchanged.
The conversion of all outstanding shares of Class E Common Stock into shares
of EDS Common Stock on a one-for-one basis will be accomplished through a
merger (the "Merger") of General Motors with GM Mergeco Corporation, an
indirect wholly owned subsidiary of EDS organized for this purpose
("Mergeco"), pursuant to a merger agreement between General Motors and Mergeco
(the "Merger Agreement"). Immediately prior to the Merger, EDS will contribute
to Mergeco $500 million in cash (the "Special Inter-Company Payment"). As a
result of the Merger, all of Mergeco's assets, which will consist entirely of
the cash contributed by EDS, will become assets of General Motors.
Furthermore, as a result of the Merger, the General Motors Restated
Certificate of Incorporation will be amended to delete provisions regarding
the Class E Common Stock (including provisions that require Class E Common
Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio
upon a disposition by GM of substantially all of the business of EDS and under
certain other circumstances) and to make certain other changes.
Immediately before the Merger, General Motors and EDS will enter into a new
Master Service Agreement (the "Master Services Agreement") and certain related
agreements pursuant to which EDS will continue to serve as General Motors'
principal supplier of information technology ("IT") services on a world-wide
basis for an initial term of 10 years following the Split-Off, which may be
extended by agreement of the parties. The IT services to be provided by EDS
under the Master Services Agreement will generally be similar to those
provided to General Motors under the existing agreements and arrangements
between the parties. However, the Master Services Agreement provides that
certain significant changes will be made to the pricing and terms of services
currently provided by EDS to General Motors. The General Motors Board of
Directors (the "GM Board") believes that such changes are necessary (i) in
light of the fact that, after the Split-Off, EDS will no longer be a
subsidiary of General Motors and the Capital Stock Committee of the GM Board
(the "Capital Stock Committee") will no longer be able to monitor the IT
service arrangements between the parties, (ii) to reflect the evolutionary
nature of the General Motors-EDS customer relationship and the IT services
industry and (iii) to provide additional assurances to General Motors, as EDS'
largest customer, that the IT services performed by EDS will remain
competitive.
The GM Board has determined that ownership of EDS is not necessary for GM to
execute its IT strategy or to ensure the security of its computer data and
other information. Furthermore, the GM Board has determined that there are
certain actual and potential conflicts between the business of EDS and the
other businesses of General Motors. The Split-Off is intended to address such
conflicts in a manner that is beneficial from the standpoint of all
stockholders of General Motors and to allow the boards and management of GM
and EDS to increase their focus on their respective business operations.
Approximately one-third of the outstanding Class E Common Stock is held by a
trust under the General Motors Hourly-Rate Employees Pension Plan.
Accordingly, after the Split-Off, so long as such pension plan holds any EDS
Common Stock, any appreciation or depreciation in the value of such stock will
affect the level of General Motors' pension expense and unfunded pension
liability.
<PAGE>
The Split-Off is intended to accomplish at least three business objectives
from the perspective of EDS and holders of Class E Common Stock: (i) to remove
limitations on EDS' ability to participate in major strategic alliances
(including mergers and acquisitions which can be effected using EDS Common
Stock); (ii) to remove limitations on EDS' ability to obtain additional
business from and establish new customer relationships with companies that
compete with General Motors or its subsidiaries; and (iii) to enhance EDS'
access to the capital necessary for investment in its future growth.
General Motors has received a ruling from the Internal Revenue Service to
the effect that the Split-Off will be treated as a tax-free exchange under
Section 355 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, for U.S. federal income tax purposes, no gain or loss will be
recognized by either General Motors or the holders of Class E Common Stock on
the exchange of EDS Common Stock for Class E Common Stock pursuant to the
Split-Off.
The Capital Stock Committee, which consists entirely of independent
directors, has had a significant role on behalf of the GM Board in developing
and reviewing the terms of the Split-Off and related transactions to ensure
the fairness of such transactions to all classes of General Motors common
stock. In taking action with respect to the Split-Off, the GM Board and the
Capital Stock Committee considered, among other things, the process of arm's
length negotiation established by the GM Board in order to develop the terms
of the Split-Off, the one-for-one ratio for converting shares of Class E
Common Stock into shares of EDS Common Stock, the opportunity to accomplish
the purposes of the Split-Off described above, the amount of the Special
Inter-Company Payment and the terms of the Master Services Agreement. The GM
Board and the Capital Stock Committee also considered (i) the opinion, dated
March 31, 1996, of Merrill Lynch, Pierce, Fenner & Smith Incorporated to the
GM Board that, as of that date and on the basis of and subject to the
assumptions, limitations and other matters set forth therein, the Financial
Effects of the Transactions (as defined in such opinion) are fair, from a
financial point of view, to General Motors and, accordingly, to General
Motors' common stockholders after consummation of the Merger, namely the
holders of the $1 2/3 Common Stock and the Class H Common Stock and (ii) the
opinion of each of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated,
each dated March 31, 1996, to the GM Board to the effect that, as of such
date, based on and subject to the assumptions, limitations and other matters
set forth therein, the financial effect of the Split-Off Transactions (as
defined in each such opinion) taken as a whole is fair, from a financial point
of view, to the holders of Class E Common Stock.
BASED ON THE FOREGOING, THE GM BOARD HAS DETERMINED THAT THE SPLIT-OFF AND
RELATED TRANSACTIONS ARE IN THE BEST INTERESTS OF, AND FAIR TO, GENERAL MOTORS
AND EACH CLASS OF GM COMMON STOCKHOLDERS. THE GM BOARD HAS UNANIMOUSLY
APPROVED THE SPLIT-OFF AND RELATED TRANSACTIONS AND RECOMMENDS THAT GENERAL
MOTORS COMMON STOCKHOLDERS APPROVE THE SPLIT-OFF AND RELATED TRANSACTIONS BY
EXECUTING AND RETURNING THE ENCLOSED CONSENT.
In lieu of a special meeting of General Motors common stockholders, action
on the Split-Off and related transactions will be taken by written consent.
The Split-Off will be consummated on a date to be determined by General
Motors, which date is expected to be as soon as practicable after consents
from the number of General Motors common stockholders required to approve the
Split-Off and related transactions are received by General Motors (but no
sooner than 20 business days after the date of mailing of this Solicitation
Statement/Prospectus). Consummation of the Split-Off and related transactions
is conditioned upon, among other things, receiving the consent of the holders
of (i) a majority of the voting power of all outstanding shares of all three
classes of General Motors common stock, voting together as a single class
based on their respective voting rights, (ii) a majority of the outstanding
shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a
majority of the outstanding shares of Class E Common Stock, voting as a
separate class.
In connection with the Split-Off, you are also being asked to approve the
1996 Incentive Plan of EDS (the "Amended EDS Incentive Plan"), which amends
and restates EDS' existing stock incentive plan in order, among other things,
to provide that awards made thereunder will be in the form of EDS Common Stock
rather than Class E Common Stock. Approval of the Amended EDS Incentive Plan
by the common stockholders of
2
<PAGE>
General Motors is being sought to ensure that the deductibility by EDS, for
U.S. federal income tax purposes, of certain performance-based awards made
under the plan will not be limited by Section 162(m) of the Code. Approval of
the Amended EDS Incentive Plan is independent of approval of the Split-Off and
will require the consent of the holders of (i) a majority of the voting power
of all outstanding shares of all three classes of General Motors common stock,
voting together as a single class based on their respective voting rights, and
(ii) a majority of the outstanding shares of Class E Common Stock, voting as a
separate class.
THE AMENDED EDS INCENTIVE PLAN HAS BEEN APPROVED BY THE GM BOARD AND RATIFIED
AND APPROVED BY THE EDS BOARD OF DIRECTORS. THE GM BOARD RECOMMENDS THAT
GENERAL MOTORS COMMON STOCKHOLDERS APPROVE THE AMENDED EDS INCENTIVE PLAN BY
EXECUTING AND RETURNING THE ENCLOSED CONSENT.
We urge you to read the enclosed material carefully and request that you
complete, date, sign and return the enclosed consent as soon as possible. Your
consent is important regardless of the number of shares you own.
Sincerely yours,
John F. Smith, Jr.
Chairman, Chief Executive Officer,
and President
3
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY SOLICITATION STATEMENT/PROSPECTUS DATED APRIL 16, 1996
SUBJECT TO COMPLETION
GENERAL MOTORS CORPORATION ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
3044 WEST GRAND BOULEVARD 5400 LEGACY DRIVE
DETROIT, MICHIGAN 48202-3091 PLANO, TEXAS 75024-3105
(313) 556-5000 (214) 604-6000
-----------
SOLICITATION OF WRITTEN CONSENT
LOGO OF GENERAL MOTORS CORPORATION COMMON STOCKHOLDERS LOGO
-----------
-----------
PROSPECTUS OF ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
-----------
INTRODUCTION
This Solicitation Statement/Prospectus is being furnished to stockholders of
General Motors Corporation, a Delaware corporation ("General Motors" or "GM"),
who hold shares of its Common Stock, $1 2/3 par value per share (the "$1 2/3
Common Stock"), its Class E Common Stock, $0.10 par value per share (the "Class
E Common Stock"), or its Class H Common Stock, $0.10 par value per share (the
"Class H Common Stock"), in order to secure their consent to a proposal by
General Motors to effect a tax-free (for U.S. federal income tax purposes)
split-off (the "Split-Off") of General Motors' wholly owned subsidiary,
Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"),
which indirectly owns all of the capital stock of Electronic Data Systems
Corporation and which will be renamed "Electronic Data Systems Corporation"
immediately prior to the consummation of the Split-Off. As a result of the
Split-Off, (i) EDS will become an independent, publicly held company, with
approximately 485 million shares of EDS Common Stock (as defined below) traded
on the New York Stock Exchange, (ii) holders of the Class E Common Stock will
become stockholders of EDS rather than of General Motors, and (iii) Class E
Common Stock will cease to exist. All other outstanding shares of GM capital
stock will remain outstanding, and the terms of such stock will remain
essentially unchanged.
The Split-Off will be accomplished through a merger (the "Merger") of GM
Mergeco Corporation ("Mergeco"), with and into General Motors pursuant to the
Agreement and Plan of Merger, dated April , 1996 (the "Merger Agreement"),
between General Motors and Mergeco, a copy of which is attached hereto as
Appendix A. Mergeco is an indirect wholly owned subsidiary of EDS organized for
the purpose of effecting the Split-Off. In the Merger, each outstanding share
of Class E Common Stock will be converted into one share of EDS common stock,
$0.01 par value per share (the "EDS Common Stock"). General Motors will be the
surviving corporation of the Merger. The Merger Agreement also provides for the
deletion from General Motors' Restated Certificate of Incorporation, as amended
(the "General Motors Certificate of Incorporation"), of provisions regarding
the Class E Common Stock (including the provisions that require Class E Common
Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio
upon a disposition by General Motors of substantially all of the business of
EDS and under certain other circumstances) and certain other changes as
described herein.
General Motors, not EDS, is the issuer of Class E Common Stock. Dividends on
the Class E Common Stock are payable under the General Motors Certificate of
Incorporation only to the extent of (i) the paid-in surplus of General Motors
attributable to the Class E Common Stock plus (ii) a portion of the earnings of
General Motors attributable to EDS since the date of General Motors'
acquisition of the business of EDS and allocated to the amounts available for
the payment of dividends on the Class E Common Stock in accordance with the
formula specified in the General Motors Certificate of Incorporation. For a
description of dividend, voting and liquidation rights and recapitalization
provisions of the Class E Common Stock, see "Class E Common Stock." EDS is the
issuer of the EDS Common Stock, and thus, following the Split-Off, former
holders of Class E Common Stock will no longer own an interest (incident to
such holdings) in General Motors' equity or assets, but will instead own an
equity interest in EDS. For a description of the EDS Common Stock, see "EDS
Capital Stock" and "Comparison of Class E Common Stock and EDS Common Stock."
i
<PAGE>
Immediately prior to and as a condition of the consummation of the Merger,
EDS will contribute to Mergeco $500 million in cash (the "Special Inter-
Company Payment"). As a result of the Merger, all of the assets of Mergeco,
which will consist entirely of the cash contributed by EDS, will become assets
of General Motors. In determining the amount of the Special Inter-Company
Payment, the GM Board gave consideration to, among other things, the fact that
in the Separation Agreement (as hereinafter defined) GM would provide 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 General Motors Board of Directors (the "GM Board")
to determine that the Split-Off is fair to all classes of General Motors
common stockholders.
Immediately before the Merger, General Motors and EDS will enter into a new
Master Service Agreement (the "Master Services Agreement") and certain related
agreements pursuant to which EDS will continue to serve as General Motors'
principal supplier of information technology ("IT") services on a world-wide
basis for an initial term of 10 years following the Split-Off, which may be
extended by mutual agreement of the parties. The IT services to be provided by
EDS under the Master Services Agreement will generally be similar to those
provided to General Motors under the existing agreements and arrangements
between the parties. However, the Master Services Agreement provides that
certain significant changes will be made to the pricing and terms of services
currently provided by EDS to General Motors. The GM Board believes that such
changes are necessary (i) in light of the fact that, after the Split-Off, EDS
will no longer be a subsidiary of General Motors and the Capital Stock
Committee of the GM Board (the "Capital Stock Committee") will no longer be
able to monitor the IT service arrangements between the parties, (ii) to
reflect the evolutionary nature of the General Motors-EDS customer
relationship and the IT services industry and (iii) to provide additional
assurances to General Motors, as EDS' largest customer, that the IT services
performed by EDS will remain competitive.
Additionally, as a condition of the consummation of the Merger, General
Motors and EDS will enter into a Separation Agreement and certain related
agreements (collectively, the "Separation Agreement"), including an Amended
and Restated Agreement for the Allocation of United States Federal, State and
Local Income Tax (the "Tax Allocation Agreement"), establishing certain
arrangements between General Motors and EDS deemed necessary in order to deal
with various business, legal and regulatory issues following the Split-Off.
See "Relationship Between General Motors and EDS--Post-Split-Off
Arrangements--Separation Agreement."
The Split-Off and related transactions, including the consummation of the
Merger, the making of the Special Inter-Company Payment, the execution and
delivery of the Master Services Agreement (and certain other IT service
agreements to be entered into in connection therewith) and the Separation
Agreement and the consummation of the other transactions and events
contemplated by the Merger Agreement, are collectively referred to herein as
the "Transactions." See "The Split-Off" and "Relationship Between General
Motors and EDS--Post-Split-Off Arrangements."
The GM Board has determined that ownership of EDS is not necessary for GM to
execute its IT strategy or to ensure the security of its computer data and
other information. Furthermore, the GM Board has determined that there are
certain actual and potential conflicts between the business of EDS and the
other businesses of General Motors. The Split-Off is intended to address such
conflicts in a manner that is beneficial from the standpoint of all
stockholders of GM and to allow the boards and management of GM and EDS to
increase their focus on their respective business operations. Approximately
one-third of the outstanding Class E Common Stock is held by the General
Motors Special Hourly Employees Pension Trust (together with any sub-trusts
thereunder, the "GM Hourly Plan Special Trust") under the General Motors
Hourly-Rate Employees Pension Plan (the "GM Hourly Plan"). Accordingly, after
the Split-Off, so long as the GM Hourly Plan Special Trust holds any EDS
Common Stock, any appreciation or depreciation in the value of such stock will
affect the level of General Motors' pension expense and unfunded pension
liability, which are actuarially determined and computed in accordance with
generally accepted accounting principles.
The Split-Off is intended to accomplish at least three business objectives
from the perspective of EDS and holders of Class E Common Stock: (i) to remove
limitations on EDS' ability to participate in major strategic alliances
(including mergers and acquisitions which can be effected using EDS Common
Stock); (ii) to remove limitations on EDS' ability to obtain additional
business from and establish new customer relationships with
ii
<PAGE>
companies that compete with General Motors or its subsidiaries; and (iii) to
enhance EDS' access to the capital necessary for investment in its future
growth.
Pursuant to this Solicitation Statement/Prospectus, General Motors is
requesting the common stockholders of General Motors to approve the
Transactions, including the adoption of the Merger Agreement. Consummation of
the Transactions is conditioned upon, among other things, receiving the
consent of the holders of (i) a majority of the voting power of all
outstanding shares of all three classes of General Motors common stock, voting
together as a single class based on their respective voting rights, (ii) a
majority of the outstanding shares of $1 2/3 Common Stock, voting as a
separate class, and (iii) a majority of the outstanding shares of Class E
Common Stock, voting as a separate class.
Assuming the Transactions are consummated, a letter of transmittal will be
sent to all current holders of Class E Common Stock, who will then be deemed
to be holders of EDS Common Stock, with instructions for surrendering their
certificates evidencing shares of Class E Common Stock in exchange for
certificates representing an equal number of shares of EDS Common Stock.
HOLDERS OF CLASS E COMMON STOCK CERTIFICATES SHOULD NOT SURRENDER THOSE
CERTIFICATES UNTIL THEY HAVE RECEIVED SUCH LETTER OF TRANSMITTAL.
General Motors has received a ruling from the Internal Revenue Service (the
"IRS") to the effect that the Split-Off will be treated as a tax-free exchange
under Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, for U.S. federal income tax purposes, no gain or loss
will be recognized by either General Motors or the holders of Class E Common
Stock on the exchange of EDS Common Stock for Class E Common Stock pursuant to
the Split-Off. Current Treasury Regulations require each General Motors
stockholder who receives EDS Common Stock pursuant to the Split-Off to attach
to such stockholder's federal income tax return for the year in which the
Split-Off occurs a detailed statement setting forth such data as may be
appropriate in order to show the applicability of Section 355 of the Code to
the Split-Off. At the time that the letter of transmittal is sent to all
current holders of Class E Common Stock, General Motors will provide such
information to each holder of Class E Common Stock receiving EDS Common Stock
in the Split-Off in order to enable each such holder to comply with such
regulations. See "Special Factors--Certain U.S. Federal Income Tax
Considerations."
General Motors is also requesting the common stockholders of General Motors,
pursuant to this Solicitation Statement/Prospectus, to approve the 1996 Long-
Term Incentive Plan of EDS (the "Amended EDS Incentive Plan"), which amends
and restates the existing 1984 EDS Stock Incentive Plan (the "Existing EDS
Incentive Plan") in order, among other things, to provide that awards made
thereunder will be in the form of EDS Common Stock rather than Class E Common
Stock. The Amended EDS Incentive Plan has been approved by the GM Board and
has been ratified and approved by the EDS Board of Directors (the "EDS
Board"). Approval of the Amended EDS Incentive Plan by the common stockholders
of General Motors is being sought to ensure that the deductibility by EDS, for
U.S. federal income tax purposes, of certain performance-based awards made
under the Amended EDS Incentive Plan will not be limited by Section 162(m) of
the Code. Approval of the Amended EDS Incentive Plan is independent of
approval of the Transactions and will require the consent of the holders of
(i) a majority of the voting power of all outstanding shares of all three
classes of General Motors common stock, voting together as a single class
based on their respective voting rights, and (ii) a majority of the
outstanding shares of Class E Common Stock, voting as a separate class. For a
description of the Amended EDS Incentive Plan and the Existing EDS Incentive
Plan, see "EDS Management and Executive Compensation--Amended EDS Incentive
Plan" and "--Existing EDS Incentive Plan."
This Solicitation Statement/Prospectus also constitutes a prospectus of EDS
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of EDS Common Stock to be distributed in exchange for
Class E Common Stock in the Split-Off. Application has been made to list the
EDS Common Stock on the New York Stock Exchange (the "NYSE"), and such
application has been granted pending notice of issuance. EDS Common Stock will
trade under the symbol "EDS."
iii
<PAGE>
FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH THE SPLIT-OFF, SEE "RISK FACTORS REGARDING EDS AFTER THE SPLIT-OFF" ON
PAGE 19, "RISK FACTORS REGARDING GENERAL MOTORS AFTER THE SPLIT-OFF" ON PAGE
24 AND "RISK FACTORS REGARDING NON-CONSUMMATION OF THE SPLIT-OFF" ON PAGE 26.
All information in this Solicitation Statement/Prospectus concerning General
Motors has been furnished by General Motors, and all information concerning
EDS and the Amended EDS Incentive Plan has been furnished by EDS.
This Solicitation Statement/Prospectus is dated April , 1996 and was
mailed to General Motors common stockholders within three weeks from such
date.
----------------
NEITHER THE TRANSACTIONS NOR THE SECURITIES TO BE ISSUED PURSUANT TO THIS
SOLICITATION STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
PASSED UPON THE FAIRNESS OR MERITS OF THE TRANSACTIONS OR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS SOLICITATION
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
iv
<PAGE>
AVAILABLE INFORMATION
General Motors is 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
(including certain information relating to EDS) with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by General Motors with the Commission can be
inspected, and copies may be obtained, at the Public Reference Section of the
Commission, 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. Reports, proxy
statements and other information concerning General Motors (which also contain
information concerning EDS) can also be inspected at the offices of the NYSE,
11 Wall Street, New York, New York 10005, where the Class E Common Stock,
Class H Common Stock and $1 2/3 Common Stock of General Motors are listed, and
at the offices of the following other stock exchanges where the $1 2/3 Common
Stock is listed in the United States: the Chicago Stock Exchange, Inc., One
Financial Place, 440 S. LaSalle Street, Chicago, Illinois 60605; the Pacific
Stock Exchange, Inc., 233 South Beaudry Avenue, Los Angeles, California 90012
and 301 Pine Street, San Francisco, California 94104; and the Philadelphia
Stock Exchange, Inc., 1900 Market Street, Philadelphia, Pennsylvania 19103.
Reports, proxy statements, and other information concerning General Motors
(which also contain 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 a Registration Statement on Form S-4 (as amended and including
exhibits, the "Registration Statement") with the Commission under the
Securities Act with respect to the shares of EDS Common Stock to be
distributed in exchange for Class E Common Stock in the Split-Off. General
Motors has also filed a Schedule 13E-3 Transaction Statement (as amended and
including exhibits, the "Schedule 13E-3") under the Exchange Act with respect
to certain of the Transactions. Pursuant to the rules and regulations of the
Commission, this Solicitation Statement/Prospectus omits certain information
contained in the Registration Statement and the Schedule 13E-3. 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 General
Motors, EDS, the Class E Common Stock and the EDS Common Stock, reference is
made to the Registration Statement and the Schedule 13E-3. Statements
contained herein concerning any document filed as an exhibit to the
Registration Statement or the Schedule 13E-3 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 or the Schedule 13E-3. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by General Motors with the
Commission, are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995 (as
amended and including exhibits, the "GM 1995 Form 10-K"); and
2. Current Reports on Form 8-K dated January 29, February 26 and March
12, 1996.
All documents filed by General Motors with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Solicitation Statement/Prospectus and prior to the consummation of the
Transactions shall be deemed to be incorporated by reference in this
Solicitation Statement/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 Solicitation
Statement/Prospectus to the extent that a statement contained herein or in any
other
v
<PAGE>
subsequently filed document which also 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 Solicitation Statement/Prospectus.
THIS SOLICITATION STATEMENT/PROSPECTUS INCORPORATES AND MAY INCORPORATE
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS, OTHER THAN THE EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE
FROM GENERAL MOTORS TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM
THIS SOLICITATION STATEMENT/PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL
REQUEST OF SUCH PERSON TO GENERAL MOTORS CORPORATION, ROOM 11-243, GENERAL
MOTORS BUILDING, 3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202-3091
(TELEPHONE NUMBER (313) 556-2044). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST SHOULD BE MADE WITHIN 15 BUSINESS DAYS OF THE DATE OF
MAILING OF THIS SOLICITATION STATEMENT/PROSPECTUS.
UNTIL 25 DAYS AFTER THE DATE OF MAILING OF THIS SOLICITATION
STATEMENT/PROSPECTUS, ALL DEALERS EFFECTING TRANSACTIONS IN EDS COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
vi
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction............................................................. i
Available Information.................................................... v
Incorporation of Certain Documents by Reference.......................... v
Summary.................................................................. 1
Introduction............................................................ 1
General Motors.......................................................... 1
EDS..................................................................... 2
The Transactions........................................................ 2
Amended EDS Incentive Plan.............................................. 11
Certain Per Share and Other Financial Information....................... 13
General Motors Summary Consolidated Historical and Pro Forma Financial
Data................................................................... 15
EDS Summary Consolidated Historical and Pro Forma Financial Data........ 17
Risk Factors Regarding EDS after the Split-Off........................... 19
Dividend Policy......................................................... 19
Increased Leverage; No Assurance of Access to Capital................... 19
No Prior Public Market for EDS Common Stock; No Assurance as to Market
Price.................................................................. 19
Dependence on Major Customer; Changes in Pricing and Terms.............. 20
Significant Stockholder................................................. 21
No Assurance of Strategic Alliances and Other Business Opportunities.... 21
Termination of Subsidiary Relationship with General Motors.............. 22
Certain Limitations on Changes in Control of EDS........................ 22
Forward-Looking Information May Prove Inaccurate........................ 23
Risk Factors Regarding General Motors after the Split-Off................ 24
Reduction in General Motors' Consolidated Net Worth, Assets and Certain
Ratios................................................................. 24
Loss of Potential Availability of EDS Funds and Assets.................. 24
Effect of Split-Off on GM Pension Expense and Unfunded Pension
Liability.............................................................. 25
Loss of Ownership Interest in IT Provider............................... 25
Forward-Looking Information May Prove Inaccurate........................ 25
Risk Factors Regarding Non-Consummation of the Split-Off................. 26
Business Conflicts and Objectives....................................... 26
Changes in Terms of Existing IT Services Agreements..................... 26
Special Factors.......................................................... 27
Purposes of the Split-Off............................................... 27
Alternatives to the Split-Off........................................... 28
Effects of the Split-Off................................................ 29
Background of the Split-Off............................................. 31
Recommendations of the Capital Stock Committee and the GM Board;
Fairness of the Transactions........................................... 47
Fairness Opinions....................................................... 48
Requisite Vote for the Transactions..................................... 65
Certain U.S. Federal Income Tax Considerations.......................... 65
GM-PBGC Agreement....................................................... 66
Certain Litigation...................................................... 67
The Split-Off............................................................ 69
General................................................................. 69
Merger Agreement........................................................ 70
No Appraisal Rights..................................................... 71
Stock Exchange Listings for EDS Common Stock............................ 72
Accounting Treatment.................................................... 72
Certain U.S. Federal Income Tax Considerations.......................... 72
Regulatory Requirements................................................. 72
Relationship Between General Motors and EDS.............................. 73
Pre-Split-Off Relationship.............................................. 73
Post-Split-Off Arrangements............................................. 74
Plans and Proposals of EDS............................................... 81
EDS Dividend Policy..................................................... 81
EDS Unaudited Pro Forma Consolidated Capitalization...................... 82
General Motors Unaudited Pro Forma Condensed Consolidated Financial
Statements.............................................................. 83
EDS Unaudited Pro Forma Condensed Consolidated Financial Statements...... 86
EDS Selected Consolidated Financial Information.......................... 89
EDS Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 90
Business of EDS.......................................................... 97
General................................................................. 97
Strategy................................................................ 97
Services................................................................ 98
Business Areas.......................................................... 98
Acquisitions and Strategic Alliances.................................... 100
Revenues................................................................ 100
Services for General Motors............................................. 100
Backlog................................................................. 101
Competition............................................................. 101
Employees............................................................... 102
</TABLE>
vii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Patents, Proprietary Rights and Licenses................................ 102
Regulation.............................................................. 102
Real Property........................................................... 102
Legal Proceedings....................................................... 103
EDS Management and Executive Compensation................................ 104
Directors and Executive Officers........................................ 104
Director Compensation................................................... 107
Executive Compensation.................................................. 108
Amended EDS Incentive Plan.............................................. 108
Existing EDS Incentive Plan............................................. 115
EDS Retirement Plan..................................................... 119
Stock Purchase Plan..................................................... 120
Change of Control Employment Agreements................................. 121
Compensation Committee Interlocks and Insider Participation............. 122
Indemnification Agreements.............................................. 122
Class E Common Stock..................................................... 124
Introduction............................................................ 124
Price Range and Dividends............................................... 124
Dividend Policy......................................................... 124
Voting Rights........................................................... 126
Liquidation Rights...................................................... 126
Recapitalization........................................................ 126
Subdivision or Combination.............................................. 127
Considerations Relating to Multi-Class Common Stock Capital Structure... 127
EDS Capital Stock........................................................ 128
EDS Common Stock........................................................ 128
EDS Preferred Stock..................................................... 128
EDS Rights Agreement.................................................... 129
Limitation on EDS Directors' Liability.................................. 131
Section 203 of the Delaware General Corporation Law..................... 132
Limitations on Changes in Control....................................... 132
EDS Transfer Agent and Registrar........................................ 133
Comparison of Class E Common Stock and EDS Common Stock.................. 134
General................................................................. 134
Dividend Policy......................................................... 134
Voting Rights........................................................... 134
Liquidation Rights...................................................... 134
Recapitalization........................................................ 135
Certain Limitations on Changes in Control of EDS........................ 135
Solicitation of Written Consent of General Motors Common Stockholders.... 136
Matters to be Considered................................................ 136
Action by Written Consent............................................... 137
Consents................................................................ 138
Security Ownership of Certain Beneficial Owners and Management of General
Motors and EDS.......................................................... 140
General Motors.......................................................... 140
EDS...................................................................... 143
GM Hourly Plan Special Trust............................................ 143
Estimated Fees and Expenses.............................................. 146
Legal Matters............................................................ 146
Experts.................................................................. 146
</TABLE>
<TABLE>
<C> <S> <C>
Merger
Appendix A-- Agreement... A-1
Fairness
Appendix B-- Opinions
Merrill
Lynch
Fairness
Appendix B-1-- Opinion..... B-1
Lehman
Brothers
Fairness
Appendix B-2-- Opinion..... B-5
Morgan
Stanley
Fairness
Appendix B-3-- Opinion..... B-10
EDS
Consolidated
Financial
Appendix C-- Statements..
Independent
Auditors'
Report...... C-1
EDS
Consolidated
Financial
Statements
and Notes
Thereto..... C-2
Amended EDS
Incentive
Appendix D-- Plan........ D-1
</TABLE>
viii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere or incorporated by reference in this
Solicitation Statement/Prospectus and the Appendices hereto. General Motors
stockholders are urged to read this Solicitation Statement/Prospectus and the
Appendices hereto in their entirety. Unless the context otherwise requires, all
references in this Solicitation Statement/Prospectus to General Motors include
General Motors and its subsidiaries (including EDS to the extent that such
references relate to periods prior to the Split-Off). Electronic Data Systems
Holding Corporation currently owns all of the capital stock of Electronic Data
Systems Intermediate Corporation, which in turn owns all of the capital stock
of Electronic Data Systems Corporation. Immediately prior to the Split-Off, (i)
Electronic Data Systems Intermediate Corporation will be merged with and into
Electronic Data Systems Holding Corporation and (ii) Electronic Data Systems
Corporation will be merged with and into Electronic Data Systems Holding
Corporation and, pursuant to such merger, Electronic Data Systems Holding
Corporation will be renamed "Electronic Data Systems Corporation." Unless the
context otherwise requires, all references in this Solicitation
Statement/Prospectus to EDS give effect to the transactions described in the
preceding sentence and include Electronic Data Systems Corporation and its
subsidiaries. The share numbers in this Solicitation Statement/Prospectus
reflect all stock dividends and subdivisions or combinations of General Motors
capital stock prior to the date hereof.
INTRODUCTION
This Solicitation Statement/Prospectus is being furnished in connection with
the solicitation by the GM Board of the written consent of General Motors
common stockholders approving the Transactions, including the adoption of the
Merger Agreement. Pursuant to the Merger, each outstanding share of Class E
Common Stock will be converted into one share of EDS Common Stock. In lieu of a
special meeting of stockholders, action on the Transactions will be taken by
written consent. The Transactions will be consummated on a date to be
determined by GM, which is expected to be as soon as practicable after the
requisite consents thereto are received from holders of $1 2/3 Common Stock,
Class E Common Stock and Class H Common Stock, provided that the conditions to
the consummation of the Merger set forth in the Merger Agreement have been
satisfied or waived and the Merger Agreement has not been terminated. The
Transactions will in any event not be consummated sooner than 20 business days
after the date of mailing of this Solicitation Statement/Prospectus to GM's
common stockholders. See "--Vote Required for Approval; Voting Securities Owned
by Certain Persons" and "The Split-Off."
This Solicitation Statement/Prospectus is also being furnished by General
Motors to obtain the approval by the General Motors common stockholders of the
Amended EDS Incentive Plan, which amends and restates the Existing EDS
Incentive Plan in order, among other things, to provide that awards made
thereunder will be in the form of EDS Common Stock rather than Class E Common
Stock. Approval of the Amended EDS Incentive Plan by the common stockholders of
General Motors is being sought to ensure that the deductibility by EDS, for
U.S. federal income tax purposes, of certain performance-based awards made
under the Amended EDS Incentive Plan will not be limited by Section 162(m) of
the Code. See "--Amended EDS Incentive Plan--Stockholder Approval; Vote
Required," "EDS Management and Executive Compensation--Amended EDS Incentive
Plan" and "--Existing EDS Incentive Plan."
This Solicitation Statement/Prospectus also constitutes a prospectus of EDS
under the Securities Act with respect to shares of EDS Common Stock to be
distributed in exchange for Class E Common Stock in the Split-Off.
GENERAL MOTORS
The major portion of General Motors' operations is derived from the
automotive products industry, consisting of the design, manufacture, assembly
and sale of automobiles, trucks and related parts and accessories. Primarily
through its wholly owned subsidiaries, EDS, General Motors Acceptance
Corporation ("GMAC") and
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Hughes Electronics Corporation ("Hughes"), General Motors also manufactures
products and provides services in other industry segments. General Motors'
principal executive offices are located at 3044 West Grand Boulevard, Detroit,
Michigan 48202-3091 (Telephone Number (313) 556-5000).
EDS
EDS is a world leader in applying information technology, with over 30 years
of experience in using advanced computer and communications technologies to
meet its clients' business needs. EDS' total revenues in 1995 were $12.4
billion, of which approximately $3.9 billion was attributable to the
performance of IT and other services on behalf of General Motors and its
affiliates. As of December 31, 1995, EDS employed approximately 96,000 persons
and served clients in the United States and approximately 40 other countries.
See "Business of EDS." EDS' principal executive offices are located at 5400
Legacy Drive, Plano, Texas 75024-3105 (Telephone Number (214) 604-6000).
THE TRANSACTIONS
Purposes of the Split-Off
The GM Board has determined that ownership of EDS is not necessary for GM to
execute its IT strategy or to ensure the security of its computer data and
other information. Furthermore, the GM Board has determined that there are
certain actual and potential conflicts between the business of EDS and the
other businesses of General Motors. The Split-Off is intended to address such
conflicts in a manner that is beneficial from the standpoint of all
stockholders of General Motors and to allow the boards and management of GM and
EDS to increase their focus on their respective business operations.
Approximately one-third of the outstanding Class E Common Stock is held by the
GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so long as the
GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or
depreciation in the value of such stock will affect the level of General
Motors' pension expense and unfunded pension liability, which are actuarially
determined and computed in accordance with generally accepted accounting
principles.
The Split-Off is intended to accomplish at least three business objectives
from the perspective of EDS and holders of Class E Common Stock: (i) to remove
limitations on EDS' ability to participate in major strategic alliances
(including mergers and acquisitions which can be effected using EDS Common
Stock); (ii) to remove limitations on EDS' ability to obtain additional
business from and establish new customer relationships with companies that
compete with General Motors or its subsidiaries; and (iii) to enhance EDS'
access to the capital necessary for investment in its future growth. See
"Special Factors--Purposes of the Split-Off."
Effects of the Split-Off
As a result of the Split-Off, EDS will become an independent, publicly held
company. In addition, holders of the Class E Common Stock will become
stockholders of EDS rather than of General Motors, and the Class E Common Stock
will cease to exist. The Split-Off will not result in the recapitalization of
Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as
currently provided in the General Motors Certificate of Incorporation upon a
disposition by General Motors of substantially all of the business of EDS and
under certain other circumstances. Holders of EDS Common Stock will have no
rights comparable to such recapitalization rights of holders of Class E Common
Stock. See "Comparison of Class E Common Stock and EDS Common Stock." All other
outstanding shares of GM capital stock will remain outstanding after the Split-
Off, and the terms of such stock will remain essentially unchanged. No dividend
or other distribution will be made on any GM capital stock in connection with
the Split-Off. See "Special Factors--Effects of the Split-Off."
The Merger
The Split-Off will be accomplished through the consummation of the Merger of
Mergeco with and into General Motors pursuant to the Merger Agreement. Mergeco
is an indirect wholly owned subsidiary of EDS organized for the purpose of
effecting the Split-Off. Pursuant to the Merger, among other things, (i)
Mergeco
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<PAGE>
will be merged with and into General Motors, with General Motors being the
surviving corporation, (ii) each outstanding share of Class E Common Stock will
be automatically converted into one share of EDS Common Stock and (iii)
provisions in the General Motors Certificate of Incorporation regarding the
Class E Common Stock will be deleted and certain other provisions therein,
including provisions with respect to the General Motors Preferred Stock (the
"Preferred Stock"), will be amended. There are currently no shares of Preferred
Stock outstanding. The changes to the General Motors Certificate of
Incorporation relating to the Preferred Stock will allow the GM Board to
determine the specific rights, preferences and limitations of any series of
Preferred Stock if and when issued in the discretion of the GM Board and will
cause the Preferred Stock to assume the characteristics of "blank-check"
preferred stock, which the General Motors Preference Stock already possesses.
Such changes include the deletion of a restrictive covenant limiting the
payment of cash dividends on classes of General Motors stock other than the
Preferred Stock based on a net quick assets test, the removal of a restriction
on the placing of liens on General Motors property, the elimination of certain
voting rights of the Preferred Stock and the deletion of a specified
liquidation price of $100 per share of Preferred Stock. See "The Split-Off--
Merger Agreement--Effect of the Merger."
The consummation of the Merger is subject to certain conditions set forth in
the Merger Agreement. The Merger Agreement may be terminated under certain
circumstances set forth therein, including by General Motors at any time prior
to the effective date of the Merger in the event that the GM Board concludes
that termination would be in the best interests of General Motors and its
stockholders. See "The Split-Off--Merger Agreement."
Special Inter-Company Payment
Immediately prior to and as a condition of the consummation of the Merger,
EDS will contribute to Mergeco the Special Inter-Company Payment in the amount
of $500 million in cash. As a result of the Merger, all of the assets of
Mergeco, which will consist entirely of the cash contributed by EDS, will
become assets of General Motors. In determining the amount of the Special
Inter-Company Payment, the GM Board gave consideration to, among other things,
the fact that in the Separation Agreement GM would provide 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 is fair to all classes of General
Motors common stockholders.
IT Services Agreements
Immediately prior to and as a condition of the consummation of the Merger,
General Motors and EDS will enter into the new Master Services Agreement, which
will serve 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 after the Split-Off
(collectively, together with the Master Services Agreement, the "IT Services
Agreements"). The Master Services Agreement contemplates that EDS will continue
to serve as GM's 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 existing Master Agreement (the
"Existing Master Services Agreement"), which currently serves as a framework
for individual services agreements between GM and EDS (collectively, together
with the Existing Master Services Agreement, the "Existing IT Services
Agreements"). Under the IT Services 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 will be considered to be "in-scope" for purposes
of the Master Services Agreement accounted for approximately $3.4 billion of
approximately $3.9 billion in the aggregate of revenues 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 Services Agreement. Following the Split-Off, 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 Services
Agreement.
The IT Services Agreements provide that certain of the Existing IT Services
Agreements applicable to particular units, sectors or other organizations
within General Motors will be extended for additional terms of
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<PAGE>
between approximately one and three years beyond their current expiration
dates. The IT Services Agreements also provide that certain significant changes
will be made 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 communications services will
be reduced and that the parties will work together to achieve targets for
increased structural cost reductions. General Motors will also be given the
right to competitively bid and, subject to certain restrictions, outsource a
limited portion of its IT service requirements to third party providers. In
addition, 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. The Master Services Agreement provides for
termination in the event of material default by either party, non-payment by
GM, the insolvency of either party and certain changes in control of EDS. The
GM Board believes that the changes reflected in the Master Services Agreement
are necessary (i) in light of the fact that, after the Split-Off, EDS will no
longer be a subsidiary of General Motors and the Capital Stock Committee will
no longer be able to monitor the IT service arrangements between the parties,
(ii) to reflect the evolutionary nature of the General Motors-EDS customer
relationship and the IT services industry and (iii) to provide additional
assurances to General Motors, as EDS' largest customer, that the IT services
performed by EDS will remain competitive. See "Relationship Between General
Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements."
Negotiating Teams
In order to ensure that the terms of the Split-Off would be fair to all
classes of GM common stockholders, the GM Board determined that it was
appropriate to institute a process of arm's-length negotiation between separate
teams acting on behalf of each of the groups of GM stockholders that could be
deemed to have divergent interests in the Split-Off. Accordingly, in August
1995, the GM Board appointed two management negotiating teams. One team, which
consisted of executive officers of General Motors (the "GM Team"), was charged
with negotiating recommended terms of the Split-Off from the perspective of the
holders of $1 2/3 Common Stock and the Class H Common Stock. The other team,
which consisted of executive officers of EDS (the "EDS Team"), was charged with
negotiating recommended terms of the Split-Off from the perspective of the
holders of Class E Common Stock. The GM Team and the EDS Team negotiated the
terms of the IT Services Agreements and the Separation Agreement, the amount of
the Special Inter-Company Payment and the other material terms of the
Transactions and recommended such terms to the Capital Stock Committee and the
GM Board.
Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
The GM Board has received an opinion from Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), dated March 31, 1996 (the "Merrill Lynch
Fairness Opinion"), that, as of that date and on the basis of and subject to
the assumptions, limitations and other matters set forth therein, the Financial
Effects of the Transactions (as defined in the Merrill Lynch Fairness Opinion)
are fair, from a financial point of view, to General Motors and, accordingly,
to General Motors' common stockholders after consummation of the Merger, namely
the holders of the $1 2/3 Common Stock and the Class H Common Stock. The
Merrill Lynch Fairness Opinion, which sets forth the assumptions made, the
matters considered and the limits on the review undertaken by Merrill Lynch, is
attached as Appendix B-1 to this Solicitation Statement/Prospectus and should
be read in its entirety. For information relating to the Merrill Lynch Fairness
Opinion, see "Special Factors--Fairness Opinions--Merrill Lynch Fairness
Opinion."
Fairness Opinions of Lehman Brothers Inc. and Morgan Stanley & Co.
Incorporated
The GM Board has received a written opinion from each of Lehman Brothers Inc.
("Lehman Brothers") and Morgan Stanley & Co. Incorporated ("Morgan Stanley,"
and together with Lehman Brothers, the "EDS Team Financial Advisors"), each
dated March 31, 1996 (the "Lehman Brothers and Morgan Stanley Fairness
Opinions"), to the effect that, as of that date and on the basis of and subject
to the assumptions, limitations and other matters set forth therein, the
financial effect of the Split-Off Transactions (as defined in the Lehman
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<PAGE>
Brothers and Morgan Stanley Fairness Opinions) taken as a whole is fair, from a
financial point of view, to the holders of Class E Common Stock. Assumptions
made, matters considered and limits on the review undertaken by Lehman Brothers
and Morgan Stanley, respectively, are set forth in the Lehman Brothers and
Morgan Stanley Fairness Opinions, which are attached as Appendix B-2 and B-3,
respectively, to this Solicitation Statement/Prospectus and should be read in
their entirety. For information relating to the Lehman Brothers and Morgan
Stanley Fairness Opinions, including a discussion of certain of the factors
considered by EDS Team Financial Advisors in reaching their respective
opinions, see "Special Factors--Fairness Opinions--EDS Team Financial Advisors
Fairness Opinions."
Advantages and Disadvantages of the Split-Off to the Holders of $1 2/3 Common
Stock and Class H Common Stock
Factors considered by the Capital Stock Committee and the GM Board to have a
positive effect on the holders of the $1 2/3 Common Stock include the removal
of certain existing and potential business conflicts between EDS and certain
other GM business units; any decrease in GM's pension expense and funding
obligations that may be caused by any appreciation resulting from the Split-Off
in the EDS Common Stock to be owned by the pension plans for GM's hourly-rate
and salaried employees; the receipt of the Special Inter-Company Payment; the
terms of the new IT Services Agreements; and the elimination of the potential
recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120%
exchange ratio upon a disposition by GM of substantially all of the business of
EDS. Certain of these factors, including the removal of potential business
conflicts between EDS and Hughes and, with respect to Delco Electronics
Corporation ("Delco"), the terms of the new IT Services Agreements, were also
considered to have a positive effect on the holders of Class H Common Stock.
The factors considered by the Capital Stock Committee and the GM Board to have
a negative effect on the holders of the $1 2/3 Common Stock include the loss of
ownership of its IT provider, EDS, the possible effect of the Split-Off on GM's
credit rating and credit profile and the loss of the ability of General Motors
to elect to recapitalize shares of Class E Common Stock as shares of $1 2/3
Common Stock. See "Special Factors--Background of the Split-Off--March 3, 1996
Capital Stock Committee Meeting," "--March 22, 1996 Capital Stock Committee
Meeting," "--Recommendations of the Capital Stock Committee and the GM Board;
Fairness of the Transactions" and "--Fairness Opinions."
Advantages and Disadvantages of the Split-Off to the Holders of Class E Common
Stock
Factors considered by the Capital Stock Committee and the GM Board to have a
positive effect on the holders of the Class E Common Stock included the
benefits of owning an equity security like EDS Common Stock rather than Class E
Common Stock, which is a derivative or "tracking" security; the removal of
constraints on EDS' ability, as a subsidiary of GM, to participate in strategic
alliances, including the ability to use EDS Common Stock in large acquisitions;
the availability of new market opportunities and increased growth potential for
EDS; lower cost of and better access to capital for EDS; the possibility that
EDS Common Stock would be included in the Standard & Poor's 500 Index after the
Split-Off; the release of EDS from certain liabilities relating to GM's U.S.
pension plans; and the potential of holders of EDS Common Stock to realize
premiums over prevailing market prices in connection with certain corporate
transactions, including tender offers and other change of control transactions.
The factors considered by the Capital Stock Committee and the GM Board to have
a negative effect on the holders of Class E Common Stock were the payment of
the Special Inter-Company Payment; the terms of the new IT Services Agreements;
and the loss of the right to recapitalization of the Class E Common Stock into
$1 2/3 Common Stock at a 120% exchange ratio upon a disposition by GM of
substantially all of the business of EDS and under certain other circumstances.
See "Special Factors--Background of Split-Off--March 3, 1996 Capital Stock
Committee Meeting," "--March 22, 1996 Capital Stock Committee Meeting," "--
Recommendations of the Capital Stock Committee and the GM Board; Fairness of
the Transactions" and "--Fairness Opinions."
Recommendations of the Capital Stock Committee and the GM Board; Fairness of
the Transactions
The Capital Stock Committee, which consists entirely of independent
directors, has unanimously recommended that the GM Board proceed with the
Transactions as being in the best interests of, and fair to,
5
<PAGE>
General Motors and each class of GM common stockholders. Based upon, among
other things, the GM Board's review and consideration of the terms and
conditions of the Transactions and related matters, including the process of
arm's-length negotiation established by the GM Board in order to develop the
terms of the Split-Off, the oversight of such process and the GM/EDS
relationship by the Capital Stock Committee and its recommendation, the reports
and recommendations of the GM Team, the EDS Team and GM executive management,
and the Merrill Lynch Fairness Opinion and the Lehman Brothers and Morgan
Stanley Fairness Opinions, the GM Board has determined that the Transactions
are in the best interests of, and fair to, General Motors and each class of GM
common stockholders. Accordingly, the GM Board has unanimously approved the
Transactions and recommends that General Motors common stockholders execute
consents approving the Transactions, including the adoption of the Merger
Agreement. For a description of the factors considered by the Capital Stock
Committee and the GM Board in reaching their respective determinations, see
"Special Factors--Background of the Split-Off" and "--Recommendations of the
Capital Stock Committee and the GM Board; Fairness of the Transactions."
Vote Required for Approval; Voting Securities Owned by Certain Persons
Consummation of the Transactions is conditioned upon, among other things,
receiving the consent of the holders of (i) a majority of the voting power of
all outstanding shares of all three classes of General Motors common stock,
voting together as a single class based on their respective voting rights, (ii)
a majority of the outstanding shares of $1 2/3 Common Stock, voting as a
separate class, and (iii) a majority of the outstanding shares of Class E
Common Stock, voting as a separate class. For purposes of the vote described in
clause (i) above, and as provided for in the General Motors Certificate of
Incorporation, holders of $1 2/3 Common Stock will be entitled to one vote per
share, holders of Class E Common Stock will be entitled to one-eighth of a vote
per share and holders of Class H Common Stock will be entitled to one-half of a
vote per share. See "Solicitation of Written Consent of General Motors Common
Stockholders." As of the Record Date, directors and executive officers of
General Motors together held less than 1% of the outstanding shares of each
class of GM common stock. As of the Record Date, pension, savings and incentive
plans of General Motors (excluding its subsidiaries), including the GM Hourly
Plan Special Trust, together beneficially owned approximately 14% of the $1 2/3
Common Stock outstanding, approximately 36% of the Class E Common Stock
outstanding and approximately 5% of the Class H Common Stock outstanding. As of
the Record Date, persons expected to be directors and executive officers of EDS
upon consummation of the Split-Off together held less than 1% of the
outstanding shares of each class of GM common stock. See "Security Ownership of
Certain Beneficial Owners and Management of General Motors and EDS."
Risk Factors Regarding EDS after the Split-Off
Holders of Class E Common Stock will receive shares of EDS Common Stock in
the Split-Off and should therefore be aware of certain risk factors with
respect to an investment in EDS Common Stock, including that (i) the EDS Board
may consider and implement after the Split-Off a dividend policy for EDS Common
Stock that is different than the dividend policy that the GM Board has
maintained with respect to the Class E Common Stock; (ii) it is anticipated
that EDS may incur substantially more debt after the Split-Off than it has had
while a subsidiary of GM and will borrow approximately $500 million to finance
the Special Inter-Company Payment; (iii) there is currently no public market
for EDS Common Stock and no assurance can be given that the trading price of a
share of EDS Common Stock after the Split-Off will be equal to or greater than
the trading price of a share of Class E Common Stock prior to the Split-Off;
(iv) although the percentage of EDS' total revenues attributable to GM and its
affiliates has decreased significantly in recent years, GM will continue to
account for a substantial portion of EDS' revenues upon consummation of the
Split-Off; (v) the GM Hourly Plan Special Trust will hold approximately 31% of
the outstanding EDS Common Stock immediately after the consummation of the
Split-Off; (vi) there can be no assurance that the Split-Off will enable EDS to
enter into major strategic
6
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alliances and take advantage of other growth opportunities or otherwise achieve
the business objectives described herein; (vii) after the Split-Off, EDS may no
longer be able to benefit from General Motors' worldwide network of business
relationships with companies and government contacts; and (viii) the Restated
Certificate of Incorporation of EDS (after giving effect to the Split-Off, the
"EDS Certificate of Incorporation") and the EDS Bylaws (after giving effect to
the Split-Off, the "EDS Bylaws"), as well as the EDS Rights Agreement (as
hereinafter defined) and the provisions of certain other agreements, could have
the effect of delaying, deferring or preventing a change in control of EDS
after the Split-Off. See "Risk Factors Regarding EDS after the Split-Off."
Risk Factors Regarding General Motors after the Split-Off
Holders of $1 2/3 Common Stock and Class H Common Stock should be aware of
certain risk factors, including that after the Split-Off, (i) GM will no longer
own the outstanding stock of EDS and, accordingly, its balance sheet and income
statement will no longer reflect the assets and operations of EDS; (ii) General
Motors will no longer be able to consider the use of EDS funds and assets for
GM's other businesses or corporate needs and the holders of $1 2/3 Common Stock
and Class H Common Stock will lose their rights to share in the distribution of
EDS' equity and assets upon the liquidation of General Motors; (iii) so long as
the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation
or depreciation in the value of such stock will affect the level of GM's
pension expense and unfunded pension liability; and (iv) GM will no longer have
an ownership interest in its principal IT provider, and its rights with respect
to IT services provided by EDS will be derived solely by contract. See "Risk
Factors Regarding General Motors after the Split-Off."
Risk Factors Regarding Non-Consummation of the Split-Off
Holders of all classes of General Motors common stock should be aware of
certain factors if the Split-Off is not consummated, including that (i) there
are certain actual and potential conflicts between the businesses of EDS and
the other businesses of General Motors, as well as certain business objectives
of EDS, that would need to be addressed in a different manner if EDS were to
remain a subsidiary of General Motors, and there can be no assurance that the
GM Board will be able to address these conflicts and objectives in a manner
that will not have an adverse effect on the business, financial condition or
results of operations of EDS or General Motors or on the market price of any
class of GM common stock, and (ii) GM management has advised EDS management
that, if the Split-Off is not consummated, General Motors would seek
substantial changes to the Existing IT Services Agreements, including
implementation of substantially all of the changes reflected in the IT Services
Agreements, although no agreement has been reached between GM and EDS regarding
the terms on which EDS will provide IT services to GM if the Split-Off is not
consummated, and the Existing IT Services Agreements will remain in effect
until GM and EDS agree to changes or the GM Board, upon recommendation of the
Capital Stock Committee, determines that particular changes should be made and
that such changes are fair to all classes of GM common stockholders.
No Appraisal Rights
General Motors stockholders will not be entitled to any appraisal rights in
connection with the Transactions. See "The Split-Off--No Appraisal Rights."
7
<PAGE>
Summary Comparison of Class E Common Stock and EDS Common Stock
The following is a summary comparison of the terms of the outstanding Class E
Common Stock and the EDS Common Stock proposed to be distributed in the Split-
Off. For more detailed information regarding the terms of the Class E Common
Stock and EDS Common Stock, see "Class E Common Stock," "EDS Capital Stock" and
"Comparison of Class E Common Stock and EDS Common Stock."
CLASS E COMMON STOCK EDS COMMON STOCK
GENERAL............. Holders of Class E Common Holders of EDS Common Stock
Stock are stockholders of will be stockholders of EDS,
General Motors, not of which will no longer be a
EDS, and have an interest subsidiary of General Motors,
in the equity and assets and will have an equity in-
of General Motors, which terest in EDS. EDS is a Dela-
includes 100% of the ware corporation.
stock of EDS. General Mo-
tors is a Delaware corpo-
ration.
DIVIDEND POLICY..... Under the General Motors Under Delaware law and the
Certificate of Incorpora- EDS Certificate of Incorpora-
tion, dividends on Class tion, dividend policy with
E Common Stock may be de- respect to the EDS Common
clared and paid only to Stock will be determined by
the extent of the sum of the EDS Board. EDS management
(i) the paid in surplus intends to recommend to the
of General Motors attrib- EDS Board at its first meet-
utable to the Class E ing following consummation of
Common Stock plus (ii) an the Split-Off that EDS con-
allocated portion of the tinue to pay quarterly divi-
earnings of General Mo- dends through 1996 in an
tors attributable to EDS, amount equal to $0.15 per
determined as described share. The EDS Board will not
herein under "Class E be required to follow such
Common Stock" (the recommendation by EDS manage-
"Available Separate Con- ment. The EDS Board will be
solidated Net Income" of free to adopt such dividend
EDS). The current divi- policy as it deems appropri-
dend policy of the GM ate and, during or after
Board is to pay dividends 1996, to change its dividend
on Class E Common Stock, policies and practices from
when, as and if declared time to time and to decrease
by the GM Board, at an or increase the dividends
annual rate equal to ap- paid on the EDS Common Stock
proximately 30% of the on the basis of EDS' finan-
Available Separate Con- cial condition, earnings and
solidated Net Income of capital requirements and
EDS for the prior year. other factors the EDS Board
may deem relevant.
VOTING RIGHTS....... Holders of Class E Common Holders of EDS Common Stock
Stock are entitled to will be entitled to cast one
cast one-eighth of a vote vote per share on all matters
per share on all matters submitted to a vote of the
submitted to a vote of common stockholders of EDS.
the common stockholders
of General Motors and,
with specified excep-
tions, such holders vote
together as a single
class with the holders of
$1 2/3 Common Stock and
Class H Common Stock on
all matters based on
their respective voting
rights as set forth in
the General Motors Cer-
tificate of Incorpora-
tion.
8
<PAGE>
CLASS E COMMON STOCK EDS COMMON STOCK
LIQUIDATION RIGHTS.. Upon the liquidation, Upon the liquidation, disso-
dissolution or winding up lution or winding up of EDS,
of General Motors, after after the preferential or
the holders of GM Pre- participating amounts to
ferred Stock (if any) and which the holders of EDS Pre-
GM Preference Stock re- ferred Stock (if any) are en-
ceive the full preferen- titled have been paid or set
tial amounts to which aside for payment, holders of
they are entitled, hold- EDS Common Stock will be en-
ers of Class E Common titled to receive any assets
Stock will be entitled to available for distribution to
share in the distribution stockholders.
of the remaining avail-
able assets of General
Motors with all other
holders of GM common
stock in proportion to
their respective liquida-
tion units. Holders of
Class E Common Stock are
entitled to a number of
liquidation units equal
to approximately one-
eighth per share, com-
pared to approximately
one per share for holders
of $1 2/3 Common Stock
and approximately one-
half per share for hold-
ers of Class H Common
Stock.
RECAPITALIZATION All outstanding shares of Holders of EDS Common Stock
RIGHTS.............. Class E Common Stock may will have no rights compara-
be recapitalized as ble to those of holders of
shares of $1 2/3 Common Class E Common Stock with re-
Stock (i) at any time af- spect to the potential recap-
ter December 31, 1995, in italization of Class E Common
the sole discretion of Stock into $1 2/3 Common
the GM Board (provided, Stock at a 120% exchange ra-
that during each of the tio. Holders of EDS Common
five full fiscal years Stock will, however, have the
preceding the recapitali- potential to realize premiums
zation, the aggregate over prevailing market prices
cash dividends on Class E for EDS Common Stock in con-
Common Stock have been no nection with certain corpo-
less than a specified rate transactions, including
percentage of the Avail- tender offers for EDS Common
able Separate Consoli- Stock and change in control
dated Net Income of EDS transactions involving EDS,
for the prior fiscal although there can be no as-
year) and (ii) automati- surance in this regard.
cally, if at any time
General Motors disposes
of substantially all of
the business of EDS. In
the event of any such re-
capitalization, each
holder of Class E Common
Stock would receive
shares of $1 2/3 Common
Stock having a market
value, as of a specified
date, equal to 120% of
the market value of such
holder's Class E Common
Stock on such date. As a
result of the Merger, the
General Motors Certifi-
cate of Incorporation
will be amended so that
the Split-Off will not
result in any such recap-
italization.
9
<PAGE>
CLASS E COMMON STOCK EDS COMMON STOCK
CERTAIN LIMITATIONS
ON CHANGES IN
CONTROL.............
The EDS Certificate of Incor-
poration and the EDS Bylaws
The holders of Class E contain certain provisions,
Common Stock are not sub- such as a "fair price" provi-
ject to provisions compa- sion, which could have the
rable to the "fair price" effect of delaying, deferring
provision in the EDS Cer- or preventing a change in
tificate of Incorporation control of EDS and of limit-
or the provisions of the ing any opportunity to real-
EDS Rights Agreement. ize premiums over prevailing
market prices for EDS Common
Stock in connection there-
with. In addition, the Rights
Agreement (the "EDS Rights
Agreement") to which EDS is a
party provides for preferred
stock purchase rights that
could have the same effect.
One such right will be at-
tached to each share of EDS
Common Stock distributed upon
conversion of a share of
Class E Common Stock in the
Split-Off.
LISTING............. The Class E Common Stock Application has been made to
is listed and traded on list the EDS Common Stock on
the NYSE. the NYSE, and such applica-
tion has been granted pending
notice of issuance.
Certain U.S. Federal Income Tax Considerations
General Motors has received a ruling (the "Tax Ruling") from the IRS to the
effect that the Split-Off will be treated as a tax-free exchange under Section
355 of the Code. Accordingly, for U.S. federal income tax purposes, no gain or
loss will be recognized by either General Motors or holders of Class E Common
Stock on the exchange of EDS Common Stock for Class E Common Stock pursuant to
the Split-Off. The Tax Ruling is based on certain factual representations and
assumptions, however, and does not address U.S. state or local or non-U.S. tax
consequences or the tax consequences of transactions (if any) effectuated prior
to or after the Split-Off. If any such factual representations or assumptions
are incorrect or untrue in any material respect, the Tax Ruling may be
invalidated. Current Treasury Regulations require each General Motors
stockholder who receives EDS Common Stock pursuant to the Split-Off to attach
to such stockholder's federal income tax return for the year in which the
Split-Off occurs a detailed statement setting forth such data as may be
appropriate in order to show the applicability of Section 355 of the Code to
the Split-Off. At the time that the letter of transmittal is sent to all
current holders of Class E Common Stock, General Motors will provide such
information to each holder of Class E Common Stock receiving EDS Common Stock
in the Split-Off in order to enable each such holder to comply with such
regulations. For a more detailed discussion of the federal income tax
consequences of the Split-Off to General Motors and its stockholders, see
"Special Factors--Certain U.S. Federal Income Tax Considerations."
GM--PBGC Agreement
GM expects that, effective upon consummation of the Split-Off, the U.S.
Pension Benefit Guaranty Corporation (the "PBGC") will release EDS and its
subsidiaries from all existing and potential liabilities relating to General
Motors' U.S. pension plans under Title IV of the Employee Retirement Income
Security Act of 1974,
10
<PAGE>
as amended ("ERISA"), pursuant to the procedures set forth in an agreement
dated March 3, 1995 between General Motors and the PBGC (as amended, the "GM-
PBGC Agreement"). The PBGC has executed appropriate release instruments and has
delivered them to an escrow agent for delivery to GM and EDS following
consummation of the Split-Off. The GM-PBGC Agreement was entered into in
connection with the March 1995 contribution by GM to the GM Hourly Plan of
173.2 million shares of Class E Common Stock and $4 billion in cash. See
"Special Factors--Effects of the Split-Off" and "--GM-PBGC Agreement."
Certain Litigation
Two purported class actions relating to the Split-Off, the consolidated
action Solomon v. General Motors Corporation, et al. and TRV Holding Company v.
General Motors Corporation, et al., and Ward, et al., as Trustees for the
Eisenberg Children's Irrevocable Trust II v. General Motors Corporation, et
al., have been filed against General Motors and its directors in Delaware
Chancery Court. Both of the complaints seek injunctive relief against the
Split-Off, and the Solomon/TRV complaints seek monetary damages in addition.
See "Special Factors--Certain Litigation." General Motors believes that the
suits are without merit and intends to defend against them vigorously.
Regulatory Requirements
GM and EDS believe that no material U.S. federal or other regulatory
requirements remain to be complied with by GM or EDS, and no material approvals
thereunder must be obtained by GM or EDS, in order to consummate the Split-Off.
However, there may be certain regulatory (e.g., securities and competition)
requirements to be complied with and approvals to be obtained by GM and EDS
outside of the United States in connection with the consummation of the Split-
Off. GM and EDS are currently working together to evaluate and comply in all
material respects with such requirements and to obtain all such approvals, and
do not anticipate that any such foreign requirements will hinder, delay or
restrict in any material respect consummation of the Transactions. See "The
Split-Off--Regulatory Requirements."
AMENDED EDS INCENTIVE PLAN
General
The Amended EDS Incentive Plan is intended to amend and restate the Existing
EDS Incentive Plan in order, among other things, to provide that awards made
thereunder will be in the form of EDS Common Stock rather than Class E Common
Stock. Awards to employees of EDS under the Amended EDS Incentive Plan may be
made in the form of stock options, stock appreciation rights, restricted or
non-restricted stock or units denominated in stock, cash awards, performance
awards or any combination of the foregoing. Awards to nonemployee directors of
EDS under such plan will be in the form of grants of stock options and
restricted stock. The aggregate number of shares of EDS Common Stock that will
be available for grant under the Amended EDS Incentive Plan (in addition to
shares that are subject to outstanding awards at the time of consummation of
the Split-Off) will be 60,000,000, which is approximately 35% less than the
number of shares of Class E Common Stock that are currently available for grant
under the Existing EDS Incentive Plan. The Amended EDS Incentive Plan will be
administered by the Compensation and Benefits Committee of the EDS Board.
Stockholder Approval; Vote Required
Approval of the Amended EDS Incentive Plan by the common stockholders of
General Motors is being sought to ensure that the deductibility by EDS, for
U.S. federal income tax purposes, of certain performance-based awards made
under the Amended EDS Incentive Plan will not be limited by Section 162(m) of
the Code. Approval of the Amended EDS Incentive Plan is independent of the vote
on the Transactions and will require the consent of the holders of (i) a
majority of the voting power of all outstanding shares of all three classes of
General Motors common stock, voting together as a single class based on their
respective voting rights, and (ii)
11
<PAGE>
a majority of the outstanding shares of Class E Common Stock, voting as a
separate class. See "Solicitation of Written Consent of General Motors Common
Stockholders."
Effectiveness of Plan
If the Amended EDS Incentive Plan is approved by the stockholders of General
Motors, it will become effective in its entirety upon consummation of the
Split-Off. If the Amended EDS Incentive Plan is not approved by the
stockholders of General Motors, the Existing EDS Incentive Plan will remain in
effect (with certain modifications intended to reflect, among other things, the
assumption of such plan by EDS upon the consummation of the Split-Off) and the
Amended EDS Incentive Plan will become effective upon the consummation of the
Split-Off to the extent that it relates to nonemployee directors of EDS but
will not become effective to the extent that it relates to employees of EDS.
See "EDS Management and Executive Compensation--Amended EDS Incentive Plan" and
"--Existing EDS Incentive Plan."
12
<PAGE>
CERTAIN PER SHARE AND OTHER FINANCIAL INFORMATION
The following table presents selected historical and pro forma per share data
for all three classes of GM common stock and selected pro forma per share data
for the EDS Common Stock. The historical per share data as of and for the year
ended December 31, 1995 have been derived from General Motors' Consolidated
Financial Statements and should be read in conjunction with such Consolidated
Financial Statements (including the notes thereto) and Management's Discussion
and Analysis in the GM 1995 Form 10-K, which is incorporated herein by
reference, including the information with respect to EDS in Exhibit 99(a)
thereto. The pro forma per share data for all three classes of GM common stock
and the EDS Common Stock as of and for the year ended December 31, 1995 give
effect to the Transactions and have been derived from, and should be read in
conjunction with, the financial data set forth under "General Motors Unaudited
Pro Forma Condensed Consolidated Financial Statements" and "EDS Unaudited Pro
Forma Condensed Consolidated Financial Statements." The pro forma per share
data for all three classes of GM common stock and the EDS Common Stock are not
necessarily indicative of future operating results.
GM COMMON STOCK HISTORICAL PER SHARE DATA
<TABLE>
<CAPTION>
AS OF AND FOR
THE YEAR ENDED
DECEMBER 31, 1995
-------------------------
$1 2/3
PAR VALUE CLASS E CLASS H
--------- ------- -------
<S> <C> <C> <C>
Book value per share (a)........................ $24.37 $3.11 $12.20
Cash dividends per share........................ 1.10 0.52 0.92
Earnings per share attributable
to common stocks............................... 7.21 1.96 2.77
</TABLE>
GM COMMON STOCK PRO FORMA PER SHARE DATA(B)
<TABLE>
<CAPTION>
AS OF AND FOR
THE YEAR ENDED
DECEMBER 31, 1995
-------------------------
$1 2/3
PAR VALUE CLASS E CLASS H
--------- ------- -------
<S> <C> <C> <C>
Book value per share (a)........................ $22.30 $-- $11.15
Earnings per share attributable
to common stocks............................... 7.41 -- 2.77
</TABLE>
EDS COMMON STOCK PRO FORMA PER SHARE DATA (C)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1995
----------------------------
<S> <C>
Book value per share (d)..................... $9.16
Earnings per share........................... 1.64
</TABLE>
- --------
(a) Determined based on the liquidation rights with respect to the assets of
General Motors associated with the three classes of General Motors common
stock. For a description of such liquidation rights, see "Class E Common
Stock."
(b) Pro forma amounts reflect the removal of the assets and liabilities of EDS,
the impact of the IT Services Agreements, the Special Inter-Company Payment
and other items related to the Split-Off and the reclassification of EDS'
operating results to income from discontinued operations.
(c) Pro forma amounts include adjustments to reflect the impact of the IT
Services Agreements, the Special Inter-Company Payment (including, with
respect to EDS Common Stock, the financing thereof) and other items related
to the Split-Off. For certain information regarding the anticipated 1996
financial impact of the Transactions on EDS, see "EDS Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(d) Calculated by dividing book value of the net assets of EDS by the number of
shares of EDS Common Stock expected to be outstanding upon consummation of
the Split-Off.
13
<PAGE>
On August 4, 1995, the last trading day before General Motors announced that
it intended to pursue a split-off of EDS through which EDS would become an
independent, public company, the closing price of the Class E Common Stock, as
reported on the NYSE Composite Tape, was $43 5/8, and the aggregate market
value of the outstanding Class E Common Stock was approximately $19.1 billion.
On such date, the closing price of the $1 2/3 Common Stock and the Class H
Common Stock, as reported on the NYSE Composite Tape, was $48 1/4 and $41 7/8,
respectively, and the aggregate market value of the outstanding $1 2/3 Common
Stock and the outstanding Class H Common Stock was approximately $36.1 billion
and $4.0 billion, respectively.
On December 29, 1995, the last trading day before General Motors announced
that it had received the Tax Ruling, the closing price of the Class E Common
Stock, as reported on the NYSE Composite Tape, was $52, and the aggregate
market value of the outstanding Class E Common Stock was approximately $22.8
billion. On such date, the closing price of the $1 2/3 Common Stock and the
Class H Common Stock, as reported on the NYSE Composite Tape, was $52 7/8 and
$49 1/8, respectively, and the aggregate market value of the outstanding $1 2/3
Common Stock and the outstanding Class H Common Stock was approximately $39.8
billion and $4.8 billion, respectively.
On March 29, 1996, the last trading day before General Motors announced that
the GM Board had approved the Transactions, the closing price of the Class E
Common Stock, as reported on the NYSE Composite Tape, was $57, and the
aggregate market value of the outstanding Class E Common Stock was
approximately $27.7 billion. On such date, the closing price of the $1 2/3
Common Stock and the Class H Common Stock, as reported on the NYSE Composite
Tape, was $53 1/4 and $63 1/4, respectively, and the aggregate market value of
the outstanding $1 2/3 Common Stock and the outstanding Class H Common Stock
was approximately $40.3 billion and $6.2 billion, respectively.
GENERAL MOTORS RATIOS OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
The following table presents GM's historical and pro forma ratio of earnings
to fixed charges for the periods indicated. The historical ratio of earnings to
fixed charges for the years ended December 31, 1995 and 1994 have been derived
from General Motors' Consolidated Financial Statements and should be read in
conjunction with such Consolidated Financial Statements (including the notes
thereto) and Management's Discussion and Analysis in the GM 1995 Form 10-K,
which is incorporated herein by reference, including the information with
respect to EDS in Exhibit 99(a) thereto. The GM pro forma ratio of earnings to
fixed charges for the year ended December 31, 1995 gives effect to the
Transactions and has been derived from and should be read in conjunction with
the financial data set forth under "General Motors Unaudited Pro Forma
Condensed Consolidated Financial Statements." The GM pro forma ratio of
earnings to fixed charges is not necessarily indicative of future operating
results.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
PRO FORMA
1995 1995 1994
--------- ---- ----
<S> <C> <C>
2.42 2.52 2.51
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of consolidated income before cumulative effect of accounting change
plus income taxes and fixed charges included in net income after eliminating
the amortization of capitalized interest and the undistributed earnings of
affiliates; "fixed charges" consist of interest and related charges on debt,
that portion of rentals deemed to be interest, and interest capitalized in the
period.
For purposes of computing the pro forma ratio of earnings to fixed charges,
"earnings" consist of pro forma income from continuing operations before
cumulative effect of accounting change plus pro forma income taxes and pro
forma fixed charges included in pro forma income from continuing operations
after eliminating the pro forma amortization of capitalized interest and the
pro forma undistributed earnings of affiliates; pro forma "fixed charges"
consist of pro forma interest and related charges on debt, that portion of pro
forma rentals deemed to be interest, and pro forma interest capitalized in the
period.
14
<PAGE>
GENERAL MOTORS SUMMARY CONSOLIDATED HISTORICAL
AND PRO FORMA FINANCIAL DATA
The following General Motors summary consolidated historical financial data
have been derived from General Motors' Consolidated Financial Statements. Such
data should be read in conjunction with General Motors' Consolidated Financial
Statements (including the notes thereto) and Management's Discussion and
Analysis in the GM 1995 Form 10-K, which is incorporated herein by reference,
including the information with respect to EDS in Exhibit 99(a) thereto. The
General Motors summary consolidated historical financial data as of and for
the years ended December 31, 1995, 1994, 1993, 1992 and 1991 have been derived
from General Motors' Consolidated Financial Statements, which have been
audited by Deloitte & Touche LLP, independent auditors. The summary
consolidated financial data presented with GMAC on an equity basis as of and
for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are
unaudited. The General Motors unaudited summary consolidated pro forma
financial data as of and for the year ended December 31, 1995 give effect to
the Transactions and have been derived from, and should be read in conjunction
with, the financial data set forth under "General Motors Unaudited Pro Forma
Condensed Consolidated Financial Statements." Pro forma data are not
necessarily indicative of future financial position or operating results.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1995(A) 1995(B) 1994(C) 1993 1992(D) 1991(E)
---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Total net sales and
revenues.............. $160,272.5 $168,828.6 $154,951.2 $138,219.5 $132,242.2 $123,108.8
---------- ---------- ---------- ---------- ---------- ----------
Costs and expenses..... 151,763.5 159,052.3 146,597.9 134,694.2 134,338.3 126,180.3
Special provision for
scheduled plant
closings and other
restructurings........ -- -- -- 950.0 1,237.0 2,820.8
---------- ---------- ---------- ---------- ---------- ----------
Total costs and
expenses............ 151,763.5 159,052.3 146,597.9 135,644.2 135,575.3 129,001.1
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) from
continuing operations
before cumulative
effect of accounting
changes............... 6,134.5 6,932.5 5,658.7 2,465.8 (2,620.6) (4,992.0)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... $ 6,982.7 $ 6,880.7 $ 4,900.6 $ 2,465.8 $(23,498.3) $ (4,452.8)
========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA
Cash and marketable
securities............ $ 16,517.6 $ 16,642.9 $ 16,075.6 $ 17,962.7 $ 15,107.7 $ 10,192.4
---------- ---------- ---------- ---------- ---------- ----------
Total assets........... 208,006.5 217,123.4 198,598.7 188,200.9 190,196.0 184,074.6
---------- ---------- ---------- ---------- ---------- ----------
Notes and loans
payable............... 81,221.7 83,323.5 73,730.2 70,441.2 82,592.3 94,022.1
---------- ---------- ---------- ---------- ---------- ----------
Stockholders' equity... 18,748.7 23,345.5 12,823.8 5,597.5 6,225.6 27,327.6
---------- ---------- ---------- ---------- ---------- ----------
Cumulative Amount
Available for Payment
of Dividends (f)
Class E Common Stock.. $ -- $ 10,672.1 $ 3,752.1 $ 3,243.8 $ 2,546.4 $ 1,753.0
Class H Common Stock.. 2,909.5 2,909.5 2,169.3 1,886.7 1,582.9 1,218.5
$1 2/3 Par Value
Common Stock......... 18,496.7 12,474.7 9,013.8 4,870.0 3,487.7 23,264.1
---------- ---------- ---------- ---------- ---------- ----------
Total................ $ 21,406.2 $ 26,056.3 $ 14,935.2 $ 10,000.5 $ 7,617.0 $ 26,235.6
========== ========== ========== ========== ========== ==========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1995(A) 1995(B) 1994(C) 1993 1992(D) 1991(E)
---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
GM OPERATIONS WITH
GMAC ON AN EQUITY
BASIS:
OPERATING RESULTS
Total net sales and
revenues.............. $143,753.7 $152,614.5 $141,576.0 $125,252.7 $118,571.6 $109,156.9
---------- ---------- ---------- ---------- ---------- ----------
Costs and expenses..... 138,146.9 145,630.5 134,815.3 122,812.1 121,420.0 112,719.3
Special provision for
scheduled plant
closings and other
restructurings........ -- -- -- 950.0 1,237.0 2,820.8
---------- ---------- ---------- ---------- ---------- ----------
Total costs and
expenses.............. 138,146.9 145,630.5 134,815.3 123,762.1 122,657.0 115,540.1
---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) from
continuing operations
before cumulative
effect of accounting
changes............... 6,134.5 6,932.5 5,651.3 2,465.8 (2,903.2) (4,660.5)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... $ 6,982.7 $ 6,880.7 $ 4,900.6 $ 2,465.8 $(23,498.3) $ (4,452.8)
========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA
Cash and marketable
securities............ $ 10,740.8 $ 10,866.1 $ 10,976.4 $ 10,485.0 $ 7,960.8 $ 4,419.4
---------- ---------- ---------- ---------- ---------- ----------
Total assets........... 126,062.4 135,243.3 126,334.9 120,980.5 121,356.2 104,797.5
---------- ---------- ---------- ---------- ---------- ----------
Long-term debt and
capitalized leases.... 6,467.0 6,134.0 6,218.7 6,383.6 7,055.4 6,699.1
---------- ---------- ---------- ---------- ---------- ----------
Stockholders' equity... 18,748.7 23,345.5 12,823.8 5,597.5 6,225.6 27,327.6
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
- --------
(a) The unaudited summary consolidated pro forma financial data give effect to
the removal of assets and liabilities of EDS; the reclassification of EDS'
operating results to income from discontinued operations; the receipt by GM
of the Special Inter-Company Payment; adjustments to costs and expenses to
reflect communication and information processing charges under the terms of
the IT Services Agreements and additional selling, general, and
administrative costs incurred as a result of the Split-Off; and income tax
expense on the pro forma adjustments calculated at 38%.
(b) In November 1995, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on its Issue No. 95-1,
"Revenue Recognition on Sales with a Guaranteed Minimum Resale Value."
Adoption of this consensus, effective January 1, 1995, resulted in an
unfavorable cumulative effect of $51.8 million, or $0.07 per share,
attributable to $1 2/3 Common Stock.
(c) Effective January 1, 1994, GM adopted Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment
Benefits." The unfavorable cumulative effect of adopting SFAS No. 112 was
$758.1 million, or $751.3 million, or $1.05 per share, attributable to $1
2/3 Common Stock and $6.8 million, or $0.08 per share, attributable to
Class H Common Stock.
(d) GM adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," effective January 1, 1992. The unfavorable cumulative
effect of adopting SFAS No. 106 was $20,687.3 million, or $33.38 per share,
attributable to $1 2/3 Common Stock and $150.4 million, or $2.08 per share,
attributable to Class H Common Stock. Also, effective January 1, 1992,
Hughes Aircraft Company changed its revenue recognition policy for certain
commercial businesses. The unfavorable effect of this change on 1992
earnings was $32.8 million, or $0.05 per share, attributable to $1 2/3
Common Stock, and $7.2 million, or $0.10 per share, attributable to Class H
Common Stock.
(e) Effective January 1, 1991, accounting procedures were changed to include in
inventory general purpose spare parts previously charged directly to
expense. The effect of this change on 1991 earnings was a favorable
adjustment of $302.7 million, or $0.50 per share, attributable to $1 2/3
Common Stock, and $3.8 million, or $0.04 per share, attributable to Class H
Common Stock. Also, GM adopted SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1991. The favorable (unfavorable) cumulative effect of
adopting SFAS No. 109 was $230.5 million, or $0.38 per share, attributable
to $1 2/3 Common Stock, ($6.1) million, or ($0.03) per share, attributable
to Class E Common Stock, and $8.3 million, or $0.09 per share, attributable
to Class H Common Stock.
(f) Amount of funds legally available as of such date for the payment of
dividends on each class of GM common stock under the General Motors
Certificate of Incorporation.
16
<PAGE>
EDS SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following EDS summary consolidated historical financial data have been
derived from EDS' Consolidated Financial Statements. Such data should be read
in conjunction with EDS' Consolidated Financial Statements (including the notes
thereto), which are included as Appendix C to this Solicitation
Statement/Prospectus, and "EDS Management's Discussion and Analysis of
Financial Condition and Results of Operations." The EDS summary 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 EDS unaudited summary consolidated pro forma financial data as of
and for the year ended December 31, 1995 give effect to the Transactions and
have been derived from, and should be read in conjunction with, the financial
data set forth under "EDS Unaudited Pro Forma Condensed Consolidated Financial
Statements." Pro forma data are not necessarily indicative of future financial
position or operating results.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------
PRO FORMA
1995(A) 1995 1994 1993 1992 1991(B)
--------- -------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Systems and other
contracts revenues
General Motors and
affiliates............ $ 3,715.3 $3,891.1 $ 3,547.2 $ 3,323.7 $ 3,348.5 $ 3,362.2
Outside customers...... 8,531.0 8,531.0 6,412.9 5,183.6 4,806.7 3,666.3
--------- -------- --------- --------- --------- ---------
Total revenues......... 12,246.3 12,422.1 9,960.1 8,507.3 8,155.2 7,028.5
--------- -------- --------- --------- --------- ---------
Costs and expenses
Cost of revenues....... 9,604.6 9,601.6 7,529.4 6,390.6 6,205.8 5,415.1
Selling, general, and
administrative........ 1,299.0 1,291.5 1,187.1 1,005.4 969.3 761.9
--------- -------- --------- --------- --------- ---------
Total costs and
expenses.............. 10,903.6 10,893.1 8,716.5 7,396.0 7,175.1 6,177.0
--------- -------- --------- --------- --------- ---------
Operating income........ 1,342.7 1,529.0 1,243.6 1,111.3 980.1 851.5
Interest and other
income, net............ (97.0) (62.0) 40.6 20.0 20.7 42.2
--------- -------- --------- --------- --------- ---------
Income before income
taxes.................. 1,245.7 1,467.0 1,284.2 1,131.3 1,000.8 893.7
Provision for income
taxes.................. 450.7 528.1 462.3 407.3 365.3 330.7
Cumulative effect of
accounting change(b)... -- -- -- -- -- (15.5)
--------- -------- --------- --------- --------- ---------
Net Income/Separate
Consolidated Net Income
(c)(d)................. $ 795.0 $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5
========= ======== ========= ========= ========= =========
Average number of shares
of Class E Common Stock
outstanding (Numerator)
(d).................... -- 404.6 260.3 243.0 209.1 195.3
Class E Dividend Base
(Denominator) (d)...... -- 483.7 481.7 480.6 479.3 478.1
Available Separate
Consolidated Net Income
(d).................... -- $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6
Earnings per share
attributable to Class E
Common
Stock (d).............. -- 1.96 1.71 1.51 1.33 1.14
Dividends per share of
Class E Common Stock
(d).................... -- 0.52 0.48 0.40 0.36 0.32
Weighted average number
of EDS common shares
outstanding............ 483.6 -- -- -- -- --
Net income per share.... $ 1.64 -- -- -- -- --
BALANCE SHEET DATA
Cash and marketable
securities............. $ 638.6 $ 638.6 $ 757.8 $ 607.5 $ 587.9 $ 415.8
Current assets.......... 4,368.1 4,381.5 3,354.1 2,506.8 2,157.0 1,945.6
Total assets (c)(e)..... 10,785.8 10,832.4 8,786.5 6,942.1 6,123.5 5,703.2
Current liabilities..... 3,296.4 3,261.4 2,873.2 2,160.4 1,903.1 2,396.7
Long-term debt.......... 2,352.8 1,852.8 1,021.0 522.8 561.1 281.9
Stockholders' equity
(e)(f)................. 4,430.2 4,978.5 4,232.5 3,617.4 3,063.4 2,610.3
OTHER DATA
Depreciation and
amortization........... $ 1,107.8 $1,107.8 $ 771.1 $ 626.8 $ 603.2 $ 524.4
Expenditures for
property
and equipment.......... 1,261.5 1,261.5 1,186.0 816.4 639.0 673.2
</TABLE>
17
<PAGE>
- --------
(a) Pro forma amounts include adjustments to reflect the impact of the IT
Services Agreements, the Special Inter-Company Payment (and the financing
thereof) and other items related to the Split-Off. For certain information
regarding the anticipated 1996 financial impact of the Transactions, see
"EDS Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(b) Effective January 1, 1991, GM and its affiliates (including 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 $6.1 million, or $0.03 per share, was attributable to Class E Common
Stock.
(c) Separate Consolidated Net Income and Total assets exclude the effects of
purchase accounting adjustments relating to General Motors' 1984
acquisition of EDS.
(d) Calculated for purposes related to the Class E Common Stock, which will be
converted into EDS Common Stock on a one-for-one basis pursuant to the
Split-Off.
(e) Holders of 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 General
Motors (which include 100% of the stock of EDS).
(f) General Motors' equity in its indirect wholly owned subsidiary, EDS
(excluding the effects of purchase accounting adjustments relating to
General Motors' 1984 acquisition of EDS).
18
<PAGE>
RISK FACTORS REGARDING EDS AFTER THE SPLIT-OFF
Holders of Class E Common Stock will receive shares of EDS Common Stock in
the Split-Off and should therefore consider carefully, in addition to the
other information set forth in this Solicitation Statement/Prospectus, the
following factors.
DIVIDEND POLICY
The payment of dividends on the Class E Common Stock is subject to the
policies and practices of the GM Board. The current dividend policy of the GM
Board is to pay quarterly dividends on the Class E Common Stock, when, as 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 the current policies and practices of the GM Board, the quarterly
dividend paid on each share of Class E Common Stock was $0.13 per share during
1995. In February 1996, the GM Board increased the quarterly dividend on Class
E Common Stock to $0.15 per share. The GM Board reserves the right to
reconsider from time to time its policies and practices regarding dividends on
Class E Common Stock and to increase or decrease the dividends paid on Class E
Common Stock on the basis of General Motors' consolidated financial position,
including liquidity, and other factors, including the earnings and
consolidated financial position of EDS. See "Class E Common Stock."
Following the Split-Off, the dividend policy and practices with respect to
the EDS Common Stock will be as determined and as may be changed from time to
time by the EDS Board, not the GM Board. Under Delaware law and the EDS
Certificate of Incorporation, the EDS Board is not required to declare
dividends on the EDS Common Stock. EDS management intends to recommend to the
EDS Board at its first meeting following consummation of the Split-Off that
EDS continue to pay quarterly dividends through 1996 in an amount equal to
$0.15 per share. The EDS Board will not be required to follow such
recommendation by EDS management. The EDS Board will be free to adopt such
dividend policy as it deems appropriate and, 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. See "Plans and Proposals of EDS--EDS Dividend
Policy."
INCREASED LEVERAGE; NO ASSURANCE OF ACCESS TO CAPITAL
After the Split-Off, it is expected that EDS may over time incur
substantially more debt than it has while a subsidiary of GM. EDS expects that
it will borrow approximately $500 million under its existing commercial paper
and committed credit 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 currently maintains 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 is more highly leveraged following the
Split-Off, EDS may also be required to pay higher interest rates on its
outstanding borrowings. Furthermore, although General Motors and EDS believe
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 "Special Factors--Purposes of the Split-Off" and "EDS Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
NO PRIOR PUBLIC MARKET FOR EDS COMMON STOCK; NO ASSURANCE AS TO MARKET PRICE
Although the Class E Common Stock (which is a stock of General Motors
designed to provide holders with financial returns based on the performance of
EDS) has been traded publicly since its initial issuance in 1984, there has
been no public market for the EDS Common Stock since such time. Because, among
other things, EDS Common Stock will be a security of EDS (rather than a
security of GM), with different terms than the Class E Common Stock (including
no rights comparable to the potential recapitalization of Class E Common Stock
into
19
<PAGE>
$1 2/3 Common Stock at a 120% exchange ratio under certain circumstances),
there can be no assurance that the public market for EDS Common Stock will be
similar to the public market for Class E Common Stock. See "EDS Capital Stock"
and "Comparison of Class E Common Stock and EDS Common Stock." Based on the
one-for-one exchange ratio for the Split-Off, approximately 485 million shares
of EDS Common Stock will be issued and outstanding immediately after the Split-
Off, which shares have been approved for listing on the NYSE subject to notice
of issuance. Based on the ownership of Class E Common Stock on the Record Date,
immediately after the Split-Off, shares of EDS Common Stock will be broadly
distributed among numerous individual and institutional holders, and
approximately 149.5 million shares will be held by the GM Hourly Plan Special
Trust. Ultimately, the value of each share of EDS Common Stock will be
principally determined in the trading markets and could be influenced by many
factors, including the terms and conditions of the Split-Off, 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 EDS Common Stock, and general economic and other
conditions. See "EDS 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 EDS Common Stock immediately after the Split-Off
will be consistent with the trading value of each share of Class E Common Stock
immediately before the Split-Off. The trading value of EDS Common Stock could
be higher or lower than the trading value of Class E Common Stock, and GM and
EDS are unable to estimate whether such difference (whether favorable or
unfavorable) will be material to holders of EDS Common Stock.
DEPENDENCE ON MAJOR CUSTOMER; 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 Merger, General Motors and EDS will enter into the
Master Services Agreement and certain other related IT Services Agreements. 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. However, unlike the Existing Master Services Agreement
(which does not have a fixed term, but provides 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 Services Agreement provides for
an initial term of 10 years from the date upon which the Split-Off is
consummated, which may be extended by agreement of the parties. Furthermore,
the Master Services Agreement will provide General Motors with termination
rights under certain circumstances, including upon the occurrence of certain
changes in control of EDS.
In addition, the IT Services Agreements provide that certain significant
changes will be made 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 will also be
given the right to competitively bid and, subject to certain restrictions,
outsource a limited portion of its IT service requirements to third party
providers. In addition, 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. The GM Board believes that such
changes are necessary (i) in light of the fact that, after the Split-Off, EDS
will no longer be a subsidiary of General Motors and the Capital Stock
Committee will no longer be able to monitor the IT service arrangements between
the parties, (ii) to reflect the evolutionary nature of the General Motors-EDS
customer relationship and the IT services industry and (iii) to provide
additional assurances to General Motors, as EDS' largest customer, that the IT
services performed by EDS will remain competitive. See "Relationship Between
General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements."
20
<PAGE>
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. 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 would not have a material adverse effect in the long
term on the results of operations of EDS. See "EDS Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business of
EDS--Revenues."
SIGNIFICANT STOCKHOLDER
As of the Record Date, the GM Hourly Plan Special Trust owned approximately
149.5 million shares of Class E Common Stock and, assuming none of such shares
are sold, upon consummation of the Split-Off, will own approximately 31% of
the outstanding EDS Common Stock. United States Trust Company of New York and
its affiliate, U.S. Trust Company of California, N.A. (together, the "GM
Hourly Plan Trustees"), as the independent trustees of the GM Hourly Plan
Special Trust, have the authority and discretion to cause the GM Hourly Plan
Special Trust to hold such shares of Class E Common Stock (and following the
Split-Off, of EDS Common Stock) or to sell all or any portion thereof from
time to time as they deem appropriate. The shares owned by the GM 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. GM and EDS have been advised that, in order to discharge
their fiduciary duties, the GM Hourly Plan Trustees continually look for
attractive opportunities to sell a portion of their holdings of Class E Common
Stock (and following the Split-Off, EDS Common Stock). There can be no
assurance as to the timing or size of any offerings of shares owned by the GM
Hourly Plan Special Trust since, subject to the terms of the agreements
referred to above, the GM Hourly Plan Trustees have the right to sell such
shares at any time. The sale of shares by the GM Hourly Plan Special Trust
will depend on, among other things, market conditions, the price of, and
demand for, such shares, and other factors outside the control of EDS.
Although the GM Hourly Plan Trustees have notified GM and EDS of their intent
to manage the disposition of shares of EDS Common Stock in a manner consistent
with maintaining an orderly market for the EDS Common Stock, there can be no
assurance in this regard and sales of substantial amounts of EDS Common Stock
by the GM Hourly Plan Special Trust could adversely affect the then prevailing
market price for the EDS Common Stock and could impair EDS' ability to raise
additional capital through the sale of equity securities.
The GM Hourly Plan Trustees have the authority and discretion to direct the
voting and exercise of all other rights relating to the shares of Class E
Common Stock (and after the Split-Off, of EDS Common Stock) held by the GM
Hourly Plan Special Trust. Although the GM Hourly Plan Trustees have stated
that such stock was not acquired for such purpose, the level of such ownership
will give the GM 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 below under "--Certain Limitations on Changes in Control of EDS,"
the GM Hourly Plan Special Trust is a party to certain agreements which
restrict its ability to transfer shares of Class E Common Stock (and EDS
Common Stock after the Split-Off) and to vote in favor of certain business
combinations involving EDS. See "Security Ownership of Certain Beneficial
Owners and Management of General Motors and EDS--GM Hourly Plan Special
Trust."
NO ASSURANCE OF STRATEGIC ALLIANCES AND OTHER BUSINESS OPPORTUNITIES
The Split-Off is 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 result from EDS' status as a subsidiary of
General Motors. EDS is not currently a party to any agreement or understanding
with respect to any material
21
<PAGE>
strategic alliance or business combination. Although General Motors and EDS
believe that the Split-Off will enhance 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 if the Split-Off is consummated. See "Special Factors--
Purposes of the Split-Off." The ability of EDS to enter into and consummate
business combinations will be limited by the matters described below under "--
Certain Limitations on Changes in Control of EDS."
TERMINATION OF SUBSIDIARY RELATIONSHIP WITH GENERAL MOTORS
As a subsidiary of General Motors, EDS has been able to benefit since 1984
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. After the Split-Off, EDS will be
a stand-alone, public company and thus will no longer be 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 EDS
The EDS Certificate of Incorporation and the EDS 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 are not found in the
General Motors Certificate of Incorporation or General Motors By-Laws and 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 EDS Common Stock in connection therewith. The EDS
Rights Agreement, which also has no equivalent at General Motors, could have
the same effect. See "EDS Capital Stock" and "Comparison of Class E Common
Stock and EDS Common Stock."
As noted above, as of the Record Date, the GM Hourly Plan Special Trust owned
approximately 31% of the outstanding Class E Common Stock. The GM Hourly Plan
Special Trust is a party to the Registration Rights Agreement (as defined
herein), which contains certain restrictions on its ability to transfer the
shares of Class E Common Stock held by it (including by tendering into any
tender offer), which restrictions will continue to apply to its holdings of EDS
Common Stock after consummation of the Split-Off. General Motors and the GM
Hourly Plan Special Trust are also parties to the Transfer Agreement (as
defined herein), which is intended to preserve the tax-free status of the
Split-Off and which contains restrictions on the ability of the GM Hourly Plan
Special Trust to transfer Class E Common Stock and to vote in favor of certain
business combinations involving EDS, which restrictions will apply to the EDS
Common Stock for a period generally of two years after the Split-Off. The
contractual restrictions to which the shares of EDS Common Stock owned by the
GM 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 EDS Common Stock, that could give the holders of
EDS Common Stock the opportunity to realize a premium over the then prevailing
market price of such stock. See "Security Ownership of Certain Beneficial
Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust."
In addition, in order to preserve the tax-free status of the Split-Off, under
the Separation Agreement, EDS will be prohibited, until after the two-year
anniversary of the consummation of the Split-Off 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 EDS
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 the six-month anniversary of the
consummation of the Split-Off, 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
22
<PAGE>
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 General
Motors and EDS--Post-Split-Off Arrangements--Separation Agreement." The Master
Services Agreement will also provide General Motors with certain termination
rights upon the occurrence of certain changes in control of EDS. See
"Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT
Services Agreements."
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Solicitation Statement/Prospectus contains certain forward-looking
statements and information relating to EDS that are based on the beliefs of GM
or EDS management as well as assumptions made by and information currently
available to GM or EDS management. When used in this document, the words
"anticipate," "believe," "estimate" and "expect" and similar expressions, as
they relate to GM, EDS or GM or EDS management, are intended to identify
forward-looking statements. Such statements reflect the current views of GM or
EDS with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
Solicitation Statement/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. Neither GM nor EDS intends to update these
forward-looking statements.
23
<PAGE>
RISK FACTORS REGARDING GENERAL MOTORS AFTER THE SPLIT-OFF
Holders of $1 2/3 Common Stock and Class H Common Stock should consider
carefully, in addition to the other information set forth in this Solicitation
Statement/Prospectus, the following factors.
REDUCTION IN GENERAL MOTORS' CONSOLIDATED NET WORTH, ASSETS AND CERTAIN RATIOS
Following the Split-Off, General Motors will no longer own all the
outstanding shares of EDS and, accordingly, General Motors' balance sheet will
reflect decreased stockholders' equity and liabilities as well as decreased
assets, resulting in an overall reduction in General Motors' consolidated net
worth of approximately $5 billion. General Motors also expects that, as a
result of the Split-Off, certain GM financial ratios on a consolidated basis
(including gross margin percentage, operating margin percentage and net margin
percentage) will decrease, since the business of EDS is generally a higher
margin business than GM's other businesses. See "General Motors Unaudited Pro
Forma Condensed Consolidated Financial Statements."
LOSS OF POTENTIAL AVAILABILITY OF EDS FUNDS AND ASSETS
Under the General Motors Certificate of Incorporation, the portion of
General Motors' consolidated earnings attributable to EDS that is included in
the amount available for the payment of dividends on the Class E Common Stock
is determined by a fraction, the numerator of which is a number equal to the
weighted average number of shares of Class E Common Stock outstanding during
each quarterly accounting period and the denominator of which was 484.4
million for the first quarter of 1996; provided that such fraction shall never
be greater than one. The denominator is adjusted from time to time as deemed
appropriate by the GM Board to reflect subdivisions and combinations of the
Class E Common Stock and certain transfers of capital to or from EDS. The
denominator is sometimes referred to herein as the Class E Dividend Base. See
"Class E Common Stock--Dividend Policy." Under the current dividend policies
and practices of General Motors, General Motors pays dividends to holders of
Class E Common Stock in an aggregate amount approximately equal to the product
of the aggregate dividends received from EDS multiplied by the fraction
described above.
For the first quarter of 1996, the fraction described above was 463.2
million/484.4 million, or approximately 0.96. Approximately 44.7 million
shares of Class E Common Stock were issued between January 1 and February 22,
1996 upon conversion of approximately 3.2 million shares of General Motors
Series C Convertible Preference Stock (the "Series C Preference Stock"). The
remaining 6,784 outstanding shares of Series C Preference Stock were redeemed
on February 22, 1996 for $3.6 million. After giving effect for a full quarter
to the issuance of such shares upon conversion (rather than for the portion of
the quarter during which such shares were outstanding), such fraction would be
approximately equal to one. Thus, under General Motors' current dividend
policies and practices and assuming that the Split-Off did not occur, General
Motors would not (unless such policies and practices were changed in the sole
discretion of the GM Board) retain a significant portion, if any, of the cash
received as dividends from EDS for other corporate purposes, since such cash
would instead be paid as dividends to holders of Class E Common Stock. After
the Split-Off, General Motors will no longer be the sole stockholder of EDS,
and any dividends declared by EDS will be paid directly to the holders of EDS
Common Stock. Accordingly, GM will no longer be able to consider using the
funds generated by EDS to fund GM's other businesses or corporate needs,
including in periods of economic downturn, rather than paying dividends to the
holders of Class E Common Stock. Any use by General Motors of funds generated
by EDS for purposes other than paying dividends to holders of Class E Common
Stock would take place only after due consideration by the Capital Stock
Committee and the GM Board of the best interests of the holders of each class
of its common stock, the best interests of all of its common stockholders and
the fiduciary duties owed by the GM Board to the holders of each class of its
common stock.
In addition, as a result of the Split-Off, holders of $1 2/3 Common Stock
and Class H Common Stock will lose their rights to share (in proportion to
their respective liquidation units as set forth in the General Motors
Certificate of Incorporation) in the distribution of EDS' equity and assets
upon the liquidation of General Motors.
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EFFECT OF SPLIT-OFF ON GM PENSION EXPENSE AND UNFUNDED PENSION LIABILITY
Approximately one-third of the outstanding Class E Common Stock is currently
held by the GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so
long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any
appreciation or depreciation in the value of EDS Common Stock will affect the
level of General Motors' pension expense and unfunded pension liability, which
are actuarially determined and computed in accordance with generally accepted
accounting principles.
LOSS OF OWNERSHIP INTEREST IN IT PROVIDER
After the Split-Off, General Motors will no longer have an ownership
interest in its principal IT provider and the Capital Stock Committee will no
longer monitor the terms on which EDS provides IT services to General Motors.
Rather, following the Split-Off, all General Motors' rights concerning EDS'
provision of IT services to it will be purely contractual in nature and
governed by the IT Services Agreements and any other service contracts that
may be entered into between General Motors and EDS. The GM Board has
determined, however, that continued ownership of EDS is not necessary for GM
to execute its IT strategy or to ensure the security of its computer data and
other information. See "Special Factors--Background of the Split-Off."
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Solicitation Statement/Prospectus contains certain forward-looking
statements and information relating to GM that are based on the beliefs of GM
management as well as assumptions made by and information currently available
to GM management. When used in this document, the words "anticipate,"
"believe," "estimate" and "expect" and similar expressions, as they relate to
GM or GM management, are intended to identify forward-looking statements. Such
statements reflect the current view of GM with respect to future events and
are subject to certain risks, uncertainties and assumptions, including the
risk factors described in this Solicitation Statement/ 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. GM does not
intend to update these forward-looking statements.
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RISK FACTORS REGARDING NON-CONSUMMATION OF THE SPLIT-OFF
Holders of all classes of General Motors common stock should consider
carefully, in addition to the other information in this Solicitation
Statement/Prospectus, the following factors.
BUSINESS CONFLICTS AND OBJECTIVES
The GM Board has determined that there are certain actual and potential
conflicts between the businesses of EDS and the other businesses of General
Motors and that it is likely that these conflicts will continue and intensify
over time. The GM Board believes that the Split-Off would resolve these
business conflicts and enhance certain additional EDS business objectives more
effectively than any of the other available alternatives. See "Special
Factors-- Alternatives to the Split-Off." However, if the Split-Off is not
consummated, the GM Board will need to consider alternative means of
addressing these conflicts and objectives. There can be no assurance that the
GM Board will be able to address these conflicts and objectives in a manner
that will not have an adverse effect on the business, financial condition or
results of operations of EDS or General Motors or on the market price of any
class of GM common stock.
CHANGES IN TERMS OF EXISTING IT SERVICES AGREEMENTS
If the Split-Off is not consummated, the Existing IT Services Agreements
will continue, with such changes as General Motors and EDS may from time to
time agree upon or as the GM Board upon recommendation of the Capital Stock
Committee may from time to time determine to be fair to all classes of GM
common stockholders. No agreement has been reached between GM and EDS
regarding any changes to the Existing IT Services Agreements that may take
effect if the Split-Off is not approved by General Motors common stockholders
or is not consummated for any other reason. GM management has advised EDS
management that in such an eventuality it would seek substantial changes in
the Existing IT Services Agreements, including implementation of substantially
all of the changes provided for by the Master Services Agreement. Neither the
GM Board nor the Capital Stock Committee has determined whether to require
such changes to the Existing IT Services Agreements if the Split-Off is not
consummated, but they anticipate considering such changes if such
circumstances arise.
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SPECIAL FACTORS
PURPOSES OF THE SPLIT-OFF
The GM Board has determined that ownership of EDS is not necessary for GM to
execute its IT strategy or to ensure the security of its computer data and
other information. Furthermore, the GM Board has determined that there are
certain actual and potential conflicts between the business of EDS and the
other businesses of General Motors. The Split-Off is intended to address such
conflicts in a manner that is beneficial from the standpoint of all
stockholders of GM and to allow the boards and management of GM and EDS to
increase their focus on their respective business operations. Approximately
one-third of the outstanding Class E Common Stock is held by the GM Hourly
Plan Special Trust. Accordingly, after the Split-Off, so long as the GM Hourly
Plan Special Trust holds any EDS Common Stock, any appreciation or
depreciation in the value of EDS Common Stock will affect the level of General
Motors' pension expense and unfunded pension liability, which are actuarially
determined and computed in accordance with generally accepted accounting
principles.
The Split-Off of EDS from General Motors is intended to accomplish at least
three business objectives from the perspective of EDS and the holders of Class
E Common Stock. First, converting EDS from a wholly owned subsidiary of GM
into an independent, publicly owned company is 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 is intended to remove limitations on EDS' ability to obtain additional
business and establish new customer relationships that result 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 is intended to better position EDS to meet its growing capital needs.
Each of these business objectives is described in more detail below.
Strategic Alliances. The first purpose of the Split-Off is to eliminate the
impediments arising from General Motors' ownership of EDS that have prevented
EDS from pursuing and consummating strategic transactions that are important
to its continued competitiveness. During the decade in which EDS has been a
subsidiary of General Motors, there has 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 has engaged in
discussions with leading telecommunications providers regarding potential
strategic combinations on numerous occasions during the last decade. See "--
Background of the Split-Off." While some of these negotiations reached
advanced stages (most notably the discussions with Sprint Corporation in
1994), none has 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, have prevented or hindered the consummation of a transaction.
General Motors and EDS believe that these factors will continue to restrict
EDS' ability to expand into integrated worldwide markets so long as EDS
remains a subsidiary of General Motors.
Certain Additional Growth Opportunities. A second purpose of the Split-Off
is to remove certain limitations on EDS' ability to obtain additional business
and establish new customer relationships that have arisen as a result of EDS'
status as a subsidiary of GM. These limitations have not been imposed by GM,
but rather are a result of certain reactions of potential EDS customers to
EDS' affiliation with GM. Such limitations have become increasingly
significant during the 1990s as the businesses of General Motors and GMAC and
the telecommunications and certain other businesses of Hughes have expanded
either to present conflicts that limit 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 have been reluctant to become customers or partners of EDS due
to concerns relating to divulging confidential and proprietary information to
an affiliate of one of their competitors. For example, GM and EDS believe that
EDS' affiliation
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with General Motors and GMAC has limited EDS' ability to expand its business
within the automotive, consumer finance and related industries, despite EDS'
extensive expertise in these important markets. Similarly, GM and EDS believe
that common ownership of EDS and Hughes, which participates in the direct to
home satellite television services and wireless communications industries, has
caused EDS to lose or be disadvantaged in seeking certain business
opportunities with potential customers and partners, including in the cable
television industry, who are concerned by Hughes' competition in these areas.
General Motors and EDS expect impediments and conflicts like these to
intensify in future years if the Split-Off does not occur.
Capital Needs. A third purpose of the Split-Off is 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 is limited by factors relating to GM. EDS and the
remainder of GM's operations are in industries with different characteristics,
and each of them has 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, places 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
create conflicts that GM and EDS believe will continue 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 believes
that its capital requirements are likely to continue to increase in the
future.
Achievement of each of the foregoing business objectives is dependent on
numerous factors in addition to consummation of the Split-Off, 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 if
the Split-Off is consummated.
ALTERNATIVES TO THE SPLIT-OFF
In addition to considering the Split-Off of EDS from General Motors, the GM
Board considered four other alternatives to address the conflicts and
limitations and accomplish the objectives outlined in "--Purposes of the
Split-Off." The first alternative considered was to make no change to the
existing structure or businesses of the General Motors group. Maintaining the
current structure, however, would not address EDS' difficulties in completing
strategic alliances, the growing business conflicts between the business of
EDS and other businesses of General Motors or challenges in providing for the
growing capital needs of EDS. Furthermore, due to converging lines of business
among EDS and other business units within General Motors, this option would
require the GM Board and the Capital Stock Committee to increasingly confront
difficult business decisions regarding capital allocation and other
operational issues in order to avoid, mitigate or resolve conflicts.
The second alternative considered was the maintenance of the existing
structure of the GM group with explicit delineation of the areas and the
manner in which EDS and Hughes could operate and compete. Implementation of
this approach would have required extensive oversight by the GM Board and the
Capital Stock Committee, involving continual and complex definitions and
redefinitions of markets and competitive boundaries in a highly fluid business
landscape, and would have continued to limit operating and strategic
flexibility for both EDS and Hughes. Moreover, this approach would have left
unresolved complications surrounding the unwillingness of potential strategic
partners to enter into alliances with EDS, conflicts stemming from the
unwillingness of competitors of General Motors, Hughes and GMAC to do business
with EDS, and limitations on meeting EDS' heightened capital needs.
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The third alternative considered was the merger of all or part of the
businesses of EDS and Hughes. Under this option, EDS and Hughes would have
consolidated their efforts to win contracts instead of competing for them and
potentially benefited from opportunities such as Hughes' ability to provide a
portion of EDS' telecommunications needs. A merger of EDS and Hughes, however,
could have exacerbated EDS' difficulties in seeking and maintaining certain
customers and partners that are Hughes' competitors in the telecommunications
industry and could have limited EDS' access to critical telecommunications
capabilities not owned by EDS or Hughes. Moreover, before this option could
have been implemented, a variety of difficult operational issues, such as
determining exactly which operations should be merged and how this would be
accomplished, would have needed to be resolved.
The fourth alternative considered was the divestiture of all or part of
Hughes. This approach would have eliminated business conflicts arising from
EDS' affiliation with Hughes, made more capital available for the remaining
members of the GM group, including EDS, and simplified General Motors'
decision-making process with respect to capital allocation within the group.
It would not, however, have removed many of the obstacles to EDS' consummation
of strategic combinations or addressed the conflicts caused by competition
between customers of EDS and other members of the GM group. Additionally, it
would not have addressed the conflicts between the capital raising activities
of General Motors and EDS. Furthermore, General Motors currently views the
automotive electronics business of Hughes' wholly owned subsidiary, Delco, as
part of GM's core operations.
After examining the four other alternatives, the GM Board concluded that a
divestiture of EDS offered the most comprehensive solution to the conflicts
and limitations described in "--Purposes of the Split-Off." Such a divestiture
was expected to remove the limitations on EDS' ability to participate in major
strategic alliances and to obtain additional business that the GM Board
believed were attributable to EDS' status as a subsidiary of General Motors,
although there can be no assurance as to whether and to what extent any of the
business objectives of the Split-Off will be achieved if the Split-Off is
consummated. See "Risk Factors Regarding EDS After the Split-Off--No Assurance
of Strategic Alliances and Other Business Opportunities." A divestiture of EDS
was also expected to address EDS' capital needs more effectively than the
other alternatives. In addition, such a divestiture was expected to allow the
boards and management of GM and EDS to increase their focus on their
respective business operations. On the other hand, divestiture of EDS was not
believed to present potential adverse consequences for GM's automotive
business because the GM Board had determined that ownership of EDS is not
necessary for GM to execute its IT strategy or to ensure the security of its
computer data and other information.
In considering a divestiture of EDS, the GM Board determined that any such
transaction should be one that would both be tax-free for U.S. federal income
tax purposes and not result in a recapitalization of the Class E Common Stock
into $1 2/3 Common Stock at a 120% exchange ratio as provided under the
General Motors Certificate of Incorporation upon a disposition by General
Motors of substantially all of the business of EDS and under certain other
circumstances. This determination was based on the GM Board's belief that the
payment by General Motors of either the 20% premium on the Class E Common
Stock resulting from such exchange ratio or a material tax on an EDS
divestiture would not be in the best interests of General Motors and its
stockholders and that payment of the 20% premium in the context of a split-off
of EDS would not be consistent with the purpose for which the 120% exchange
rate provision was included in the terms of the Class E Common Stock.
EFFECTS OF THE SPLIT-OFF
As a result of the Split-Off, EDS will become 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 is a
security of General Motors designed to provide financial returns based on the
performance of EDS) will be converted into one share of EDS Common Stock. As a
result of the Merger, the General Motors Certificate of Incorporation will be
amended so that the Split-Off will not result in the recapitalization of Class
E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as currently
provided in the General Motors Certificate of Incorporation upon a disposition
by General Motors of substantially all of the business of EDS and under
certain other circumstances, and to change certain provisions relating to the
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Preferred Stock that will allow the GM Board to determine the specific rights,
preferences and limitations of any series of Preferred Stock if and when
issued in the discretion of the GM Board and that will cause the Preferred
Stock to assume the characteristics of "blank check" preferred stock. Holders
of EDS Common Stock will have no rights comparable to such recapitalization
rights of holders of Class E Common Stock. See "Comparison of Class E Common
Stock and EDS Common Stock."
Upon consummation of the Split-Off, General Motors' $1 2/3 Common Stock and
Class H Common Stock will remain outstanding and essentially unaltered.
Moreover, because under the General Motors Certificate of Incorporation
dividends on each class of General Motors' common stock may only be declared
and paid out of certain defined amounts attributable to such class, dividends
to holders of $1 2/3 Common Stock and Class H Common Stock will be largely
unaffected by the Split-Off. See "Risk Factors Regarding General Motors after
the Split-Off--Loss of Potential Availability of EDS Funds and Assets" and
"Class E Common Stock--Dividend Policy" and "--Considerations Relating to
Multi-Class Common Stock Capital Structure." If the Split-Off takes place,
however, holders of $1 2/3 Common Stock and Class H Common Stock will lose the
portion of their liquidation rights attributable to General Motors' ownership
of EDS' equity and assets. For additional information on the effects of the
Split-Off on GM, see "Risk Factors Regarding General Motors after the Split-
Off--Reduction in General Motors' Consolidated Net Worth, Assets and Certain
Ratios" and "General Motors Unaudited Pro Forma Condensed Consolidated
Financial Statements." In addition, in the Merger, the General Motors
Certificate of Incorporation will be amended as described herein. See "The
Split-Off--Merger Agreement."
Immediately prior to the Split-Off and as a condition of the Merger whereby
the Split-Off is effected, EDS will contribute to Mergeco the Special Inter-
Company Payment. As a result of the Merger, all of Mergeco's assets, which
will consist entirely of the cash contributed by EDS, will become assets of
General Motors. General Motors will retain such cash for its general corporate
purposes, and no corresponding or related dividend will be distributed by
General Motors to its stockholders. EDS expects to fund the Special Inter-
Company Payment through borrowings under its existing commercial paper and
committed credit facilities. See "EDS Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Immediately prior to and as a condition of the consummation of the Merger,
General Motors and EDS will enter into the Master Services Agreement. 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. However, unlike the Existing Master Services Agreement (which does
not have a fixed term, but provides 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 Services Agreement provides for an initial
term of 10 years from the date upon which the Split-Off is consummated, which
may be extended by agreement of the parties. In addition, the IT Services
Agreements provide that certain significant changes will be made to the
pricing and terms of services provided by EDS to General Motors. The GM Board
believes that such changes are necessary (i) in light of the fact that, after
the Split-Off, EDS will no longer be a subsidiary of General Motors and the
Capital Stock Committee will no longer be able to monitor the IT service
arrangements between the parties, (ii) to reflect the evolutionary nature of
the General Motors-EDS customer relationship and the IT services industry and
(iii) to provide additional assurances to General Motors, as EDS' largest
customer, that the IT services performed by EDS will remain competitive. See
"Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT
Services Agreements," "EDS Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business of EDS--Revenues."
Upon consummation of the Split-Off, former holders of Class E Common Stock
will no longer own any interest (incident to such holdings) in the equity or
assets of General Motors, but will instead own an equity interest in EDS. Such
holders will no longer have any rights (as such holders) to share in the
equity and assets of General Motors upon General Motors' liquidation but will
have the right to receive their proportionate share of EDS' assets in the
event of its liquidation. In addition, as holders of EDS Common Stock rather
than Class E Common Stock, such holders (in their capacities as such) will no
longer be entitled to vote as General Motors stockholders but will have the
right to vote directly on matters with respect to EDS submitted to the vote of
EDS' stockholders. As EDS stockholders, former holders of Class E Common Stock
will forego the potential for
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a recapitalization of their Class E Common Stock into $1 2/3 Common Stock at a
120% exchange ratio as currently provided by the General Motors Certificate of
Incorporation upon a disposition by General Motors of substantially all of the
business of EDS and under certain other circumstances. Holders of EDS Common
Stock will, however, have the potential to realize premiums over prevailing
market prices for their EDS Common Stock in connection with certain corporate
transactions, including tender offers for EDS Common Stock and change in
control transactions involving EDS, although there can be no assurance in this
regard. Such premiums, if any, will not be limited by any formula in the EDS
Certificate of Incorporation comparable to that relating to the
recapitalization of Class E Common Stock in the General Motors Certificate of
Incorporation. See "Risk Factors Regarding EDS after the Split-Off--Certain
Limitations on Changes in Control of EDS," "Class E Common Stock--Liquidation
Rights" and "--Recapitalization" and "Comparison of Class E Common Stock and
EDS Common Stock."
Approximately one-third of the outstanding Class E Common Stock is held by
the GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so long as
the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation
or depreciation in the value of EDS Common Stock will affect the level of
General Motors' pension expense and unfunded pension liability, which are
actuarially determined and computed in accordance with generally accepted
accounting principles. Under the terms of the GM-PBGC Agreement, which was
entered into in connection with the March 1995 contribution of Class E Common
Stock and cash to the GM Hourly Plan, GM has agreed to defer the use of
funding credits that would otherwise result from such stock and cash
contributions. Consequently, GM will continue to make regular cash
contributions to the GM Hourly Plan over the next several years.
Because all outstanding shares of Class E Common Stock will be eliminated in
the Split-Off, the Class E Common Stock will be delisted from the NYSE.
Application has been made to list the EDS Common Stock on the NYSE, and such
application has been granted pending notice of issuance. The trading symbol
for the EDS Common Stock on the NYSE will be "EDS."
The Class E Common Stock is currently registered as an equity security of
General Motors under the Exchange Act. General Motors is permitted under the
Exchange Act to apply to the Commission for termination of such registration
if the Class E Common Stock is neither listed on a national securities
exchange nor held by at least 300 holders of record, and General Motors
intends to apply for such termination immediately following consummation of
the Split-Off. General Motors will, however, remain subject to the reporting
obligations of the Exchange Act on account of its other outstanding
securities. In addition, EDS intends to file with the Commission a
registration statement on Form 10 registering the EDS Common Stock under the
Exchange Act, and EDS will be subject to the reporting obligations of the
Exchange Act following the Split-Off.
BACKGROUND OF THE SPLIT-OFF
GM's Acquisition of EDS. In 1984, General Motors acquired EDS, which at the
time was already a leading provider of IT services. In connection with the
acquisition of EDS, General Motors created a new class of its common stock,
the Class E Common Stock, designed to provide financial returns based on the
future performance of EDS. The agreement governing the acquisition of EDS by
GM contemplated that EDS would be operated as an independent subsidiary of
General Motors with a substantial degree of autonomy. Pursuant to such
agreement, in 1985, General Motors and EDS entered into the Existing Master
Services Agreement. Within the framework of the Existing Master Services
Agreement, EDS is currently responsible for substantially all of the worldwide
data processing and telecommunications activities of General Motors and its
subsidiaries (other than Hughes, with the exception of its subsidiary, Delco),
including integrated information systems for payroll, health and benefits,
office automation, communications and plant automation functions. See
"Business of EDS--Services for General Motors."
It is GM's policy that a standard of fair dealing govern the relationship
between EDS and General Motors. To that end, in 1985 the GM Board formed a
standing committee, comprised entirely of independent directors of General
Motors, with responsibility for reviewing, among other things, (i) the
principal business and financial relationships and transactions among GM, EDS
and Hughes, (ii) the dividend policies and practices of GM and
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(iii) such other matters as have the potential to have differing effects on
holders of the three classes of General Motors common stock. That committee is
currently known as the "Capital Stock Committee." See "Class E Common Stock--
Considerations Relating to Multi-Class Common Stock Capital Structure."
EDS Strategic Combination Discussions. During the period in which EDS has
been a subsidiary of GM, there has been an increasing convergence of the
computing and software, communications, media and entertainment, and
electronic commerce industries. Because the ability to offer customers
integrated IT services and systems is increasingly viewed as necessary to
remain competitive and grow, strategic alliances among service providers in
these industries have become more prevalent. Consistent with this industry
trend, EDS has engaged in discussions with leading telecommunications
providers regarding potential strategic combinations on numerous occasions in
the last decade in an effort to enhance its own competitiveness.
In 1991, EDS explored the possibility of acquiring an international supplier
of IT services and had preliminary strategic discussions with a long-distance
carrier. In late 1992 and early 1993, EDS engaged in extended negotiations
with an international telecommunications company regarding a strategic
alliance. These discussions involved numerous types of possible business
alliances and reached varying stages of negotiations, but none of them
resulted in any consummated transaction.
In 1994, EDS and GM reached an advanced stage of negotiations on a possible
merger with a telecommunications company, Sprint Corporation ("Sprint"). Like
many of EDS' earlier potential strategic partners, Sprint was unwilling to
enter into a business combination with EDS if General Motors (whose dividend
and other financial policies are tied to a worldwide, cyclical automotive
business) remained the major stockholder of the merged entity. Based upon the
GM Board's determination that continued ownership of EDS was not necessary for
General Motors to implement its IT strategy and that General Motors would be
willing to split-off EDS to advance EDS' strategic objectives, GM announced
publicly that it would consider a split-off of EDS to facilitate EDS' possible
combination with Sprint. In particular, in a May 16, 1994 press release,
General Motors stated, in part:
"General Motors Corporation today confirmed that it is considering a
proposal to spin off its wholly owned subsidiary, Electronic Data Systems
Corp., (EDS) to holders of Class E common stock. Such a spin-off would be
proposed to General Motors shareholders if ongoing negotiations between EDS
and Sprint result in an agreement for those companies to merge or form a
strategic alliance.
A spin-off of EDS to Class E shareholders would be proposed only in a
transaction that is tax free, and does not result in the recapitalization
of Class E common stock into General Motors $1 2/3 par value common stock
at a 120 percent exchange ratio, as currently provided for under certain
circumstances by General Motors' certificate of incorporation.
EDS has been a wholly owned subsidiary of General Motors since 1984. In
the event that EDS becomes an independent company, General Motors and EDS
plan to enter into a new, 10-year master agreement, with options for
renewal, under which EDS would continue to provide the same information
technology services for General Motors that it does today."
Discussions with Sprint terminated in June 1994 when General Motors, EDS and
Sprint were unable to agree on the proper exchange ratio for EDS stock and
Sprint stock to have been issued in the EDS/Sprint transaction subsequent to
the split-off then contemplated by the parties. The parties disagreed in part
because of the difficulty, for purposes of such exchange ratio, of valuing the
Sprint stock in relation to the Class E Common Stock, which is a security of
General Motors with rights to dividends based on the earnings of EDS, as
opposed to a security of an independent company with full voting control. The
failure to complete the EDS/Sprint transaction was also partially attributable
to the additional constraints and complications created by combining one
complex transaction, a split-off of EDS, with a second complex transaction, a
strategic merger involving a second public company. Such uncertainties and
complexities added both time and procedural requirements (such as additional
stockholder votes and governmental approvals, including a ruling by the IRS as
to the tax-free status of a split-off) to the transaction process, and thereby
made the likelihood of completing the transaction more uncertain. See "--
Purposes of the Split-Off."
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Consideration of Split-Off. Following the termination of discussions with
Sprint, the GM Board reaffirmed that it remained willing to consider a split-
off of EDS under appropriate circumstances. On June 6, 1994, GM issued a press
release stating that it "would continue to consider a proposal to spin-off its
wholly owned subsidiary, Electronic Data Systems (EDS) Corp., if necessary to
facilitate EDS' ability to attain its strategic objectives. Such a spin-off
could occur through an exchange of EDS common stock for Class E stock and
would only be proposed in a transaction that is tax-free."
From time to time after June 1994, GM and EDS management personnel and
financial, legal and accounting advisers engaged in informal discussions of
EDS' strategic needs and ways of addressing them, including the possibility of
a split-off. Initially, these discussions assumed that a split-off would be
proposed only in the context of a specific strategic combination with a third
party. However, as the discussions progressed, they came to include
consideration of splitting off EDS for general strategic reasons rather than
in the context of a particular business combination.
In connection with these ongoing discussions, in February 1995, McKinsey &
Company ("McKinsey"), a management consulting firm, began to assess the
implications of the changing information technology industry for General
Motors' major lines of business, including the market forces driving the
convergence of computing, telecommunications, electronic commerce and media.
General Motors engaged McKinsey to assist GM management in developing a
perspective on current and potential conflicts among the major businesses
within GM, with a particular focus on whether EDS would be in a stronger
competitive position if it were not owned by GM.
During January to July 1995, GM and EDS management personnel and financial,
legal and accounting advisers met from time to time to assess EDS' strategic
objectives and to consider legal, tax and accounting issues that would be
presented by a split-off transaction. Among other things, the independent
accounting firms for GM and EDS considered the appropriate accounting
treatment for a split-off transaction and reviewed their conclusions with the
accounting staff of the Commission. In addition, during and after April 1995,
tax counsel for GM and EDS began to assess whether the strategic objectives
identified by management were consistent with the principles necessary to make
a determination that any proposed transaction would be tax-free to General
Motors and its stockholders for U.S. federal income tax purposes. These
preliminary discussions did not result in any definitive determination either
that a split-off would be desirable in the absence of a strategic combination
or as to the structure or terms of any transaction that might be presented to
the GM Board.
In June 1995, the GM Hourly Plan Special Trust and a trust (the "GM Salaried
Plan Trust") under the General Motors Retirement Plan Trust for Salaried
Employees completed a public offering in which they sold 42.5 million shares
of Class E Common Stock. See "Security Ownership of Certain Beneficial Owners
and Management of General Motors and EDS--GM Hourly Plan Special Trust." In
the prospectus related to such public offering, General Motors stated:
"The managements of EDS and General Motors are engaged in discussions
concerning the most appropriate means of addressing EDS' strategic
objectives, including the possibility of a spin-off of EDS. These
discussions have not produced a definitive proposal as to the structure or
terms of any transaction or as to whether any transaction will be proposed
to the board of directors of General Motors or EDS or the stockholders of
General Motors. Any spin-off of EDS would be proposed only in a transaction
determined by General Motors' Board to be fair to holders of all classes of
General Motors' capital stock and that would be tax free and would not
result in the recapitalization of Class E Common Stock into General Motors
$1 2/3 Common Stock at a 120% exchange ratio as currently provided for
under certain circumstances in the General Motors Certificate of
Incorporation."
Based on the continuing discussions between management personnel at GM and
EDS and on the ongoing work by McKinsey, representatives of General Motors'
financial staff (Leon J. Krain, Vice President and Group Executive, and Heidi
Kunz, then Vice President and Treasurer) presented the financial staff's
recommendations regarding a possible split-off of EDS to General Motors'
senior management decisionmaking body, the
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President's Council, on July 28, 1995. The members of the President's Council
in attendance consisted of J.T. Battenberg III, Executive Vice President,
Louis R. Hughes, Executive Vice President, J. Michael Losh, Executive Vice
President and Chief Financial Officer, Harry J. Pearce, as Executive Vice
President, John F. Smith, Jr., as Chief Executive Officer and President, and
G. Richard Wagoner, Jr., Executive Vice President. The President's Council
reviewed the financial staff's recommendation that General Motors proceed to
develop the terms of a possible split-off of EDS and recommended that the
matter be brought before the GM Board and the Capital Stock Committee at their
regular meetings to be held in early August 1995. At its meeting on August 4,
1995, the President's Council decided to present the matter to the GM Board
and the Capital Stock Committee, as recommended by GM management.
August 1995 Capital Stock Committee Meeting. At meetings of the Capital
Stock Committee on August 6, 1995 and of the GM Board on August 7, 1995, GM
management reported its recommendation that General Motors proceed to develop
a specific proposal to split-off EDS. The principal discussion of these
matters took place during the meeting of the Capital Stock Committee on August
6, 1995 (the "August 1995 CSC Meeting"). All of the members of the GM Board
were invited to attend this meeting, which was attended not only by the
members of the Capital Stock Committee (Thomas H. Wyman, Chairman, John H.
Bryan, Ann D. McLaughlin, John G. Smale and Dennis Weatherstone) but also by
certain other members of the GM Board (Thomas E. Everhart, Charles T. Fisher
III, J.W. Marriott, Jr., Edward T. Pratt, Jr. and Louis W. Sullivan) and by
Mr. Smith as Chief Executive Officer and President. The August 1995 CSC
Meeting was also attended by Mr. Battenberg, Mr. Krain, Mr. Losh, Mr. Pearce,
Mr. Wagoner, Ms. Kunz, Thomas A. Gottschalk, General Counsel, and other
members of GM management; by Lester M. Alberthal, Jr., Chairman, President and
Chief Executive Officer of EDS and Gary J. Fernandes and John R. Castle, Jr.,
Senior Vice Presidents of EDS; and by a representative of McKinsey and the
Capital Stock Committee's independent legal counsel, Weil, Gotshal & Manges
LLP.
At the August 1995 CSC Meeting, management reviewed the history of General
Motors' ownership of EDS since 1984 and General Motors' determination that
continued ownership of EDS was not necessary for General Motors to execute its
IT strategy or to ensure the security of its computer data and other
information. Management also reviewed the growing perception of conflicts with
other GM businesses as EDS' business grew and expanded in scope during the
time it had been owned by General Motors. Among other things, as boundaries
increasingly disappeared between certain industries in which EDS and Hughes
participate, EDS had experienced a growing number of business conflicts and
limitations arising from the common ownership of both companies by General
Motors. Furthermore, it had become increasingly apparent that GM's ownership
of EDS presented a significant impediment to EDS' ability to consummate large
strategic transactions such as the proposed alliance with Sprint. Also, EDS'
significant annual growth in revenues, among other things, had resulted in
greater capital needs for its business, which sometimes conflicted with GM's
need to access capital for its other businesses. See "--Purposes of the Split-
Off."
Management also reported on a number of financial, legal, tax and accounting
matters that would affect any proposed split-off. These matters included the
necessity that the exchange ratio for the Class E Common Stock and the EDS
Common Stock and other terms be fair to all classes of General Motors common
stockholders, that the transaction be tax-free to General Motors and its
stockholders for U.S. federal income tax purposes, that the terms of the
Existing IT Services Agreements be amended and that other agreements
customarily incident to a split-off be entered into by General Motors and EDS
in connection with any split-off. Management also reported its determination,
concurred with by General Motors' independent accountants, that under
generally accepted accounting principles a split-off would be accounted for at
General Motors' historical amounts as a non-reciprocal transfer to the holders
of Class E Common Stock, with no accounting gain or loss being recognized by
General Motors in its consolidated statement of income on account thereof.
A representative of McKinsey summarized the conclusions of the consulting
project undertaken by McKinsey as described above. He observed that both EDS
and Hughes were currently well positioned to participate in the large and
rapidly developing IT and telecommunications marketplace. However, common
ownership of EDS and Hughes by General Motors and the increasing convergence
of IT and telecommunications industry participants and market sectors had
created business conflicts between EDS, Hughes and General Motors
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that McKinsey anticipated would continue and intensify over time. He also
stated that McKinsey believed that competition for customers and business
partners, restrictions on bidding and other customer concerns arising from
common ownership, obstructions to strategic transactions, reduced access to
funds for capital expenditures and differences in each company's decision-
making processes were all likely to have an increasing effect on the
businesses of EDS, Hughes and General Motors over time.
GM management and the McKinsey representative next reviewed the possible
alternative strategic options for EDS and Hughes that had been identified:
continuing the status quo by allowing each business to continue independently;
determining where and how each company would operate in order to avoid
conflicts; merging all or part of the businesses of EDS and Hughes; divesting
Hughes; and divesting EDS. The McKinsey representative discussed the relative
degree to which each of the five alternatives would effectively address the
conflicts and limitations described in "--Purposes of the Split-Off," as well
as certain related business synergies and the feasibility of implementation.
The matters discussed and conclusions reached, which were concurred with by GM
management, were substantially as set forth under "--Alternatives to the
Split-Off." Based on the foregoing, GM management then reported that it had
concluded that a split-off of EDS would most effectively address EDS'
strategic objectives and recommended that the GM Board authorize development
of definitive terms for a split-off of EDS.
The Capital Stock Committee, with other GM Board members participating,
engaged in a detailed discussion of the matters reported by management and
McKinsey. They also discussed a number of matters relating to the valuation of
EDS to be used in any split-off that might be proposed, the necessity of
negotiating amendments to the terms of the Existing IT Services Agreements in
connection with a split-off, tax considerations related to a split-off and the
business plans for EDS following a split-off.
The Capital Stock Committee also discussed and considered appropriate means
of ensuring that the terms of any split-off transaction would be fair to all
classes of GM common stockholders. In particular, the Capital Stock Committee
determined that it would be appropriate to institute a process of arm's-length
negotiation between separate teams negotiating from the perspective of each of
the groups of General Motors stockholders that could be deemed to have
divergent interests in a split-off. Accordingly, the Capital Stock Committee
considered and endorsed procedures for establishing the financial and other
essential terms of a split-off in which the GM Board would be aided by two
management negotiating teams, one consisting of GM executive officers and the
other consisting of EDS executive officers, with each team to be counseled by
its own internal and outside financial and legal advisers. See "--Negotiating
Teams." The progress of the negotiating teams would be reported to the Capital
Stock Committee, which would oversee the negotiations to ensure a level
playing field between the parties and keep the full GM Board informed about
the status of negotiations. The Capital Stock Committee and, ultimately, the
full GM Board would then review the results of this negotiating process in
making their own determinations as to whether the structure and terms of any
split-off proposal would be fair to all General Motors common stockholders. In
addition, any such transaction approved by the GM Board would then be
submitted for approval to appropriate class votes of GM common stockholders,
including separate class votes of holders of $1 2/3 Common Stock and Class E
Common Stock. In considering alternative means for establishing the terms of a
split-off, the Capital Stock Committee also requested that GM management
explore the feasibility of structuring a split-off in a way that would permit
the market, upon full disclosure of all material facts, to determine the
relative values of the Class E Common Stock and the EDS Common Stock.
After discussion of the foregoing matters, the Capital Stock Committee
determined to recommend that the GM Board approve management's recommendation
of authorization to proceed to develop definitive terms for a split-off of EDS
using the negotiating procedures that had been described to the Capital Stock
Committee.
August 1995 GM Board Meeting. At its meeting the following day, August 7,
1995, which was attended by all of GM's directors, the GM Board received a
report of the matters discussed at the August 1995 CSC Meeting and concluded
that a split-off of EDS, on terms that would be tax-free to General Motors and
its stockholders for U.S. federal income tax purposes and fair to all classes
of General Motors common stockholders, would be in the best interests of
General Motors and its stockholders. Accordingly, the GM Board appointed the
negotiating teams and authorized the process described above in order to aid
the GM Board in the development
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of definitive terms for such a transaction, subject to oversight of the
negotiating process by the Capital Stock Committee and subject to the GM
Board's own review and consideration of such definitive terms and changes
thereto that it might determine to make. Consistent with the principle of
trying to ensure a level playing field for the two negotiating teams, the GM
Board determined that officers and employees of General Motors and EDS who
served as members of the negotiating teams or in support of such teams would
be indemnified to the same extent as directors and officers of General Motors
are indemnified under General Motors' By-Laws. Finally, the GM Board
authorized the filing of a request with the IRS seeking a ruling on the tax-
free status of the proposed transaction.
Following the August 7, 1995 Board meeting, General Motors issued a press
release stating as follows:
"GM said today that it intends to pursue a split-off of its wholly owned
subsidiary, EDS, to its GM Class E shareholders in a tax-free exchange of
stock. The GM Board of Directors today approved a recommendation by GM and
EDS managements to develop specific terms and a plan for a split-off
transaction through which EDS would become an independent, public company.
The split-off would be subject to a number of approvals and to a favorable
vote by holders of GM common stocks.
. . .
To achieve a split-off, GM would exchange EDS capital stock for the
outstanding shares of GM Class E common stock. There are currently 438.7
million shares of GM Class E common stock outstanding, and 44.9 million
shares currently reserved for issuance upon conversion of Series C
Preference Stock. The process of establishing definitive terms for a split-
off transaction which will be fair to all holders of GM common stock will,
among other things, consider differences between the values of GM Class E
and EDS common stocks in order to establish any adjustment deemed
appropriate by the GM Board of Directors.
A split-off would be subject to the appropriate stockholder approvals,
and a favorable Internal Revenue Service ruling that the transaction would
be tax-free. The specific terms of a transaction, which are yet to be
developed, must also be approved by the GM Board of Directors. Subject to
these and other approvals and conditions, GM and EDS expect that a split-
off could occur in the first half of 1996. However, it should be noted that
due to the numerous uncertainties involved in these matters, there can be
no assurance that any split-off of EDS will be proposed or completed.
A split-off would be proposed only in a manner that would not result in
the recapitalization of GM Class E common stock into GM $1 2/3 par value
common stock at a 120 percent exchange ratio, as currently provided for
under certain circumstances in the GM certificate of incorporation.
In the event of a split-off GM and EDS would enter into a long-term
agreement in which EDS would provide substantially the same information
technology and other services for GM that it does today."
Alternative Market-Based Valuation Mechanisms. In a letter dated August 28,
1995, the General Motors Treasurer's Office responded to the request made by
the Capital Stock Committee at its August 6, 1995 meeting for the exploration
of the feasibility of structuring a split-off in a way that would allow the
market to value the differences between the Class E Common Stock and the EDS
Common Stock. Taking into account various legal, tax and accounting
considerations, the Treasurer's Office reviewed four such potential market
mechanisms, none of which were found to be feasible. Under the first
alternative, General Motors would have distributed some shares of EDS Common
Stock to the public prior to a split-off and set a split-off exchange ratio
based on the trading values of both stocks. Under the second alternative, EDS
Common Stock would have been publicly traded on a "when-issued" basis (i.e.,
conditional pending issuance) for a period of time preceding a split-off, and
the split-off exchange ratio would have been based on the trading prices of
the EDS Common Stock and the Class E Common Stock during such period. Under
the third alternative, shares of EDS Common Stock would have been sold through
an auction in which, in order to preserve the tax-free nature of such
transaction, participation would have been restricted to GM stockholders and
consideration for the purchase of EDS Common Stock in the auction would have
been restricted to GM capital stock. Under the fourth alternative, GM would
have issued to holders of $1 2/3 Common Stock warrants that would be required
to accompany each share of Class E Common Stock in order for such stock to be
exchanged for EDS Common Stock in a split-off on a one-for-one basis. This
fourth alternative contemplated that holders of $1 2/3 Common Stock and Class
E Common Stock would engage in negotiations to arrive at a price for the
warrants reflecting their relative valuations of the two securities.
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After assessing the foregoing alternatives, the Treasurer's Office reported
its conclusion that the practical problems and costs associated with the
implementation of any such market mechanism would be substantial. In addition,
the letter expressed the Treasurer's Office's opinion that, due to the
imperfect market in which the EDS Common Stock would be priced under any of
the available alternatives, the relative pricing observed in any such market
should not be relied on by the GM Board as the basis for determining the terms
of any split-off. The letter concluded that a "private" valuation of the
respective values of the Class E Common Stock and the EDS Common Stock (such
as that contemplated by the process established by the GM Board) would better
take into account all relevant considerations. In view of the conclusions
reached by the Treasurer's Office, a market mechanism for valuing the
differences between Class E Common Stock and EDS Common Stock was not utilized
and the GM Board continued to rely on the arm's-length negotiation process,
with Capital Stock Committee oversight, as described herein. Furthermore, no
conclusion was reached as to how any such market based valuation, even if
reliably determined, would affect the GM Board's deliberations as to the
fairness of all of the terms and conditions of a split-off.
Negotiating Teams. As noted previously, in order to aid the GM Board in the
development of definitive financial and other essential terms of the Split-
Off, the GM Board appointed two management negotiating teams at its August
1995 meeting. One team, which consisted of executive officers of General
Motors (the GM Team), was charged with negotiating terms of the Split-Off to
be recommended to the Capital Stock Committee and the GM Board from the
perspective of the holders of the $1 2/3 Common Stock and the Class H Common
Stock, who would continue to be stockholders of General Motors after the
Split-Off. The GM Team initially consisted of Harry J. Pearce, as General
Motors' Executive Vice President with responsibility, among other things, for
EDS and Hughes matters, and Heidi Kunz, then Vice President and Treasurer of
General Motors. On December 4, 1995, the GM Board accepted the resignation of
Ms. Kunz as Vice President and Treasurer and appointed John D. Finnegan to
replace Ms. Kunz in that position. On December 4, 1995, the GM Board also
elected Mr. Pearce to the GM Board and designated him as Vice Chairman of the
GM Board. On February 5, 1996, the GM Board reconstituted the GM Team to
consist of Messrs. Finnegan, Krain and Losh. The GM Team was authorized to use
the assistance of General Motors' Treasurer's Office Staff and Legal Staff,
and also engaged Merrill Lynch as its independent financial advisor and the
law firms of Kirkland & Ellis, Richards Layton & Finger and Milbank, Tweed,
Hadley & McCloy as its outside counsel.
The other team, which consisted of executive officers of EDS (the EDS Team),
was charged with negotiating terms of the Split-Off to be recommended to the
Capital Stock Committee and the GM Board from the perspective of the holders
of Class E Common Stock, who would become stockholders of EDS in the Split-
Off. The EDS Team consisted of Lester M. Alberthal, Jr., Chairman, President
and Chief Executive Officer of EDS, Gary J. Fernandes, Senior Vice President
of EDS, and Joseph M. Grant, Senior Vice President and Chief Financial Officer
of EDS. The EDS Team was authorized to use the assistance of the Financial and
Legal Staffs of EDS and also engaged Lehman Brothers as its independent
financial advisor and the law firms of Baker & Botts, L.L.P., Prickett, Jones,
Elliott, Kristol & Schnee and Hughes & Luce, L.L.P. as its outside counsel. In
March 1996, certain senior personnel involved in providing financial advice to
the EDS Team left Lehman Brothers to join Morgan Stanley, at which time Morgan
Stanley also began advising the EDS Team. Since the time Morgan Stanley began
advising the EDS Team, it and Lehman Brothers have performed their services in
cooperation with each other. See "--Fairness Opinions--EDS Team Financial
Advisors Fairness Opinions."
On August 31, 1995, representatives of Weil, Gotshal & Manges LLP,
independent counsel to the Capital Stock Committee, held a meeting with the
General Counsel of General Motors and another attorney on the GM Legal Staff
as representatives of the GM Team and with a Senior Vice President of EDS and
the General Counsel of EDS as representatives of the EDS Team. At this
meeting, there was preliminary discussion of the appropriate sequence for
negotiating the provisions of the IT Services Agreements and the amount of any
special payment between GM and EDS.
On September 7, 1995, members and representatives of the management
negotiating teams and their advisors met with representatives of Weil, Gotshal
& Manges LLP for further discussion of the sequencing of negotiations and
other procedural matters. The meeting was attended on behalf of the GM Team by
Ms. Kunz and representatives of the GM Treasurer's Office, the GM Legal Staff,
Merrill Lynch and Kirkland & Ellis. Participants in the meeting for the EDS
Team were Mr. Fernandes and Mr. Grant, together with EDS' General
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Counsel and representatives of Lehman Brothers and Baker & Botts, L.L.P. The
participants in the meeting discussed the order in which they would negotiate
various terms of the transaction. It was determined at the meeting that the
terms of the IT Services Agreements would be negotiated before other matters,
such as the amount of any special payment between General Motors and EDS, in
order to enhance the arm's-length and commercially reasonable nature of the IT
Services Agreements on a stand-alone basis. Counsel for the Capital Stock
Committee also reviewed the background behind the formation of the management
negotiating teams and explained the process contemplated by the Capital Stock
Committee.
Negotiation of IT Services Agreements. The EDS Team designated Paul
Chiapparone, Senior Vice President of EDS, and John R. Castle, Jr., Senior
Vice President of EDS, as its lead negotiators regarding the IT Services
Agreements, and the GM Team similarly designated Leon J. Krain, GM Vice
President and Group Executive--Finance (who later was designated a member of
the GM Team), and Thomas A. Gottschalk, General Counsel of GM, as its lead
negotiators. Subsequently, Messrs. Krain and Gottschalk formed a negotiating
guidance team, consisting of themselves, Robert Hendry, GM Group Vice
President, North American Operations Business Support Group, and Vince
Barabba, General Director--Knowledge Network, to provide senior level
direction to GM's staff negotiators.
The lead negotiators met on September 21, 1995 to discuss the framework and
procedures for the negotiations and the appointment of staff-level negotiating
teams and outside advisors.
The staff negotiators for the teams held their first meeting on September
29, 1995. The GM Team representatives outlined their view of the essential
elements of new agreements that would meet GM's business requirements,
including the duration of the principal agreement's initial term,
determination of "in-scope" services to be provided, provisions relating to
competitiveness of services provided with respect to quality, service, price
and technology, and the establishment of appropriate payment terms for
services rendered. The EDS Team representatives asked clarifying questions but
did not negotiate substantive terms at that time.
At its meeting on October 2, 1995, the GM Board received reports on the
status of the Split-Off from Mr. Pearce and Mr. Wyman, chairman of the Capital
Stock Committee, including a report on the principal issues with respect to
the negotiation of the IT Services Agreements. All of the members of the GM
Board were present at the meeting.
During October and early November 1995, the representatives of the
management negotiating teams exchanged views regarding the IT services issues
that had been identified by GM at the September 29, 1995 meeting. The EDS Team
representatives noted that GM and EDS had participated in a successful
strategic IT partnership for more than ten years and stated that the GM/EDS
relationship should continue largely unchanged so as to continue to help GM
achieve important strategic objectives, including maximizing the value
provided to GM by EDS' worldwide organization and resources, making
information a strategic advantage for GM on a global basis, improving GM's
worldwide competitive cost and quality position through the innovative and
effective use of IT, implementing common systems and processes approved by GM,
enabling GM to make the most effective use of its IT expenditures and allowing
GM and EDS to continue to work together to demonstrate that GM pays reasonable
prices for and receives meaningful value from the services provided by EDS. On
that basis, the EDS Team representatives suggested that no material changes
would be needed to the Existing IT Services Agreements other than to provide
for a specific duration rather than an indefinite term and that the principal
issues to be negotiated should be limited to the duration of initial and
renewal terms for the agreements, provisions for termination upon material
default or non-payment, mitigation and allocation of recurring costs resulting
from the split-off, dispute resolution procedures, the establishment of an
information technology committee of GM and EDS corporate officers to oversee
implementation of the agreement and the elimination of any existing contract
ambiguities. As described in their September 29, 1995 presentation, the GM
Team representatives stated their view that certain additional changes would
be required in the context of a split-off because (i) the Capital Stock
Committee and other fairness mechanisms such as cost audits would no longer be
available to monitor the commercial reasonableness and fairness of
implementation of the agreements, (ii) the provisions of the agreements had
been developing in an evolutionary manner during the decade that GM had
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owned EDS and would, in any event, continue to develop to reflect changing
business, industry and economic circumstances, and (iii) the IT outsourcing
industry had experienced significant growth and change since GM acquired EDS
in 1984, and it was therefore now possible and appropriate for the agreements
to reflect the more competitive IT outsourcing market.
At its meeting on November 5, 1995, the Capital Stock Committee received a
report from representatives of Weil, Gotshal & Manges LLP, its independent
counsel, on the status of the negotiations of the IT Services Agreements. The
members of the Capital Stock Committee in attendance at the meeting consisted
of Mr. Wyman, Mr. Bryan, Ms. McLaughlin and Mr. Weatherstone. After extensive
discussion of issues that had arisen in the course of the negotiations, the
Capital Stock Committee determined that the negotiating teams were in need of
guidance as to the corporate objectives to be addressed in a split-off.
Accordingly, the Capital Stock Committee recommended that the GM Board provide
the following guidelines to the management negotiating teams regarding its
goals and priorities with respect to the Split-Off in general and the IT
Services Agreements in particular: (i) an appropriate, long-term IT supply
contract should be developed for the proposed split-off to achieve the
respective business goals of GM and EDS; (ii) the terms of any such contract
should take into account and further the legitimate interests and expectations
of all GM stockholders; (iii) GM should resume the principal role in
developing and supervising its IT strategy and programs, while still drawing
on EDS' expertise; and (iv) since following any split-off the Capital Stock
Committee would no longer be able to review the terms on which EDS provides IT
services to GM and would therefore have to rely on contractual protections,
the IT Services Agreements should provide GM with greater ability to test the
competitiveness of the terms on which EDS would provide such services to GM,
including through the opportunity to competitively bid limited portions of
GM's IT service needs and to award such bids to suppliers other than EDS when
appropriate.
At a GM Board meeting on November 6, 1995 attended by all of the directors,
the GM Board received a report from Mr. Wyman on the status of various issues
relating to the Split-Off, including the guidelines recommended by the Capital
Stock Committee. The GM Board concurred that counsel for the Capital Stock
Committee should communicate such guidelines to the GM Team and the EDS Team.
Such counsel so communicated the guidelines and indicated that the guidelines
should be used to inform and guide the continuing negotiations of the terms of
the IT Services Agreements. Counsel also communicated the GM Board's desire
that the GM Team and the EDS Team and their lead negotiators remain personally
involved in the negotiations in order to expedite them.
At meetings during the first half of November 1995, the GM Team negotiators
and the EDS Team negotiators continued to exchange proposals regarding
contract terms and identified as the key issue finding appropriate means,
including limited competitive bidding and outsourcing, to assure GM of the
competitiveness of EDS' prices, quality, service and technology. During these
meetings, the GM Team representatives also stressed the importance of
realizing long-term reductions in GM's structural costs, whether a split-off
were to occur or not. In these meetings, the respective representatives also
discussed certain other issues relating to the GM/EDS relationship that would
likely have arisen in the absence of split-off discussions, including the
implementation of a new agreement upon the expiration on December 31, 1995 of
EDS' arrangement with GM's International Operations group, the pricing of
certain information processing activities and communications services
("IPACS") provided by EDS and matters relating to a new plant floor automation
project being undertaken by GM's North American Operations group. On November
20, 1995, GM determined to withhold certain IPACS payments from EDS pending
resolution of disputed amounts.
At the GM Board meeting on December 4, 1995, with all directors in
attendance, the GM Board received a report on the status of the Split-Off from
Weil, Gotshal & Manges LLP, independent counsel to the Capital Stock
Committee. It was reported that although Messrs. Alberthal and Pearce and
other senior EDS and GM executives had become personally involved in the
negotiations of the IT Services Agreements and some progress appeared to have
been made, there was as yet no resolution of significant substantive issues.
On December 18, 1995, the GM Board met by telephone conference, with all but
one director in attendance. Representatives of EDS described the terms of
certain provisions of the EDS Certificate of Incorporation, the
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EDS Bylaws and the EDS Rights Agreement that EDS desired to adopt in order to
protect future public stockholders of EDS, including holders of Class E Common
Stock who would become EDS stockholders upon consummation of the Split-Off,
from certain abusive and coercive takeover tactics by third parties. The EDS
representatives noted that the proposal to adopt these provisions was not
being made in response to any known takeover threat and that many public
companies have similar provisions. After discussion and review of information
regarding, among other things, the market impact of such provisions, the GM
Board determined that it would have no objection to the implementation of such
provisions at any time after the management negotiating teams reached an
agreement in principle on the material terms of the IT Services Agreements.
Following the resolution of these terms, the protective provisions were
adopted by EDS on March 12, 1996. For a description of the EDS Rights
Agreement and other provisions, see "EDS Capital Stock."
Negotiations with respect to the principal terms for the IT Services
Agreements continued during December 1995 and January and February 1996. The
principal issues discussed included extension of certain service agreements,
limited exposure of certain services to competitive bidding, the timing of
payments by GM for services provided by EDS, the definition of "in-scope"
services, termination rights for GM in certain circumstances (including in the
event of certain changes in control of EDS), commitments by both parties with
respect to certain structural cost reductions for GM, the identification of
project personnel and the ownership of intellectual property. The parties also
discussed the IPACS payments being withheld by GM and certain disputed issues
involving GM's international operations.
At the GM Board Meeting on February 5, 1996, with all but one director in
attendance, Mr. Wyman reported to the GM Board on the status of the Split-Off
discussions and the GM Board reconstituted the GM Team as described above in
"--Negotiating Teams."
On February 8, 1996, the EDS Team's lead negotiators and the GM Team's lead
negotiators reached a preliminary agreement with respect to a substantial
number of terms proposed to be included in the IT Services Agreements. Two
material issues under discussion at that time were not fully resolved by the
preliminary agreement. One such issue related to the scope of GM's termination
rights in the event of a change of control of EDS and the other related to the
methods for the resolution of disputes arising in connection with the
negotiation of the terms of future service agreements under the Master
Services Agreement. In mid-February 1996, the parties commenced work on
definitive documentation for the IT Services Agreements. In March 1996,
agreement was reached by the parties' lead negotiators as to the two
previously unresolved material issues. See "Relationship Between General
Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements."
Negotiation of Special Inter-Company Payment. The GM Team and EDS Team
agreed that it would be appropriate to address a special inter-company payment
as one of the terms of the Split-Off in order to enable
the GM Board to determine that the Split-Off is fair to all classes of GM
common stockholders. See "--Recommendations of the Capital Stock Committee and
the GM Board; Fairness of the Transactions." On December 8, 1995, in response
to an inquiry from the IRS regarding the Tax Ruling, General Motors advised
the IRS that the Special Inter-Company Payment would not exceed one billion
dollars and could well be substantially less. As described above, it had been
determined in September 1995 that the amount of the Special Inter-Company
Payment would not be negotiated by the management negotiating teams until
after they reached agreement on the principal terms of the IT Services
Agreements. Accordingly, negotiation of the amount of the Special Inter-
Company Payment did not commence until shortly after the teams reached a
preliminary agreement on February 8, 1996 as to a substantial number of terms
proposed to be included in the IT Services Agreements.
In order to facilitate the negotiating process, the independent counsel for
the Capital Stock Committee invited representatives of the GM Team and the EDS
Team to make separate presentations to such counsel as to each respective
team's views on the appropriate range for the amount of the Special Inter-
Company Payment and its underlying assumptions and analysis. The two teams
generally considered similar factors relating to the overall Split-Off
transaction in formulating their views as to a range of appropriate values for
the Special Inter-Company Payment. Both teams recognized that two of the
principal factors relevant to the negotiation of the amount of the Special
Inter-Company Payment were (i) the different characteristics of the Class E
Common Stock, which is a security of GM designed to provide financial returns
based on the performance of EDS, and
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the EDS Common Stock, which is a more typical equity security, and (ii) the
financial impact of the terms of the IT Services Agreements. However, each
team had different assumptions and views about the effect of the factors due,
in part, to the asymmetrical impact that certain factors could have on GM and
EDS, respectively. For example, the GM Team anticipated that GM's IT spending
(and corresponding EDS revenues) would slightly increase over the ten-year
initial term of the IT Services Agreements, while the EDS Team expected a
slightly declining revenue stream during that period. In addition, while the
GM Team had access to information about and focused its attention on the
spending (and revenue) effects of changes in the IT Services Agreements, the
EDS Team also had access to information about and placed greater weight on the
effect that the changes in the IT Services Agreements might have on EDS'
operating margins. The teams also had different assessments of the changes
that likely would be made in the Existing IT Services Agreements in the
absence of a Split-Off and the anticipated financial impact of such changes on
EDS. The factors considered by the negotiating teams were also considered by
the Capital Stock Committee and the GM Board and are described in greater
detail below under "--March 3, 1996 Capital Stock Committee Meeting," "--March
22, 1996 Capital Stock Committee Meeting" and "--March 31, 1996 GM Board
Meeting."
The GM Team and its advisors made an initial presentation to counsel for the
Capital Stock Committee on February 16, 1996. At this meeting, the GM Team
stated that, based on its assumptions, a Special Inter-Company Payment could
be supported in the range of $750 million to $1.7 billion. Nevertheless, in
light of the prior determination that any special payment would not exceed
$1.0 billion and in order not to impair the growth potential of EDS following
the Split-Off, the GM Team stated that the Special Inter-Company Payment
should be in the range of $750 million to $1.0 billion. On February 19, 1996,
the EDS Team and its advisors had an initial meeting with the independent
counsel for the Capital Stock Committee. At this meeting, the EDS Team stated
that, based on its assumptions, the amount to be paid by EDS to GM in
connection with the Split-Off should not exceed $250 million and that the EDS
Team was not currently prepared to recommend the making of any payment.
Between February 20, 1996 and March 1, 1996, there were further discussions
by both teams and their advisors with counsel for the Capital Stock Committee
as well as three meetings between the GM Team and the EDS Team with respect to
the Special Inter-Company Payment. At these meetings, the teams exchanged
their respective views as to the appropriate factors to consider in
determining the amount of the Special Inter-Company Payment. Although both
teams generally agreed on the list of such factors and whether the factors had
positive or negative effects, the teams held widely divergent estimates of the
value and importance of almost all of the factors. Rather than resolving their
different views on individual matters, the teams sought to reach a compromise
on an amount of the Special Inter-Company Payment that would permit each team
to recommend the terms of the Transactions taken as a whole to the Capital
Stock Committee and the GM Board. As a result of these discussions, the GM
Team and EDS Team reached preliminary agreement on March 1, 1996 on a Special
Inter-Company Payment in the amount of $500 million. In reaching this
preliminary agreement, the teams recognized that the Special Inter-Company
Payment constituted only one of the many terms of the Split-Off and related
transactions, all of which are integrally related. Accordingly, the teams
viewed their agreement as to the amount of the Special Inter-Company Payment
as preliminary in that it was premised on, among other things, the review of
and approval by the Capital Stock Committee and the GM Board of all of the
terms of the Transactions on substantially the same terms as those
contemplated by the teams at the time such preliminary agreement was reached.
The teams also reached preliminary agreement that General Motors would provide
EDS a $50 million allowance relating to the resolution of various uncertain,
contingent or other matters arising out of the separation of GM and EDS.
March 3, 1996 Capital Stock Committee Meeting. At its meeting on March 3,
1996 (the "March 3, 1996 CSC Meeting"), the Capital Stock Committee received
reports and presentations as to the Split-Off and related matters. All of the
members of the Capital Stock Committee and certain other members of the GM
Board attended the meeting. The relevant portion of the March 3, 1996 CSC
Meeting was also attended by representatives of the management negotiating
teams and their advisors and by the Capital Stock Committee's independent
legal counsel.
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Independent counsel for the Capital Stock Committee reviewed certain
corporate governance matters relating to consideration of the Split-Off.
Representatives of the GM Legal Staff then reported on various aspects of the
developing Split-Off proposal and on an update provided by McKinsey to its
consulting project concerning potential conflicts between EDS' business and
other businesses of GM and its subsidiaries which had been discussed at the
August 1995 CSC Meeting. This update included McKinsey's conclusion that the
fundamental industry forces shaping competition (and creating potential
conflicts among GM's current businesses) had intensified, strengthening the
rationale underlying its earlier recommendation as to a split-off of EDS.
Mr. Gottschalk and Mr. Castle, on behalf of the GM Team and the EDS Team,
respectively, then reported on the substantial progress made by the
negotiating teams, including reaching preliminary agreement with respect to a
substantial number of terms proposed to be included in the IT Services
Agreements. With Mr. Castle's concurrence, Mr. Gottschalk summarized the
agreement that had been negotiated with respect to, among other things, the
term of the new Master Services Agreement, the allocation of responsibility
between GM and EDS for IT strategy and direction, the limited competitive
bidding that would be permitted, the identification of key EDS employees for
critical projects, revised payment terms, certain matters related to the scope
of the agreement and the inclusion of a standard of good faith and fair
dealing in the contract. He also reported that the teams were still
negotiating certain matters relating to termination provisions for the Master
Services Agreement.
Counsel for the Capital Stock Committee then reviewed certain matters
relating to the negotiations over the amount of the Special Inter-Company
Payment, noting that such payment should take into account, among other
factors, the financial impact of the IT Services Agreements on EDS to the
extent that such impact was attributable to the Split-Off. However, counsel
noted that, while both negotiating teams expressed their belief that certain
changes would have been made to the Existing IT Services Agreements in the
absence of a split-off of EDS, the exact nature and timing of such changes
were extremely difficult, if not impossible, to determine.
Mr. Finnegan and Mr. Grant, representing the GM Team and the EDS Team,
respectively, then discussed the negotiations regarding the amount of the
Special Inter-Company Payment. They observed that the payment was considered
as one element among many in the overall Split-Off transaction. They reported
on the factors considered in negotiating the amount of the payment, noting
that both teams generally agreed as to the list of such factors and whether
the factors had a positive or negative effect but that virtually all of the
factors were subject to widely varying estimates of value and importance, and
that the teams had not resolved their differences in reaching a preliminary
agreement on a payment of $500 million and a preliminary agreement to
recommend that General Motors provide EDS a $50 million allowance relating to
the resolution of various uncertain, contingent or other matters arising out
of the separation of GM and EDS.
The factors considered to have a positive effect on the holders of the $1
2/3 Common Stock were the removal of the existing and potential business
conflicts that had previously been identified between EDS and certain other GM
business units, including Hughes and GMAC; any decrease in GM's pension
expense and funding obligations that may be caused by any appreciation
resulting from the Split-Off in the EDS Common Stock to be owned by the
pension plans for GM's hourly-rate and salaried employees; the receipt of the
Special Inter-Company Payment; the terms of the new IT Services Agreements;
and the elimination of the potential recapitalization of the Class E Common
Stock into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by
GM of substantially all of the business of EDS. Certain of these factors,
including the removal of potential business conflicts between EDS and Hughes
and, with respect to Delco, the terms of the IT Services Agreements, were also
considered to have a positive effect on the holders of Class H Common Stock.
Factors considered to have a positive effect on the holders of the Class E
Common Stock included the benefits of owning an equity security like EDS
Common Stock rather than Class E Common Stock, which is a security of GM
designed to provide holders with financial returns based on the performance of
EDS; the removal of constraints on EDS' ability, as a subsidiary of GM, to
participate in strategic alliances, including the ability to use EDS Common
Stock in large acquisitions; the availability of new market opportunities and
increased growth potential for EDS; lower cost of and better access to capital
for EDS; the possibility that EDS Common Stock would be included in the
Standard & Poor's 500 Index after the Split-Off; the release by the PBGC of
EDS from liability under Title IV of ERISA
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relating to GM's U.S. pension plans; and the potential of holders of EDS
Common Stock to realize premiums over prevailing market prices in connection
with certain corporate transactions, including tender offers and other change
of control transactions.
The teams also agreed on the list of certain negative factors. The factors
considered to have a negative effect on the holders of $1 2/3 Common Stock
were the loss of the ability to control through ownership its IT provider,
EDS, the possible effect of the Split-Off on GM's credit rating and credit
profile and the loss of the ability of General Motors to elect to recapitalize
shares of Class E Common Stock as shares of $1 2/3 Common Stock. The factors
considered to have a negative effect on the holders of Class E Common Stock
were the payment of the Special Inter-Company Payment; the terms of the new IT
Services Agreements; and the loss of the right to recapitalization of the
Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio under
certain circumstances. Other practical considerations discussed included
market expectations and the requirement to have the Split-Off approved by GM's
common stockholders and that, after the Split-Off, EDS should be adequately
capitalized to pursue growth and new business opportunities.
March 4, 1996 GM Board Meeting. At the GM Board meeting on March 4, 1996,
with all but one director in attendance, Mr. Wyman reported to the GM Board
regarding the Capital Stock Committee's review of the status of the Split-Off
at its March 3, 1996 meeting.
March 18, 1996 Capital Stock Committee Meeting. At a telephonic meeting of
the Capital Stock Committee on March 18, 1996, with all members participating,
counsel to the Capital Stock Committee described the process planned for the
further review and consideration of the Split-Off by the Capital Stock
Committee, including matters related to the Capital Stock Committee's March
22, 1996 meeting. The Capital Stock Committee also received a report on the
status of certain issues with respect to the IT Services Agreements.
March 22, 1996 Capital Stock Committee Meeting. The Capital Stock Committee
met by telephone conference on March 22, 1996, with all members participating.
Members of GM and EDS management, representatives of the financial and legal
advisors to the GM Team and EDS Team and the Capital Stock Committee's
independent legal counsel participated in the relevant portions of the
meeting.
Counsel for the Capital Stock Committee reviewed certain matters relating to
directors' responsibilities, the process that had previously been established
for arm's length negotiations regarding the terms of the Split-Off and the
role of the Capital Stock Committee in reviewing the proposed terms of the
Transactions.
Mr. Finnegan presented a report on behalf of GM management as to the
background of the Transactions, including the principal business purposes for
the Split-Off, the strategic advice received from McKinsey, the Tax Ruling and
the process of arm's-length bargaining that had been followed by the
management negotiating teams. Mr. Finnegan noted that the anticipated benefits
and costs of the Transactions from the perspective of each of the three
classes of GM common stock would be addressed in the reports of the management
negotiating teams and financial advisors.
Mr. Finnegan also presented the report of the GM Team, noting that it was
relying on the advice of Merrill Lynch that it expected to be in a position to
render the Merrill Lynch Fairness Opinion to the GM Board on March 31, 1996.
He reviewed certain material terms and advantages and disadvantages of the
Transactions, including the IT Services Agreements and the Special Inter-
Company Payment, from the perspective of the holders of $1 2/3 Common Stock
and Class H Common Stock. Based on the foregoing, Mr. Finnegan stated that the
GM Team recommended the Transactions as in the best interest of and fair to
the holders of $1 2/3 Common Stock and Class H Common Stock.
Members of the EDS Team then reviewed the background and history of the
negotiations, including the appointment of the teams as an aid to the process
established by the GM Board, the engagement by the EDS Team of its financial
advisors and counsel, the preliminary agreements reached by the teams with
respect to the terms of the Master Services Agreement and the amount of the
Special Inter-Company Payment and the anticipated financial effects of the
Transactions on EDS. After reviewing the foregoing matters, the EDS Team
recommended the proposed terms of the Split-Off to the Capital Stock Committee
as being in the best interests of the holders of the Class E Common Stock and,
accordingly, fair to such holders. In reaching its conclusions,
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the EDS Team specifically noted that (i) it was relying on the advice of
Lehman Brothers and Morgan Stanley that they expected to be in a position to
render an opinion to the effect that, based on and subject to the assumptions,
limitations and other matters set forth therein, the financial effect of the
Split-Off Transactions taken as a whole is fair, from a financial point of
view, to the holders of Class E Common Stock; (ii) it had considered both the
advantages and disadvantages of the Transactions from the perspective of the
holders of Class E Common Stock; and (iii) its conclusions were subject to the
understanding of EDS' management that substantial changes would have been made
beginning in 1996 to the Existing Master Services Agreement regardless of
whether the Split-Off occurred. The disadvantages of the Transactions
identified by the EDS Team included (a) the impact on EDS and the holders of
Class E Common Stock of the changes reflected in the Master Services
Agreement; and (b) the impact on EDS and the holders of Class E Common Stock
of the Special Inter-Company Payment. The advantages of the Transactions
identified by the EDS Team included (a) the benefits of owning EDS Common
Stock instead of Class E Common Stock, which is a derivative or "tracking"
stock; (b) the removal of constraints on EDS to pursue strategic alliances not
available to EDS as a subsidiary of General Motors; (c) the removal of
constraints on EDS to pursue new market opportunities not available to EDS as
a subsidiary of General Motors; (d) the more flexible access to capital
markets that will be available to EDS after the Split-Off without regard to
competing considerations of General Motors; (e) the advice of the financial
advisors to the EDS Team regarding the likelihood of EDS being included in the
Standard & Poor's 500 Index and the benefits of such inclusion; (f) the
release by the PBGC of EDS from contingent liability for General Motors
pension benefit obligations; (g) the tax-free nature of the Split-Off; and (h)
the advantages of a simplified governance process after the Split-Off,
including the benefits of a board of directors that will be focused
exclusively on the interests of the holders of EDS Common Stock. Members of
the EDS Team also discussed certain matters relating to corporate governance
arrangements for EDS following the Split-Off, including the identity of the
persons who would be elected to serve as non-employee directors of EDS upon
the consummation of the Split-Off.
A representative of Merrill Lynch presented certain financial analyses
regarding the Split-Off, as described under "--Fairness Opinions--Merrill
Lynch Fairness Opinion." The representative said that Merrill Lynch expected
to be in a position to render the Merrill Lynch Fairness Opinion to the full
GM Board on March 31, 1996.
A representative of Morgan Stanley presented a joint report of Morgan
Stanley and Lehman Brothers as to the EDS Team Financial Advisors' analysis of
the financial effect of the Split-Off Transactions from the perspective of the
holders of Class E Common Stock. Information about the report is provided
under "--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions."
The representative said that Morgan Stanley and Lehman Brothers expected to be
in a position to render their respective opinions to the full GM Board on
March 31, 1996.
Representatives of GM's Legal and Tax Staffs described certain terms of the
Merger Agreement, the Separation Agreement and the Tax Allocation Agreement.
EDS management reported on EDS' consideration of a nonrecurring charge to be
taken no earlier than the second quarter of 1996. See "EDS Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition, EDS management reported on various matters relating to the GM Hourly
Plan Special Trust's ownership of Class E Common Stock.
Mr. Smith, GM's Chairman, Chief Executive Officer and President, summarized
the presentations and recommendations that had been made by or on behalf of
the two management negotiating teams. Based on the foregoing, he stated that
GM executive management recommended the Transactions as fair to all classes of
GM common stockholders and in the best interests of GM and its common
stockholders.
After reviewing and discussing the foregoing matters, and acting in reliance
on the reports provided by and the advice of Merrill Lynch, Lehman Brothers
and Morgan Stanley that they expected to be in a position to render fairness
opinions as described herein, the Capital Stock Committee unanimously adopted
a resolution recommending that the GM Board proceed with the Transactions as
being in the best interests of, and fair to, General Motors and each class of
GM common stockholders.
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March 31, 1996 GM Board Meeting. The GM Board held a special meeting on
March 31, 1996 to review and consider the terms of the proposed Split-Off as
recommended by the two management negotiating teams, by GM executive
management and by the Capital Stock Committee. The special meeting was
attended by all but one of the members of the GM Board as well as by members
of GM and EDS management, representatives of the financial and legal advisors
to the GM Team and the EDS Team, counsel for the Capital Stock Committee and
representatives of GM's independent auditors.
Counsel for the Capital Stock Committee reviewed the terms of proposed
resolutions to be considered by the GM Board and certain matters relating to
the GM Board's responsibilities in connection with considering the
Transactions. Counsel reviewed the GM Board's fiduciary obligations to holders
of all classes of GM common stock and the process that had been established by
the GM Board for arm's-length negotiation of the terms of the Split-Off under
the supervision of, and subject to review by, the Capital Stock Committee.
Counsel also noted that with respect to the fairness of the Transactions to
each class of GM common stockholders, approval of the Transactions would be
sought not only from all three classes of GM common stockholders voting
together as a single class in accordance with their respective voting rights,
but also from the holders of the $ 1 2/3 Common Stock voting as a separate
class and the holders of the Class E Common Stock voting as a separate class.
In addition, counsel reported on the status of certain pending litigation
relating to the Split-Off. See "--Certain Litigation."
Mr. Wyman, Chairman of the Capital Stock Committee, reported as to the
special role that the Capital Stock Committee had played for many years in
reviewing the relationship between General Motors and EDS. He described the
special charge given to the Committee in August 1995 to oversee the
negotiations between the management negotiating teams and review the proposed
terms of the Transactions, noting that the Capital Stock Committee had held
seven meetings since August 1995 relating to the Split-Off (including the
August 1995 CSC Meeting) and members of the Capital Stock Committee had
participated in numerous other informal briefings and conferences with counsel
and members of the management negotiating teams and had reported to the GM
Board regarding such meetings, briefings, and conferences at eight different
GM Board meetings, including the August 7, 1995 GM Board Meeting. Mr. Wyman
noted the Capital Stock Committee's involvement in determining that the
principal terms of the IT Services Agreements should be negotiated before
other terms of the Transactions and in providing specific guidance to the
negotiating teams in November 1995 as to the corporate objectives to be
addressed in a split-off of EDS, particularly with respect to IT Services. He
also noted the complexity of evaluating the proposed IT Services Agreements in
comparison to the arrangements that might have prevailed between the parties
in the absence of the Split-Off. He said that if the Split-Off were not
consummated for any reason, the Capital Stock Committee anticipated that it
would review further the subject of GM/EDS IT services arrangements and
consider whether any changes would be appropriate. Based on the foregoing and
the matters discussed at the March 22, 1996 meeting of the Capital Stock
Committee (including the reports and recommendations of the GM Team and EDS
Team and GM executive management and the fairness opinions expected to be
delivered by Merrill Lynch and by each of the EDS Team Financial Advisors),
Mr. Wyman stated that the Capital Stock Committee had unanimously determined
that the Transactions are in the best interests of, and fair to, General
Motors and each class of its common stockholders, and that the Capital Stock
Committee recommended that the GM Board proceed with the Transactions. See "--
March 22, 1996 Capital Stock Committee Meeting."
Mr. Finnegan presented a report of GM management with respect to the
background, purposes and terms of the Transactions, which report was
substantially similar to the report on these matters that he had delivered to
the Capital Stock Committee on March 22, 1996. See "--March 22, 1996 Capital
Stock Committee Meeting."
Mr. Smith stated that, based on the information that had previously been
delivered to the GM Board, the presentations to be made by the management
negotiating teams and their respective financial advisors, and the actions of
the Capital Stock Committee, GM's senior executive management believed that
the two teams had used a fair process to negotiate and structure a transaction
that is fair to all classes of GM common stockholders and that GM should
proceed with the Transactions as being in the best interests of GM and all of
its common stockholders.
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Merrill Lynch delivered its written opinion to the GM Board that, based on
and subject to the assumptions, limitations and other matters set forth
therein, the Financial Effects of the Transactions (as defined in the Merrill
Lynch Fairness Opinion) are fair, from a financial point of view, to General
Motors and, accordingly, to General Motors' common stockholders after
consummation of the Merger, namely the holders of the $1 2/3 Common Stock and
the Class H Common Stock. A copy of the Merrill Lynch Fairness Opinion, which
sets forth the assumptions made, matters considered and limits of the review
undertaken, is attached as Appendix B-1 to this Solicitation
Statement/Prospectus and is incorporated herein by reference. A representative
of Merrill Lynch reviewed with the GM Board certain materials relating to the
Transactions and such opinion, which materials have been filed as an exhibit
to the Schedule 13E-3. For further information about the Merrill Lynch
Fairness Opinion and related presentation to the GM Board, see "--Fairness
Opinions--Merrill Lynch Fairness Opinion."
The EDS Team Financial Advisors delivered their written opinions to the GM
Board to the effect that, based on and subject to the assumptions, limitations
and other matters set forth therein, the financial effect of the Split-Off
Transactions (as defined in the Lehman Brothers and Morgan Stanley Fairness
Opinions) taken as a whole is fair, from a financial point of view, to the
holders of Class E Common Stock. A copy of each of the Lehman Brothers and
Morgan Stanley Fairness Opinions, which sets forth the assumptions made,
matters considered and limits of the review undertaken, is attached as
Appendix B-2 and Appendix B-3, respectively, to this Solicitation
Statement/Prospectus and is incorporated herein by reference. A representative
of the EDS Team Financial Advisors reviewed with the GM Board certain
materials relating to the Transactions and such opinions, which materials have
been filed as an exhibit to the Schedule 13E-3. For further information about
the Lehman Brothers and Morgan Stanley Fairness Opinions and related
presentation to the GM Board, see "--Fairness Opinions--EDS Team Financial
Advisors Fairness Opinions."
Mr. Finnegan presented a report on behalf of the GM Team as to the
negotiation of the terms of the Split-Off, including the IT Services
Agreements and the Special Inter-Company Payment, from the perspective of the
holders of the $1 2/3 Common Stock and the Class H Common Stock, which report
was substantially similar to the report on these matters that he had delivered
to the Capital Stock Committee on March 22, 1996. See
"--March 22, 1996 Capital Stock Committee Meeting." Based on the entire
process and its results, and in reliance on the Merrill Lynch Fairness
Opinion, he stated that the GM Team believed the terms of the Transactions are
in the best interests of GM and fair to the holders of $1 2/3 Common Stock and
Class H Common Stock. Accordingly, the GM Team recommended that the
Transactions be approved by the GM Board.
Members of the EDS Team then proceeded, after reviewing the background and
history of the negotiations between the management teams, to recommend the
proposed terms of the Split-Off to the GM Board as being in the best interests
of the holders of Class E Common Stock and, accordingly, fair to such holders.
In reaching such conclusion, the EDS Team took note of the same bases and
assumptions, and reviewed the same advantages and disadvantages of the
Transactions, as were discussed at the meeting of the Capital Stock Committee
held on March 22, 1996. See "--March 22, 1996 Capital Stock Committee
Meeting."
The GM Board also received reports on the Amended EDS Incentive Plan, EDS'
consideration of a nonrecurring charge to be taken by EDS in the second
quarter of 1996 and related disclosure matters, other matters relating to the
business and operations of EDS and the governance of EDS after the Split-Off.
See "EDS Management's Discussion and Analysis of Financial Condition and
Results of Operations." In addition, EDS management reported on certain
matters relating to the GM Hourly Plan Special Trust's ownership of Class E
Common Stock.
GM management reported as to the appropriate accounting treatment for the
Split-Off and discussed the process for filing this Solicitation
Statement/Prospectus with the Commission and soliciting consents from GM's
common stockholders in connection with the Transactions and the Amended EDS
Incentive Plan. GM management also discussed the press releases and other
announcements that would be appropriate in connection with the approval by the
GM Board of the Transactions.
After considering the foregoing matters, the GM Board unanimously determined
that the Transactions are in the best interests of, and fair to, General
Motors and each class of the GM common stockholders and,
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accordingly, the GM Board unanimously approved and authorized the
Transactions. The GM Board also unanimously determined to recommend to the
common stockholders of GM that they execute consents approving the
Transactions, including the adoption of the Merger Agreement.
RECOMMENDATIONS OF THE CAPITAL STOCK COMMITTEE AND THE GM BOARD; FAIRNESS OF
THE TRANSACTIONS
As described above, at its August 7, 1995 meeting, the GM Board concluded
that certain important strategic objectives of EDS could be addressed through
a split-off of EDS and determined that a split-off of EDS on terms that would
be fair to all classes of GM common stockholders would be in the best
interests of GM and its stockholders. Furthermore, the GM Board required that
any such split-off would be proposed only in a transaction that would be tax-
free for U.S. federal income tax purposes and that would not result in the
recapitalization of Class E Common Stock into $1 2/3 Common Stock at a 120%
exchange ratio as currently provided for upon a disposition by GM of
substantially all of the assets of EDS and under certain other circumstances
by the General Motors Certificate of Incorporation. See "--Alternatives to the
Split-Off" and "--Background of the Split-Off--Consideration of Split-Off."
In August 1995, the Capital Stock Committee considered and endorsed
procedures for establishing the financial and other essential terms of a
split-off. The GM Board, in connection with its August 1995 authorization to
management to develop the terms of a specific proposal regarding a split-off,
placed substantial reliance on presentations made to and discussions held at
the August 1995 Capital Stock Committee meeting. Upon the recommendation of
the Capital Stock Committee, the GM Board established procedures that it
believed would result in the negotiation of the terms of a split-off
transaction that would be fair to all classes of GM common stockholders. The
principal procedure established was the process of arm's-length negotiation
involving the GM Team and the EDS Team, each acting with its own legal and
financial advisors and under the general oversight of the Capital Stock
Committee, to ensure a level playing field between the parties. The GM Board
relied substantially on the Capital Stock Committee to monitor and oversee the
process by which the terms of the Transactions were developed. See "--
Background of the Split-Off--Consideration of Split-Off," "--August 1995
Capital Stock Committee Meeting," "--August 1995 GM Board Meeting" and "--
Negotiating Teams."
The Capital Stock Committee and the GM Board monitored the progress of the
management negotiating teams and provided guidance to them as appropriate,
including the communication in November 1995 of certain guidelines regarding
the GM Board's goals and priorities with respect to the Split-Off in general
and the IT Services Agreements in particular. In addition, the Capital Stock
Committee provided assistance to the negotiating teams in connection with the
September 1995 decision to negotiate the terms of the IT Services Agreements
before the other terms of the Transactions in order to enhance the arm's-
length and commercially reasonable nature of the IT Services Agreements on a
stand-alone basis. As a result of so sequencing the negotiations, the
management teams were able to negotiate the amount of the Special Inter-
Company Payment as a final term of the Transactions that would enable the
Capital Stock Committee and the GM Board, taking into account all other
factors (including the terms of the IT Services Agreements), to determine that
the Transactions are fair to all classes of GM common stockholders. See
"Background of the Split-Off--Negotiating Teams," "--Negotiation of IT
Services Agreements" and "--Negotiation of Special Inter-Company Payment."
In reviewing the terms of the Split-Off, the Capital Stock Committee placed
substantial reliance on its determination (based on the reports of the two
management negotiating teams and GM executive management) that there had in
fact been a process that involved vigorous arm's-length negotiation between
the two management teams, each of which was represented by independent
financial and legal advisors. With respect to the fairness of the
Transactions, the Capital Stock Committee also considered the fact that the
Transactions would be submitted for approval not only by all of GM's common
stockholders voting together as a single class in accordance with their
respective voting rights, but also by separate class votes of the holders of
$1 2/3 Common Stock and Class E Common Stock. The Capital Stock Committee
considered the recommendations of the GM Team and the EDS Team, as well as the
fact that the proposed terms of the Transactions satisfied the conditions
initially established by the GM Board as to the tax-free nature of the Split-
Off and the absence of a recapitalization at a 120% exchange ratio and the
guidelines established in November 1995 as to certain other
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matters. The Capital Stock Committee also considered the one-for-one ratio for
converting shares of Class E Common Stock into shares of EDS Common Stock, the
opportunities that would be afforded to EDS and GM to accomplish the purposes
of the Split-Off, the amount of the Special Inter-Company Payment and the
terms of the IT Services Agreements. In addition, as to the financial fairness
of the Transactions, the Capital Stock Committee placed substantial reliance
on the presentations made and fairness opinions expected to be delivered by
Merrill Lynch and by each of the EDS Team Financial Advisors. On the basis of
all of the foregoing considerations and the other matters discussed at its
March 22, 1996 meeting, the Capital Stock Committee determined to recommend to
the GM Board that General Motors proceed with the Transactions as in the best
interests of, and fair to, GM and each class of GM common stockholders. See
"--Background of the Split-Off--March 22, 1996 Capital Stock Committee
Meeting."
The GM Board determined the fairness of the Transactions based on
substantially the same factors as those considered by the Capital Stock
Committee. The GM Board did not formally assign weights to specific factors
but considered all factors together. However, the GM Board placed principal
reliance on its conclusion that certain important strategic objectives of EDS
could be addressed through the Split-Off without significant potential adverse
consequences for GM and its determination that a fair process had been
developed and implemented for negotiating the terms of the Transactions. With
regard to the negotiating process, the GM Board attributed substantial
importance to the vigorous arm's-length negotiations that it determined had
taken place between the two management negotiating teams and to the activities
of the Capital Stock Committee and its independent counsel in overseeing and
providing guidance to the management negotiating teams. In addition, (a) as to
the fairness, from a financial point of view, of the financial effects of the
Transactions on General Motors (and, accordingly, on holders of the $1 2/3
Common Stock and the Class H Common Stock), the GM Board principally relied on
the Merrill Lynch Fairness Opinion and the presentation of Merrill Lynch to
the GM Board and (b) as to the fairness, from a financial point of view, of
the financial effects of the Transactions on holders of the Class E Common
Stock, the GM Board principally relied on the presentation and written opinion
of each of the EDS Team Financial Advisors.
In addition to and without limiting the foregoing, in determining the
fairness of the Transactions to each class of GM common stock, the GM Board
considered (i) the report, presentation and recommendation of GM's executive
management regarding the Split-Off and related transactions, (ii) the report
and recommendation of each of the GM Team and the EDS Team, (iii) the
presentation and written opinion of each of Merrill Lynch and the EDS Team
Financial Advisors, (iv) the recommendation of the Capital Stock Committee
that the GM Board proceed with the Transactions as in the best interests of,
and fair to, GM and each class of GM common stockholders, (v) the background,
oversight, deliberations and views of the Capital Stock Committee with respect
to the Transactions and the relationship between GM and EDS, (vi) the
information previously reviewed and the prior deliberations of the GM Board
concerning the potential for a split-off of EDS and the relationship between
GM and EDS and (vii) the other matters reported on at the March 31, 1996 GM
Board Meeting. See "--Background of the Split-Off--March 31, 1996 GM Board
Meeting" and "--Fairness Opinions."
Based on the foregoing, the GM Board unanimously determined that the
Transactions are in the best interests of, and fair to, General Motors and
each class of the GM common stockholders and, accordingly, the GM Board
unanimously approved and authorized the Transactions. The GM Board also
unanimously determined to recommend to the common stockholders of GM that they
execute consents approving the Transactions, including the adoption of the
Merger Agreement.
FAIRNESS OPINIONS
Merrill Lynch Fairness Opinion
On March 31, 1996, Merrill Lynch delivered its written opinion to the GM
Board that, as of that date and on the basis of and subject to the
assumptions, limitations and other matters set forth therein, the Financial
Effects of the Transactions (as defined below) are fair, from a financial
point of view, to General Motors and, accordingly, to General Motors' common
stockholders after consummation of the Merger, namely the holders of the $1
2/3 Common Stock and the Class H Common Stock. As used in the Merrill Lynch
Fairness Opinion and in
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this section of this Solicitation Statement/Prospectus, the term "Financial
Effects of the Transactions" refers collectively to the Special Inter-Company
Payment, the $50 million allowance to EDS under the Separation Agreement, the
expenses of implementing the Transactions to be borne by General Motors and
the financial effects on General Motors (excluding EDS) of (i) certain
changes, pursuant to the Master Services Agreement and certain IT Services
Agreements, to the terms on which IT services are currently provided by EDS to
General Motors (the "MSA Modifications"), (ii) the removal of certain
potential conflicts between the business of EDS and certain other businesses
of General Motors and its subsidiaries, (iii) any change in the market price
of the shares of Class E Common Stock held by the GM Hourly Plan Special Trust
and the GM Salaried Plan Trust (collectively, the "Plan Holdings") as a result
of the Transactions and (iv) the conversion of each share of Class E Common
Stock into one share of EDS Common Stock and, upon such conversion, the
cancellation of all such shares of Class E Common Stock (the "Class E Common
Stock Conversion"). A COPY OF THE MERRILL LYNCH FAIRNESS OPINION, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX B-1 TO THIS SOLICITATION
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF
THE MERRILL LYNCH FAIRNESS OPINION SET FORTH IN THIS SOLICITATION
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION. COMMON STOCKHOLDERS OF GENERAL MOTORS ARE URGED TO READ
THE MERRILL LYNCH FAIRNESS OPINION IN ITS ENTIRETY.
Merrill Lynch also provided a written presentation to the GM Board regarding
the financial and comparative analyses performed by Merrill Lynch in
connection with preparation of the Merrill Lynch Fairness Opinion and
discussed such analyses with the GM Board at its March 31, 1996 meeting. A
description of such presentation is contained in this section of the
Solicitation Statement/Prospectus. A substantially similar presentation was
provided to the Capital Stock Committee and discussed with the Capital Stock
Committee at its March 22, 1996 meeting. A copy of the written presentation to
the GM Board has been filed as an exhibit to the Rule 13e-3 Transaction
Statement filed with the Commission with respect to the Transactions and may
be inspected and copied, and obtained by mail, from the Commission as set
forth in "Available Information" and will be made available for inspection and
copying at the principal executive offices of General Motors at General Motors
Corporation, Room 11-243, General Motors Building, 3044 West Grand Boulevard,
Detroit, Michigan 48202-3091 during regular business hours by any interested
common stockholder of General Motors or his or her representative who has been
so designated in writing.
The Merrill Lynch Fairness Opinion is directed only to the fairness, from a
financial point of view, of the Financial Effects of the Transactions to
General Motors and, accordingly, to General Motors' common stockholders after
consummation of the Merger, namely the holders of the $1 2/3 Common Stock and
the Class H Common Stock, and does not constitute a recommendation to any
common stockholder of General Motors as to whether such stockholder should
consent to the Transactions. The Merrill Lynch Fairness Opinion does not in
any manner address the fairness of the Transactions to EDS or to the holders
of Class E Common Stock, matters as to which Merrill Lynch's opinion has not
been requested. Furthermore, Merrill Lynch expressed no opinion as to the
prices at which EDS Common Stock will trade subsequent to the Split-Off. The
Merrill Lynch Fairness Opinion is necessarily based upon financial, economic,
market and other conditions as they existed and could be evaluated on the date
of the Merrill Lynch Fairness Opinion.
In arriving at its opinion, Merrill Lynch, among other things: (1) reviewed
General Motors' Annual Reports, Forms 10-K and related financial information
for the five fiscal years ended December 31, 1994, General Motors' audited
financial statements for the year ended December 31, 1995, drafts of General
Motors' Annual Report and Form 10-K for that year, and General Motors' Forms
10-Q for the quarterly periods ending March 31, 1995, June 30, 1995 and
September 30, 1995; (2) reviewed EDS' Annual Reports and related financial
information for the five fiscal years ended December 31, 1994 and EDS' audited
financial statements for the year ended December 31, 1995; (3) conducted
discussions with members of senior management of General Motors concerning
their views regarding (a) the use of IT services by General Motors in the
future and (b) the strategic rationale for, and the financial effects on
General Motors (excluding EDS) of, the Split-Off, including the financial
benefits to General Motors of the removal of certain potential conflicts
between the business of EDS and certain other businesses of General Motors and
its subsidiaries; (4) reviewed certain forecasts furnished to
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Merrill Lynch by General Motors management of General Motors' future
expenditures for information technology services; (5) reviewed certain
estimates furnished to Merrill Lynch by management of General Motors of the
expenses of implementing the Transactions to be borne by General Motors; (6)
reviewed certain information, including financial forecasts, relating to the
business, earnings, cash flow, assets and prospects of EDS, furnished to
Merrill Lynch by EDS; (7) reviewed published reports of equity analysts
regarding their expectations with respect to the future earnings of EDS and
the impact of the Split-Off on such earnings; (8) conducted discussions with
members of senior management of EDS concerning their views regarding the
strategic rationale for, and the financial effects on EDS of, the Split-Off,
and various strategic alternatives available to EDS, both as a wholly owned
subsidiary of General Motors and as an independent, publicly traded company;
(9) compared certain financial ratios of EDS, on a pro forma basis giving
effect to the Split-Off, to the financial ratios of certain companies that
Merrill Lynch deemed to be reasonably similar to EDS; (10) reviewed the
historical market prices for the Class E Common Stock to be converted into EDS
Common Stock in the Split-Off and considered the potential impact of the
Split-Off on the market price thereof; (11) considered the financial benefits
to General Motors of its rights of ownership and control of EDS (taking into
account the terms of the Class E Common Stock and the GM Board's policies with
respect to the exercise of such rights), all of which would terminate as a
result of the Class E Common Stock Conversion; (12) compared the financial
terms of the Split-Off with the financial terms of certain transactions that
Merrill Lynch deemed to be relevant; (13) considered the alternatives
available to EDS and General Motors in developing and implementing strategic
alliances and other strategic alternatives for EDS, as a wholly owned
subsidiary of General Motors, with third parties; (14) reviewed a draft dated
March 27, 1996 of the Merger Agreement; (15) reviewed a draft dated March 26,
1996 of the Separation Agreement and a draft dated March 28, 1996 of the Tax
Allocation Agreement; (16) reviewed the Existing Master Services Agreement and
a draft dated March 22, 1996 of the Master Services Agreement; (17) reviewed
the General Motors Certificate of Incorporation and GM's By-laws; (18)
reviewed (a) the GM-PBGC Agreement, (b) the Escrow Agreement (the "Escrow
Agreement") made as of March 5, 1996 by and among Bankers Trust Company (the
"Escrow Agent"), the PBGC and General Motors and (c) forms of the
Unconditional Releases (as defined below in "--GM-PBGC Agreement"); (19)
reviewed the Registration Rights Agreement; (20) reviewed the Final Exemption
published by the Department of Labor in the Federal Register dated March 15,
1995 with respect to GM's March 1995 contribution of Class E Common Stock and
cash to the GM Hourly Plan Special Trust; (21) reviewed the Tax Ruling and the
request to the IRS for such ruling; (22) reviewed a draft dated March 28, 1996
of this Solicitation Statement/Prospectus; and (23) reviewed such other
financial studies and analyses and performed such other investigations and
took into account such other matters as Merrill Lynch deemed necessary,
including Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing the Merrill Lynch Fairness Opinion, Merrill Lynch assumed and
relied on the accuracy and completeness of all information supplied or
otherwise made available to it by General Motors and EDS, and Merrill Lynch
did not independently verify such information or undertake an independent
evaluation or appraisal of any of the assets or liabilities of General Motors
or EDS and was not furnished with any such evaluation or appraisal. With
respect to the forecasts furnished by General Motors management of General
Motors' future expenditures for information technology services, Merrill Lynch
assumed that they are reasonably based and reflect the best currently
available estimates and judgments of such management as to such expected
expenditures. Merrill Lynch assumed that the executed Unconditional Releases
will be released from escrow in accordance with the terms of the Escrow
Agreement. In addition, Merrill Lynch assumed that any appreciation in the
market price of the Plan Holdings as a result of the Transactions will
directly reduce General Motors' pension expense and unfunded pension
liability. Merrill Lynch was advised by General Motors that the consummation
of the Transactions will not result in any default or similar event under any
loan agreement, instrument of indebtedness or other contract of General Motors
or EDS that will not be waived.
The terms of the Transactions were developed through a process of arms'-
length negotiations between the GM Team and the EDS Team and were approved by
the Capital Stock Committee and the GM Board. See "--Background of the Split-
Off." No limitations were imposed by General Motors or the GM Board with
respect to the investigations made or procedures followed by Merrill Lynch in
rendering its opinion, except that
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Merrill Lynch was not authorized by General Motors or the GM Board to solicit,
nor did Merrill Lynch solicit, third-party indications of interest with
respect to a business combination or other extraordinary transaction involving
EDS or any of its assets.
The following paragraphs contain a summary of certain financial and
comparative analyses performed by Merrill Lynch in connection with the
preparation of the Merrill Lynch Fairness Opinion and presented to the GM
Board and the Capital Stock Committee. The summary does not purport to be a
complete description of the analyses conducted by Merrill Lynch in arriving at
its opinion. In addition, Merrill Lynch believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all such factors and analyses,
could create an incomplete view of the processes underlying its opinion.
Merrill Lynch did not assign relative weights to any of its analyses in
preparing its opinion. The preparation of a fairness opinion is a complex
process, and a summary description does not capture the full analysis. In
performing its analyses, Merrill Lynch made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of General Motors and EDS. In
addition, certain elements of the Transactions were not susceptible to precise
quantification and, in preparing its opinion, Merrill Lynch made judgments and
estimates that it considered reasonable and appropriate under the
circumstances. Any estimates incorporated in the analyses performed by Merrill
Lynch are not necessarily indicative of actual past or future values or
results, which may be significantly more or less favorable than suggested by
such estimates or analyses. Because such estimates are inherently subject to
uncertainty, none of General Motors, EDS, Merrill Lynch or any other person
assumes responsibility for their accuracy. In addition, analyses relating to
the value of businesses do not purport to be appraisals and do not necessarily
reflect the prices at which businesses may be sold in the future or at which
their shares of capital stock may trade in the future.
Overview of Analyses of the Financial Effects of the Transactions. Merrill
Lynch analyzed the value of the financial effects on General Motors (excluding
EDS) of the MSA Modifications and of the Funding Effect (as defined below
under "--Analysis of the Financial Effects of the Transactions on the Plan
Holdings") by calculating ranges of values of such financial effects, as
described below. By adding the amount of the Special Inter-Company Payment to
the sum of such ranges of values, and by subtracting a range of from $70
million to $50 million on account of the $50 million allowance provided to EDS
under the Separation Agreement and for the expenses of implementing the
Transactions to be borne by General Motors, Merrill Lynch calculated a range
of values for such financial effects of $970 million to $2.29 billion, or from
3.6% to 8.5% of the aggregate market value of the Class E Common Stock (the
"Class E Aggregate Market Value"), based on 483 million shares outstanding and
the closing market price on March 26, 1996 of $55.875 per share. Merrill Lynch
reviewed such range of percentages of the Class E Aggregate Market Value
against reference ranges of Percentage Premiums (as defined and described
below under "--Analysis of the Financial Effects of the Class E Common Stock
Conversion") developed from analyses of certain Comparable Transactions (as
defined and described below). The analyses of the Comparable Transactions were
undertaken in order to quantify the financial benefits to General Motors from
its control of EDS, all of which would terminate as a result of the Class E
Common Stock Conversion. In addition, Merrill Lynch discussed with the GM
Board and the Capital Stock Committee (as described below), but did not
attempt to quantify, (a) certain financial benefits to General Motors of the
Transactions, including financial benefits to General Motors (excluding EDS)
arising out of the removal of certain potential conflicts between the business
of EDS and certain other businesses of General Motors and its subsidiaries and
a reduction in goodwill amortization and (b) certain financial benefits that
General Motors would cease to have as a result of the Class E Common Stock
Conversion, including the ability of General Motors to elect to recapitalize
shares of Class E Common Stock as shares of $1 2/3 Common Stock under certain
circumstances (as described below under "Class E Common Stock--
Recapitalization") and the ability of General Motors to capture and retain
dividends paid by EDS to General Motors.
Analysis of the Financial Effects of the MSA Modifications. In order to
quantify the financial effects on General Motors (excluding EDS) of the MSA
Modifications, Merrill Lynch calculated: (a) ranges of values of the financial
effects of the MSA Modifications (i) giving General Motors and its affiliates
the option, with respect
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to purchases of information technology services covered under the Master
Services Agreement, to subject a portion of such purchases to competitive
bidding and to source such purchases with bidders other than EDS (the
"Outsourcing Modification"), (ii) providing certain goals for EDS to meet in
reducing the cost to General Motors and its affiliates of the services to be
provided by EDS (the "Structural Cost Reductions"), (iii) lengthening,
commencing in 1997, the time available to General Motors and its affiliates to
make payments for services (the "Payment Terms Modification") and (iv)
providing for an initial term of 10 years following the consummation of the
Split-Off (the "Primary Term"), subject to renewal; and (b) ranges of values
of the financial effects of the MSA Modifications based on assumptions
regarding possible changes to the terms on which IT services are currently
provided by EDS to General Motors that might have been implemented in the
absence of a split-off of EDS. In addition, Merrill Lynch discussed with the
GM Board and the Capital Stock Committee, but did not attempt to quantify, the
financial effects on General Motors (excluding EDS) of certain other MSA
Modifications, including the extension of certain of the Existing IT Services
Agreements for additional terms of approximately one and two years beyond
their current expiration dates, the inclusion in MSA Services of plant floor
automation services in General Motors manufacturing facilities that are
currently contracted for outside the scope of the Existing Master Services
Agreement, and certain changes to the pricing of commodity items.
. Outsourcing Modification--Primary Term. Merrill Lynch calculated a range
of values for the financial effects of the Outsourcing Modification during the
Primary Term, based on the after-tax present value of assumed price reductions
resulting from the opportunity to expose certain MSA Services to competitive
bidding and the assumption that there would be no such opportunity to
outsource during the Primary Term absent the Split-Off. Based on discussions
with General Motors management, Merrill Lynch made certain additional
assumptions for purposes of its analysis, including that (a) price reductions
of from 12% to 20% would occur on services that were actually outsourced as a
result of competitive bidding, (b) price reductions of from 6% to 10% would
occur on services that EDS would continue to provide as a result of its being
awarded a contract on the basis of its bid (which was assumed to occur with
respect to 75% of the contracts awarded after competitive bidding), (c)
average growth of expenditures by GM for IT services would be approximately 2%
per year (taking into account the assumptions regarding price reductions
described above), (d) General Motors' tax rate would be 35% and (e) General
Motors' after-tax cost of capital would be 11%. Based on such assumptions,
Merrill Lynch calculated a range of values for the financial effects on
General Motors (excluding EDS) of the Outsourcing Modification during the
Primary Term of from $165 million to $274 million (of which between $1 million
and $2 million would be benefits allocable to holders of the Class H Common
Stock).
In the absence of information as to the likelihood that terms similar to the
Outsourcing Modification would be implemented in the absence of the Split-Off,
Merrill Lynch noted that the value of the financial effects of the Outsourcing
Modification would, if and to the extent that such similar terms were
implemented, be less than the value reflected in the analysis described above,
and could be zero.
. Outsourcing Modification--After the Primary Term. Merrill Lynch calculated
a range of values for the financial effects of the Outsourcing Modification
after the Primary Term, based on the after-tax present value of assumed price
reductions resulting from the opportunity to expose certain MSA Services to
competitive bidding under the Master Services Agreement (the "Split-Off Case")
and the following two cases: one premised on the assumption that there would
be no such opportunity to outsource after the Primary Term absent the Split-
Off (the "No Outsourcing Case"); and the other premised on the assumption that
there would be a limited opportunity to outsource after the Primary Term
absent the Split-Off (the "Limited Outsourcing Case"). Based on discussions
with General Motors management, Merrill Lynch also assumed that expenditures
for IT services by General Motors would grow by 2% per year after 2005 and
made certain additional assumptions for purposes of its analysis of: (a) the
Split-Off Case, including that (i) 6.8% of General Motors' expenditures for IT
services would be outsourced in 2005 and such percentage would increase
linearly to a constant percentage within a range between 20% and 40% after
2014 and (ii) all of General Motors' expenditures for IT services would be
exposed to outsourcing after 2005; (b) the Limited Outsourcing Case, including
that (i) a constant 6.8% of General Motors' expenditures for IT services would
be outsourced after 2005 and (ii) 27.2% of General Motors'
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expenditures for IT services would be exposed to outsourcing after 2005; and
(c) for each of the Split-Off Case, the No Outsourcing Case and the Limited
Outsourcing Case, including that (i) price reductions of from 6% to 10% would
occur on services that were actually outsourced as a result of competitive
bidding, (ii) price reductions of from 3% to 5% would occur on services that
EDS would continue to provide as a result of its being awarded a contract on
the basis of its bid, (iii) General Motors' tax rate would be 35% and (iv)
General Motors' after-tax cost of capital would be 11%. Based on such
assumptions, Merrill Lynch calculated a range of values for the financial
effects of the Outsourcing Modification after the Primary Term of from $396
million to $744 million assuming that the No Outsourcing Case would have
occurred in the absence of the Split-Off (of which between $3 million and $5
million would be benefits allocable to holders of the Class H Common Stock)
and $279 million to $546 million assuming that the Limited Outsourcing Case
would have occurred in the absence of the Split-Off (of which between $2
million and $4 million would be benefits allocable to holders of the Class H
Common Stock).
. Structural Cost Reductions. Merrill Lynch calculated that the financial
benefits to General Motors (excluding EDS) of the Structural Cost Reductions
would be $163 million, based on the after-tax present value of the amount by
which (a) the targeted amounts of Structural Cost Reductions in the IT
Services Agreements exceed (b) the targeted amounts of cost reductions under
the Existing IT Services Agreements. To the extent that the amounts targeted
under the Structural Cost Reductions would have been achieved in the absence
of the Split-Off but would have been required to be shared with EDS under the
Existing IT Services Agreements until the expiration of such agreements, the
value of the Structural Cost Reductions to General Motors would be $73
million. In making the calculations of the financial effect of the Structural
Cost Reductions described above, Merrill Lynch assumed that the IT Services
Agreements would, even in the absence of the Split-Off, be renegotiated as
they expire to include terms identical to the Structural Cost Reductions.
In the absence of information as to the likelihood that terms similar to the
Structural Cost Reductions would, in the absence of the Split-Off, be
implemented prior to the expiration dates of the respective Existing IT
Services Agreements, Merrill Lynch noted that the value of the financial
effects of the Structural Cost Reductions would, if and to the extent that
such similar terms were implemented prior to such dates, be less than the
value reflected in the analysis described above, and could be zero.
. Payment Terms Modification. Merrill Lynch analyzed the financial effects
on General Motors (excluding EDS) of the Payment Terms Modification by
calculating a range of present values of the positive cash flows from
increased days receivable during the Primary Term of from $64 million to $123
million, using the following assumptions, based on discussions with General
Motors management: (a) averages of 15 additional days before payments are
rendered by General Motors to EDS during 1997, 19.3 such additional days
during 1998 and 35 such additional days during the years from 1999 to 2005,
(b) a range of after-tax funding rates for General Motors of from 4% to 12%,
and (c) expenditures by General Motors for IT services as described under "--
Outsourcing Modification--Primary Term" and applicability of the Payment Terms
Modification to 71% of such expenditures (principally in North America). In
addition, Merrill Lynch assumed that, even if there were no Split-Off, terms
of payment would, at the point in time equivalent to the end of the Primary
Term, be conformed to those in the Master Services Agreement.
In the absence of information as to the likelihood that terms similar to the
Payment Terms Modification would, in the absence of the Split-Off, be
implemented prior to the equivalent of the end of the Primary Term, Merrill
Lynch noted that the value of the financial effects of the Payment Terms
Modification would, if and to the extent that such similar terms were
implemented prior to such time, be less than the value reflected in the
analysis described above, and could be zero.
Analysis of the Financial Effects of the Transactions on the Plan Holdings.
In order to quantify the financial effects on General Motors (excluding EDS)
of the financial effects of the Transactions on the Plan Holdings, Merrill
Lynch analyzed the potential effect of the Split-Off on the per share market
price of the Class E Common Stock to be converted in the Merger into EDS
Common Stock (the "Pricing Effect"), using the following assumptions, based on
discussions with General Motors management (except as otherwise noted below):
(a)
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earnings per share ("EPS") for EDS of $2.27 in 1996 and growth in EPS ("Future
Growth") of 15% per year for the following five years, in each case absent the
Split-Off (based on analyst expectations as compiled by I/B/E/S, February
1996); (b) EDS revenue from sources other than General Motors ("Non-GM
Revenue") of $9.871 billion in 1996 (based on Merrill Lynch's estimate),
growth in Non-GM Revenue of approximately 19% per year for the following 5
years absent the Split-Off, increases in growth of such revenue of from 0% to
4% as a result of the Split-Off (focusing in the analyses, as described below,
on increases in growth of 1% to 2%) and a constant pre-tax margin of 14% on
such EDS revenue; (c) increases in EDS revenue from General Motors resulting
from the Plant Floor Agreement and a constant pre-tax margin of 14% on such
EDS revenue; (d) increases in EDS interest expense at a pre-tax rate of 6% as
a result of the Special Inter-Company Payment and the Payment Terms
Modification; and (e) the following two cases: (i) one premised on assumptions
consistent with no financial benefits to General Motors during the first five
years of the Primary Term as a result of the MSA Modifications ("MSA Case 1")
and (ii) the other premised on assumptions consistent with the maximum amount
of financial benefits to General Motors as a result of the MSA Modifications
("MSA Case 2"), in each case as summarized above under "--Analysis of the
Financial Effects of the MSA Modifications." In its analysis, Merrill Lynch
also assumed that: (1) any appreciation in the market price of the Plan
Holdings as a result of the Transactions would directly reduce General Motors'
pension expense and unfunded pension liability; (2) reductions in pension
funding would reduce future tax benefits to General Motors at a marginal rate
of 35%; and (3) General Motors' after-tax cost of capital would equal the
investment return of the GM Pension Plans (as defined below). Merrill Lynch
calculated ranges of Pricing Effect using the above assumptions and the
following equation: Price = (Price/EPS / Future Growth) X (Future Growth X
Earnings). In addition, Merrill Lynch calculated the Pricing Effect of
inclusion of EDS Common Stock in the S&P 500 Index (the "S&P 500 Inclusion
Effect") by calculating the effect of an increase of up to 2% in the ratio of
Price/EPS to Future Growth included in such equation, based on historical data
reviewed by Merrill Lynch regarding the effect of such inclusion on pricing of
the capital stock of other issuers.
Based on the above methodology, Merrill Lynch calculated ranges (the high
and low ends of such ranges corresponding to assumptions of the high and low
S&P 500 Inclusion Effect) of the Pricing Effect and ranges of amounts of
after-tax savings to General Motors from reductions in General Motors' pension
expense and unfunded pension liability (the "Funding Effect") as follows: (a)
with respect to MSA Case 1, (i) assuming a 0% increase in growth of Non-GM
Revenue, (A) a $(0.98) to $0.12 Pricing Effect and (B) a $(99) million to $12
million Funding Effect, (ii) assuming a 1% increase in growth of Non-GM
Revenue, (A) a $2.51 to $3.68 Pricing Effect and (B) a $255 million to $373
million Funding Effect, (iii) assuming a 2% increase in growth of Non-GM
Revenue, (A) a $6.06 to $7.30 Pricing Effect and (B) a $615 million to $740
million Funding Effect, (iv) assuming a 3% increase in growth of Non-GM
Revenue, (A) a $9.68 to $10.99 Pricing Effect and (B) a $982 million to $1.12
billion Funding Effect, and (v) assuming a 4% increase in growth of Non-GM
Revenue, (A) a $13.36 to $14.75 Pricing Effect and (B) a $1.36 billion to
$1.50 billion Funding Effect; and (b) with respect to MSA Case 2, (i) assuming
a 0% increase in growth of Non-GM Revenue, (A) a $(2.71) to $(1.64) Pricing
Effect and (B) a $(274) million to $(166) million Funding Effect, (ii)
assuming a 1% increase in growth of Non-GM Revenue, (A) a $0.71 to $1.85
Pricing Effect and (B) a $72 million to $187 million Funding Effect, (iii)
assuming a 2% increase in growth of Non-GM Revenue, (A) a $4.20 to $5.40
Pricing Effect and (B) a $426 million to $548 million Funding Effect, (iv)
assuming a 3% increase in growth of Non-GM Revenue, (A) a $7.75 to $9.02
Pricing Effect and (B) a $786 million to $915 million Funding Effect, and (v)
assuming a 4% increase in growth of Non-GM Revenue, (A) a $11.36 to $12.70
Pricing Effect and (B) a $1.15 billion to $1.29 billion Funding Effect.
Merrill Lynch indicated, however, that it believed that the increase in growth
of Non-GM Revenue would probably be in the range of approximately 1% to 2%
and, accordingly, focused on a range of Funding Effects of from $255 million
to $548 million in its analyses.
Merrill Lynch also reviewed data regarding the daily closing market price of
the Class E Common Stock and the daily closing market price of an index of
selected comparable companies during the periods from July 25, 1995 to August
22, 1995 and from December 15, 1995 to January 12, 1996 and, in connection
therewith, considered the potential impact that certain announcements during
such periods regarding the Split-Off had on the market price of the Class E
Common Stock. Merrill Lynch noted, however, that such announcements
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contained only then current information about the probability of the Split-Off
and the terms thereof. The index of comparable companies included: Automatic
Data Processing, Computer Sciences Corporation, First Data Corporation,
Fiserv, Inc., Policy Management Systems Corp., Shared Medical Systems
Corporation and SunGard Data Systems, Inc.
Analysis of the Financial Effects of the Class E Common Stock Conversion. In
order to analyze the financial effects on General Motors (excluding EDS) of
the Class E Common Stock Conversion, Merrill Lynch considered the financial
benefits to General Motors of its rights of ownership and control of EDS
(taking into account the terms of the Class E Common Stock and the GM Board's
policies with respect to the exercise of such rights), all of which would
terminate as a result of the Class E Common Stock Conversion. Merrill Lynch
considered the financial benefits to General Motors of its ability to elect to
recapitalize shares of Class E Common Stock as shares of $1 2/3 Common Stock
under certain circumstances (as described below under "Class E Common Stock--
Recapitalization") and its ability to capture and retain dividends paid by EDS
to General Motors, both of which would terminate as a result of the Class E
Common Stock Conversion. However, Merrill did not attempt to quantify such
financial benefits because of the low probability, according to management of
General Motors, that General Motors would undertake such a recapitalization or
attempt to capture and retain such dividends. Merrill Lynch analyzed the
financial benefits to General Motors of control of EDS by comparing the
financial terms of the Split-Off with the financial terms of certain
recapitalization and acquisition transactions in which either (a) holders of
shares of common stock issued by companies with dual class common stock
received different consideration depending on whether they were holders of the
shares having a greater number of votes per share ("High Vote Shares") or (b)
holders of a significant block (a "Blocking Position") of the common stock of
a company received different consideration than other such holders. Merrill
Lynch reviewed the premiums paid to the holders of High Vote Shares or
Blocking Positions in the following transactions (the "Comparable
Transactions"): (a) the recapitalization of Fischer & Porter in 1993 and the
recapitalization of Bergen Brunswig Corp. in 1988 (the "Recapitalization
Transactions"), (b) the acquisition of Resorts International Inc. by The Merv
Griffin Company in 1988 and the acquisition of Sealand by CSX in 1986 (the
"Competitive Acquisitions") and (c) the acquisition by Silver King
Communications of a 41% stake in Home Shopping Network, Inc. in 1995, the 1993
proposed (but not consummated) acquisition by Bell Atlantic of Tele-
Communications, Inc., the 1993 proposed (but not consummated) acquisition by
AT&T of McCaw Cellular, the acquisition by Premark International Inc. of Sikes
Corporation in 1990 and the acquisition by Trumps of Pay 'n Save in 1984 (the
"Negotiated Acquisitions"). The High Vote Shares in each applicable
transaction represented more than 50% of the outstanding voting power of the
common stock. The Blocking Position in Trumps/Pay 'n Save was 18.4% and in
CSX/Sealand was 39.2%. Merrill Lynch calculated the aggregate premium paid or
to be paid in each Comparable Transaction to the holders of High Vote Shares
or Blocking Positions, as a percentage of the total consideration (the
"Percentage Premium"). While there were numerous other instances of
acquisitions of companies with dual classes of stock or with shareholders
having Blocking Positions, such other transactions reviewed by Merrill Lynch
did not involve the payment of a premium to the holders of High Vote Shares or
Blocking Positions. The high, low and mean of the Percentage Premiums in the
Recapitalization Transactions were 11.6% (Bergen Brunswig), 2.9% (Fischer &
Porter) and 7.3%, respectively. The high, low and mean of the Percentage
Premiums in the Competitive Acquisitions were 23.1% (The Merv Griffin
Company/Resorts International Inc.), 7.1% (CSX/Sealand) and 15.1%,
respectively. The high, low, mean and median of the Percentage Premiums in the
Negotiated Acquisitions were 5.8% (AT&T/McCaw), 1.2% (Trumps/Pay 'n Save),
3.0% and 2.2%. The foregoing analysis of the Comparable Transactions takes
into account solely the purchase price paid for the equity interest in the
target company and does not take into account any value or detriment inherent
in any strategic arrangements or other agreements that may have been entered
into in connection with the Comparable Transactions.
As part of its investment banking business, Merrill Lynch is engaged
continually in the valuation of businesses and their securities in connection
with mergers and acquisitions and strategic transactions and for other
purposes. Merrill Lynch was selected by the GM Team to act as financial
advisor to General Motors, the GM Board and the GM Team because Merrill Lynch
is an internationally recognized investment banking firm, with substantial
experience in complex strategic transactions, and because Merrill Lynch was
familiar with
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General Motors (including its capital structure) and EDS. Pursuant to an
engagement letter dated December 13, 1995 (the "Engagement Letter"), General
Motors has agreed to pay Merrill Lynch a fee of $12,500,000, contingent upon
the consummation of the Split-Off. In addition, under certain circumstances,
General Motors would be obligated to pay Merrill Lynch 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 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 engagement letter also provides that General Motors
will reimburse Merrill Lynch for its reasonable out-of-pocket expenses
(including reasonable fees and disbursements of its legal counsel) and will
indemnify Merrill Lynch and certain related persons against certain
liabilities arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory, financing and
other services to General Motors and its affiliates (including financial
advisory services in connection with General Motors' contribution of Class E
Common Stock to the GM Hourly Plan Special Trust) and has received fees for
the rendering of such services in the past two years in the aggregate amount
of approximately $40,000,000. In the ordinary course of its business, Merrill
Lynch may actively trade in securities of General Motors for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
EDS Team Financial Advisors Fairness Opinions
The EDS Team Financial Advisors were engaged by General Motors to act as
financial advisors to the EDS Team in connection with the Split-Off. The EDS
Team Financial Advisors provided financial advice to the EDS Team in
connection with its consideration of the Split-Off and the negotiation of
certain terms thereof, and were requested to evaluate, and provide their
respective opinions to the GM Board as to, the fairness, from a financial
point of view, of the financial effect of the Split-Off Transactions (as
defined below) taken as a whole, to the holders of Class E Common Stock. The
Merger and the related transactions, including the Special Inter-Company
Payment, the Split-Off Changes (as defined below) effected pursuant to the
execution and delivery of the Master Services Agreement and the execution and
delivery of the Separation Agreement are collectively referred to as the
"Split-Off Transactions."
At a meeting of the GM Board held on March 31, 1996, at which the GM Board
approved the terms of the Split-Off, the EDS Team Financial Advisors rendered
their respective opinions to the GM Board to the effect that, based upon and
subject to the assumptions, limitations and other matters described in their
respective written opinions, the financial effect of the Split-Off
Transactions taken as a whole is fair, from a financial point of view, to the
holders of Class E Common Stock. Prior to the time such opinions were rendered
to the GM Board, each of the EDS Team and the Capital Stock Committee were
advised of the substance of the opinions that the EDS Team Financial Advisors
expected to render to the GM Board, and that such opinions would also be for
the use and benefit of each of the EDS Team, the EDS Board and the Capital
Stock Committee. A copy of the written opinion of Lehman Brothers is attached
as Appendix B-2 and a copy of the written opinion of Morgan Stanley is
attached as Appendix B-3 to this Solicitation Statement/Prospectus, and each
of such opinions is incorporated herein by reference. STOCKHOLDERS MAY READ
THE WRITTEN OPINIONS OF THE EDS TEAM FINANCIAL ADVISORS IN THEIR ENTIRETY FOR
A DISCUSSION OF ASSUMPTIONS MADE, MATTERS CONSIDERED AND THE SCOPE OF REVIEW
UNDERTAKEN BY THE EDS TEAM FINANCIAL ADVISORS IN RENDERING SUCH OPINIONS. The
summary of the written opinions of Morgan Stanley and Lehman Brothers set
forth in this Solicitation Statement/Prospectus is qualified in its entirety
by reference to the full text of such opinions. A copy of the EDS Team
Financial Advisors' written presentation to the GM Board has been filed as an
exhibit to the Schedule 13E-3. In addition, copies thereof will be made
available for inspection and copying at the principal executive offices of
General Motors during their
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regular business hours by any interested stockholder or any representative of
a stockholder who has been so designated in writing.
The opinions of Morgan Stanley and Lehman Brothers speak only as of the date
thereof and were provided for the use and benefit of the GM Board, the EDS
Team, the Capital Stock Committee and the EDS Board in connection with
consideration of the Split-Off Transactions. Such opinions do not constitute a
recommendation to any holder of Class E Common Stock, or any other class of
capital stock of General Motors, as to whether such stockholder should consent
to the Transactions.
No limitations were imposed by the GM Board, the Capital Stock Committee or
the EDS Team on the scope of the EDS Team Financial Advisors' investigation or
the procedures to be followed by the EDS Team Financial Advisors in rendering
their respective opinions, except as described herein. The EDS Team Financial
Advisors were not authorized to solicit, and did not solicit, any indications
of interest from any third party with respect to the purchase of all or a part
of EDS, its business or the Class E Common Stock. The EDS Team Financial
Advisors were not asked to, and did not, express an opinion as to the prices
at which EDS Common Stock will actually trade following the Merger, and the
EDS Team Financial Advisors can provide no assurance that the trading price of
a share of EDS Common Stock following the Split-Off will be equal to or in
excess of the trading price of a share of Class E Common Stock prior to the
Split-Off. The EDS Team Financial Advisors were not requested to, and did not,
recommend the terms of the Transactions, including the form or amount of the
Special Inter-Company Payment, the terms of the Master Services Agreement or
the form or amount of the consideration to be received by holders of Class E
Common Stock in the Merger, all of which were determined by the GM Board
following the negotiations and other procedures discussed under "--Background
of the Split-Off." The EDS Team Financial Advisors were not requested to opine
as to, and their respective opinions do not address, the underlying business
decision to proceed with or effect the proposed Split-Off Transactions.
In arriving at their respective opinions, the EDS Team Financial Advisors
reviewed, among other things, (i) historical financial statements of EDS and
certain other financial and operating data of EDS, (ii) historical financial
statements of General Motors, (iii) certain publicly available information
with respect to EDS and General Motors, (iv) certain projected financial data
with respect to EDS, both with and without giving effect to the Split-Off,
prepared by EDS management, (v) reported prices and trading activity for the
Class E Common Stock, (vi) drafts of this Solicitation Statement/Prospectus,
(vii) the terms of the Class E Common Stock as set forth in the General Motors
Certificate of Incorporation as currently in effect, (viii) the terms of the
EDS Common Stock as set forth in the EDS Certificate of Incorporation as
currently in effect, (ix) the Tax Ruling, (x) a summary of terms for the
Master Services Agreement provided to the GM Board in connection with its
March 31, 1996 meeting, (xi) the Registration Rights Agreement and (xii) the
EDS Rights Agreement. In addition, the EDS Team Financial Advisors held
discussions with management of EDS, and in certain cases management of General
Motors, with respect to, among other things, (i) the operations and financial
condition of EDS and the plans of EDS management with respect to the business
and affairs of EDS both prior to and after the Split-Off, (ii) the projected
financial data for EDS prepared by EDS management, (iii) the benefits and
detriments to EDS of ownership by General Motors, (iv) the expected impact of
the Split-Off Transactions on EDS' operations and the financial and strategic
flexibility of EDS, and the new business opportunities available to EDS, after
the Split-Off, (v) certain terms of (A) the GM-PBGC Agreement, (B) the
Existing Master Services Agreement and the proposed Master Services Agreement
and certain other IT Services Agreements to be entered into in connection with
the Master Services Agreement, and (C) the proposed Separation Agreement and
(vi) the effect of the Master Services Agreement (including the related
changes to the terms of the underlying services agreements, and certain other
IT Services Agreements to be entered into in connection with the Master
Services Agreement, to the extent that they relate to the financial effect of
the Master Services Agreement as projected by EDS management, as discussed
under "Discounted Cash Flow Analysis--Master Services Agreement") and the
Separation Agreement on the business, results of operations and financial
condition of EDS and on the business relationship between General Motors and
EDS (including, but not limited to, their relationship as customer and vendor,
respectively). In addition, the EDS Team Financial Advisors undertook such
other studies, analyses and investigations as they deemed appropriate for
purposes of rendering their respective opinions.
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In arriving at their respective opinions, the EDS Team Financial Advisors
assumed and relied upon the accuracy and completeness of all of the financial
and other information used by them without assuming any responsibility for
independent verification of such information and further relied upon the
assurances of management of EDS and General Motors that they are not aware of
any facts that would make such information inaccurate or misleading. With
respect to the projected financial data of EDS prepared by EDS management
(which reflect, among other things, with respect to periods following the
Split-Off, estimates of the expected value of certain benefits to be derived
by EDS from the Split-Off), upon the advice of EDS management and with the
consent of the GM Board, the EDS Team Financial Advisors assumed that such
projections were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of EDS management as to expected future
prospects and financial performance of EDS, and the EDS Team Financial
Advisors relied on such projections in rendering their respective opinions.
With respect to the estimates prepared by EDS management of the value of
certain benefits and detriments of the Split-Off to EDS, with the consent of
the GM Board, the EDS Team Financial Advisors relied on such estimates and
assumed that they were reasonably prepared and reflected the best currently
available judgments of EDS management as to such benefits and detriments. The
EDS Team Financial Advisors also took into account and considered the
determination of the GM Board, as described in this Solicitation
Statement/Prospectus, that a split-off of EDS would be proposed only in a
transaction that would not result in the recapitalization of shares of Class E
Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as provided for
under certain circumstances under the terms of the General Motors Certificate
of Incorporation. See "--Background of the Split-Off." Furthermore, the EDS
Team Financial Advisors believe that following the Split-Off, the EDS Common
Stock would very likely be included in the Standard and Poor's 500 Index and
the EDS Team Financial Advisors rendered their respective opinions on that
basis. The EDS Team Financial Advisors did not conduct a physical inspection
of the properties and facilities of EDS and did not make or obtain any
evaluation or appraisal of the assets or liabilities of EDS. The respective
opinions of the EDS Team Financial Advisors are necessarily based upon market,
economic and other conditions as they existed on, and could be evaluated as
of, the date thereof.
In connection with the review of the financial effect on EDS of the Master
Services Agreement, both EDS management and General Motors management advised
the EDS Team Financial Advisors that certain changes would have been made to
the Existing Master Services Agreement commencing in 1996 even in the absence
of the Split-Off. EDS management identified to the EDS Team Financial Advisors
those changes that EDS management believed would have been made to the
Existing Master Services Agreement commencing in 1996 even in the absence of
the Split-Off, the financial effect of which, as projected by EDS management,
would begin to impact EDS in 1996 and continue over time as reflected in the
analyses described under "Discounted Cash Flow Analysis." The changes to the
Existing Master Services Agreement which would have been made in the absence
of the Split-Off are referred to herein as the "Base Changes." Under different
base cases identified by EDS management and described under "--Discounted Cash
Flow Analysis," the Base Changes assumed to occur vary to the extent they
reflect different assumptions regarding certain rate reductions and changes in
payment terms. General Motors management advised the EDS Team Financial
Advisors that General Motors management believed that changes that differ from
or are in addition to the Base Changes identified by EDS management, which
changes, taken as a whole, would have been more favorable to General Motors
and less favorable to EDS than the Base Changes identified by EDS management,
would have been made to the Existing Master Services Agreement even in the
absence of the Split-Off. No assurances can be given as to exactly which
changes to the Existing Master Services Agreement would have been implemented
absent the Split-Off or which changes might be implemented in the future if
the Split-Off is not consummated.
At the request of the EDS Team, and with the consent of the GM Board, the
EDS Team Financial Advisors assumed that the Base Changes would have been made
to the Existing Master Services Agreement in 1996 even in the absence of the
Split-Off (or any other change in the nature of General Motors' ownership of
EDS), and that the financial effect thereof would begin in 1996 and continue
over time as reflected in the projections prepared by EDS management and
described under "--Discounted Cash Flow Analysis," and therefore, in
performing their analyses in connection with rendering their respective
opinions, at the request of the EDS Team and with the consent of the GM Board,
the EDS Team Financial Advisors did not address, and gave no effect to,
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the financial effect on EDS or holders of Class E Common Stock of the Base
Changes effected pursuant to the Master Services Agreement. At the request of
the EDS Team and with the consent of the GM Board, the EDS Team Financial
Advisors did not consider, and gave no effect to, contingent liabilities or
indemnification obligations of EDS arising under the Separation Agreement or
otherwise in connection with the Split-Off. At the request of the EDS Team,
upon the advice of General Motors management and its legal and accounting
advisors, and with the consent of the GM Board, the EDS Team Financial
Advisors also assumed that the proposed Merger would be tax free to the
holders of Class E Common Stock receiving EDS Common Stock in the Merger and
that the Unconditional Releases under the GM-PBGC Agreement would become
effective as of the effectiveness of the Merger.
The following is a summary of certain financial analyses which were reviewed
by the EDS Team Financial Advisors with the EDS Team, the Capital Stock
Committee and the GM Board in connection with the respective opinions of the
EDS Team Financial Advisors, and does not purport to be a complete description
of the analyses conducted by the EDS Team Financial Advisors in arriving at
such opinions. In arriving at their respective opinions, the EDS Team
Financial Advisors did not attribute any particular weight to any analysis or
factor considered by them, but rather considered all of these analyses and
factors together and made qualitative judgments as to the significance and
relevance thereof. Although in connection with their financial analyses the
EDS Team Financial Advisors considered various value differentials and ranges,
they did not ascribe a specific value or range of values to Class E Common
Stock or the EDS Common Stock. Although the EDS Team Financial Advisors
performed independent, as well as cooperative, analyses in connection with
providing their respective opinions, the presentations made to the Capital
Stock Committee and the GM Board described herein were made jointly by the EDS
Team Financial Advisors.
Benefits and Detriments Analysis. In considering the fairness, from a
financial point of view, to the holders of Class E Common Stock, of the
financial effect of the Split-Off Transactions taken as a whole, the EDS Team
Financial Advisors considered, among other things, (i) the $500 million
Special Inter-Company Payment, (ii) the $50 million allowance provided to EDS
under the Separation Agreement (and, with the consent of the GM Board, in
rendering their respective opinions, the EDS Team Financial Advisors assumed
that a substantial amount of such allowance will be used for the benefit of
EDS under the Separation Agreement), (iii) that EDS management has estimated
that, as a result of the allowance identified in the immediately preceding
clause, there will be no net payments made by EDS to General Motors under the
terms of the Separation Agreement (other than payments, if any, to be made
under the provisions thereof with respect to indemnification obligations or
the allocation of contingent liabilities, to which the EDS Team Financial
Advisors gave no effect in rendering their respective opinions), (iv) the
financial effect on EDS, as projected by EDS management, of the changes other
than the Base Changes (such changes being referred to herein as the "Split-Off
Changes") effected pursuant to the Master Services Agreement as discussed
under "--Discounted Cash Flow Analysis--Master Services Agreement" and
"Relationship Between General Motors and EDS--Post Split-Off Arrangements--IT
Services Agreements," (v) the financial effect, as projected by EDS
management, of projected declines following the Split-Off in sales of certain
goods and services provided by EDS to General Motors and its affiliates other
than under the Existing Master Services Agreement or the Master Services
Agreement, as the case may be, (vi) transaction costs, estimated by EDS
management, of between $25 million and $38 million payable by EDS in
connection with the Split-Off and (vii) certain estimated benefits of the
Split-Off to EDS or holders of Class E Common Stock, including (A) the
Derivative Stock Differential (as defined below) as discussed under "--
Derivative Security vs. Capital Stock Analysis," (B) the value of the
inclusion of EDS Common Stock in the Standard & Poor's 500 Index, as discussed
under "--Certain Other Analyses," (C) the value to EDS of the removal of
certain limitations on EDS' ability to participate in major strategic
alliances (including, among others, mergers and acquisitions which can be
effected using EDS Common Stock), which was estimated by EDS management as
discussed under "--Discounted Cash Flow Analysis--Consideration of Strategic
Benefits" and (D) the present value to EDS of projected new business growth
and customer relationships, which was estimated by EDS management, as
discussed under "--Discounted Cash Flow Analysis--Consolidated Company."
Accordingly, to the extent described herein, the EDS Team Financial Advisors
took into account and considered certain benefits as estimated by EDS
management that may be realized by EDS as a result of the opportunity to
pursue the business purposes of the Split-Off.
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Derivative Security vs. Capital Stock Analysis. The EDS Team Financial
Advisors identified certain significant components of value of a derivative
security having the general terms of the Class E Common Stock and of capital
stock having the general terms of the EDS Common Stock and then analyzed the
valuation impact of such differences. The primary components of the value of
such differences identified were (i) voting rights, (ii) liquidation rights
and credit risks and (iii) redemption rights.
In their analysis of voting rights differences, the EDS Team Financial
Advisors considered, among other things, (i) the voting rights of the Class E
Common Stock, (ii) the voting rights of the EDS Common Stock, including that
holders of EDS Common Stock will not have the right to vote with General
Motors stockholders, (iii) that Class E Common Stock has relatively lesser
voting rights compared to more typical common stock, primarily because holders
of Class E Common Stock do not have the ability to vote for directors of EDS
(and consequently have limited ability to direct EDS policies as set by the
EDS Board) and because the voting power in General Motors of holders of Class
E Common Stock is disproportionately low compared to the economic value of the
outstanding Class E Common Stock relative to the other classes of General
Motors common stock, (iv) factors related to selected dual class common
stocks, including trading differentials, amounts paid in merger and
acquisition transactions and the impact on trading value of selected
recapitalizations creating or eliminating a class of common stock and (v) the
impact of ownership of a substantial portion of the Class E Common Stock prior
to, and the EDS Common Stock following, the Split-Off by the GM Hourly Plan
Special Trust. Based on their voting rights analysis, the EDS Team Financial
Advisors concluded that the voting rights of the EDS Common Stock should be
perceived as more valuable than the voting rights of the Class E Common Stock.
In their analysis of liquidation rights and credit risk differences, the EDS
Team Financial Advisors considered, among other things, (i) the liquidation
rights of the Class E Common Stock, (ii) the liquidation rights of the EDS
Common Stock, (iii) that Class E Common Stock has relatively lesser
liquidation rights compared to more typical common stock, primarily because
the liquidation rights in General Motors of holders of Class E Common Stock
are disproportionately low in relation to the economic value of the
outstanding Class E Common Stock relative to the other classes of General
Motors common stock, (iv) the absence of any direct claim by holders of Class
E Common Stock on the assets of EDS upon liquidation of EDS, (v) that the new
EDS Common Stock would be entitled to a direct claim on assets of EDS upon
liquidation of EDS, and would not be entitled to any claim on assets of
General Motors upon liquidation of General Motors, (vi) the possibility that
earnings and cash flow generated by EDS might not be available to, or used for
the benefit of, EDS or holders of Class E Common Stock, (vii) analyses
performed by the EDS Team Financial Advisors suggesting that the trading value
of the Class E Common Stock is not currently adversely impacted by General
Motors' liquidation risk or the theoretical structural disadvantage of the
Class E Common Stock, which does not provide its holders with a direct claim
on the assets or cash flow of EDS and (viii) various factors indicative of
General Motors' perceived credit risk. Based on their liquidation rights and
credit risks analysis, the EDS Team Financial Advisors concluded that the
liquidation rights of the EDS Common Stock should be perceived as more
valuable than the liquidation rights of the Class E Common Stock.
In their analysis of redemption rights differences, the EDS Team Financial
Advisors considered, among other things, (i) the redemption rights that could
result in the recapitalization of Class E Common Stock as shares of $1 2/3
Common Stock at a 120% exchange ratio at the option of General Motors or
automatically upon the occurrence of certain events, including a sale,
transfer, assignment or other disposition by General Motors of the business of
EDS substantially as an entirety (whether by merger, consolidation, sale of
assets or stock, liquidation, dissolution, winding up or otherwise) relative
to the ability of EDS Common Stock to obtain the entire amount of any control
premium associated with a change in control of EDS unrestricted by the
redemption rights of General Motors, (ii) the absence of corresponding rights
with respect to the EDS Common Stock and (iii) the potential economic impact
on General Motors of redemption of the Class E Common Stock under various
scenarios. Based on their redemption rights analysis, the EDS Team Financial
Advisors concluded that the redemption rights of the Class E Common Stock
should be perceived as more valuable than the absence of redemption rights in
the EDS Common Stock.
As a result of their derivative security versus capital stock differential
analysis, the EDS Team Financial Advisors concluded that capital stock having
the general characteristics of EDS Common Stock would be
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expected to have a value in excess of a derivative security having the general
characteristics of the Class E Common Stock and that such differential (the
"Derivative Security Differential") would be expected to be in the range of $0
to $172 million, based on the March 29, 1996, $57.00 per share closing price
of the Class E Common Stock as reported on the NYSE.
Discounted Cash Flow Analysis. Based on projected financial data prepared by
EDS management, the EDS Team Financial Advisors reviewed discounted cash flow
analyses both on a "consolidated company" basis for EDS (including goods and
services provided to General Motors and its affiliates, whether or not under
the Existing Master Services Agreement or the Master Services Agreement, and
to all other customers) and with respect only to goods and services provided
to General Motors and its affiliates under the Existing Master Services
Agreement, after giving effect to the Base Changes reflected in the Master
Services Agreement with respect to non-Split-Off cases, or the Master Services
Agreement with respect to post-Split-Off cases. In addition, the EDS Team
Financial Advisors considered the estimates by EDS management of the value of
certain strategic benefits discussed under "--Consideration of Strategic
Benefits."
Consolidated Company. Based on projected financial data prepared by EDS
management, the EDS Team Financial Advisors performed analyses calculating the
present value of future streams of cash flows both as projected by management
for EDS on a consolidated company basis following the Split-Off and as
adjusted for EDS on a consolidated company basis if the Split-Off were not to
occur. EDS management advised the EDS Team Financial Advisors that the only
material differences between the categories of items included in pre-Split-Off
projected financial data and the post-Split-Off projected financial data were
the financial effect of inclusion in the post-Split-Off projected financial
data of (i) the Split-Off Changes reflected in the Master Services Agreement
and projected declines in sales of certain goods and services provided by EDS
to General Motors and its affiliates other than under the Existing Master
Services Agreement or the Master Services Agreement, as the case may be, (ii)
new business assumed to be available to EDS only if the Split-Off is completed
and (iii) the impact of the Special Inter-Company Payment; although various
assumptions within categories of items differed among different projected
cases. Estimates prepared by EDS management of the value of the removal of
certain limitations on EDS' ability to participate in major strategic
alliances, as discussed under "--Consideration of Strategic Benefits" were not
included in such projected financial data. The EDS Team Financial Advisors
compared (A) the present value of the projected cash flows of EDS on a
consolidated company basis plus a terminal value under a weighted average of
two base cases each of which assumed, among other things, the non-consummation
of the Split-Off and the modification of the Existing Master Services
Agreement to effect the Base Changes, determined under two different
scenarios, the first of which (the "Lower Base Case") assumed certain Base
Changes (with respect to certain rate reductions and changes in payment terms)
additional to the Base Changes assumed under the other case (the "Higher Base
Case") (the weighted average under such cases (the weight attributed by EDS
management to the Lower Base Case being 60% and the weight attributed by EDS
management to the Higher Base Case being 40%) being referred to as "the Base
Case") with (B) the present value of the projected cash flows of EDS on a
consolidated company basis plus terminal values under a post- Split-Off case
projected by management which was derived as the weighted average of three
post-Split-Off cases (the "Weighted Average Case"). The three post-Split-Off
cases projected by EDS management were a "Favorable Case", an "Intermediate
Case" and a "Low Case", each of which applied varying assumptions. These
assumptions included different assumptions with respect to the term of the
Master Services Agreement (including renewals and post-contract provision of
goods and services), revenue growth, outsourcing, pricing and structural cost
reductions. In deriving the Weighted Average Case, the weight attributed by
EDS management to the Favorable Case was 40%, to the Intermediate Case was 50%
and to the Low Case was 10%. The consolidated company projected financial data
were projected for a ten-year period, and therefore do not reflect the
financial effect of a significant portion of the changes to the Existing
Master Services Agreement reflected in the Master Services Agreement, to the
extent that such effect is projected to occur following such ten-year period.
Each of the Weighted Average Case, and the three other post-Split-Off cases
underlying that case assumed, among other things, the occurrence of the Split-
Off and gave effect to, among other things, both the Base Changes and the
Split-Off Changes effected pursuant to the Master Services Agreement. None of
the non-Split-
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Off or post-Split-Off projected financial data reflected estimates of the
value of the removal of certain limitations on EDS' ability to participate in
major strategic alliances, as discussed under "--Consideration of Strategic
Benefits." However, all post-Split-Off cases did include new business growth
and customer relationships believed to be available to EDS only if the Split-
Off is completed. In this regard, the projected financial data prepared on a
consolidated company basis for post-Split-Off periods reflected that the
present value of EDS management's estimates of (i) such new business growth
and customer relationships, at discount rates from 11% to 13%, as calculated
by the EDS Team Financial Advisors, was in the range of $769 million to $1,121
million and (ii) projected declines in sales of certain goods and services
provided by EDS to General Motors and its affiliates other than under the
Existing Master Services Agreement or the Master Services Agreement, as the
case may be, at discount rates from 11% to 13%, as calculated by the EDS Team
Financial Advisors, was in the range of $133 million to $167 million. The
discount rates utilized by the EDS Team Financial Advisors in performing their
analyses were selected based on a number of factors, including the interest
rate environment at the time of the opinion, required rates of return of
investors in the common stock of EDS and of similar companies, the risks
associated with an investment in the stock of similar companies, and the
weighted average cost of capital for EDS.
Cash flows were calculated as net income plus interest expense net of tax
benefit plus non-cash expense items less non-cash income items, less capital
expenditures plus or minus (as appropriate) changes in working capital and
plus or minus certain changes in other assets and liabilities. Terminal values
were calculated under the market multiple method (by applying to terminal year
earnings before interest, taxes, depreciation and amortization, multiples
based on enterprise value/cash flow multiples of selected comparable
companies). The cash flow streams and terminal values were then discounted to
present values using discount rates ranging from 11% to 13%.
The present values of the projected cash flows for all of EDS' business,
including new business that was assumed to be available to EDS only if the
Split-Off is completed, plus terminal values for all of EDS' business on a
consolidated company basis were, at discount rates from 11% to 13%, from $0.8
billion to $0.9 billion lower under the Weighted Average Case than the present
values of projected cash flows plus terminal values for all of EDS' business
on a consolidated company basis (excluding the new business assumed to be
available only if the Split-Off is completed) under the Base Case using the
same terminal value price/earnings ratio and discount rate in various
scenarios. As noted above, General Motors management advised the EDS Team
Financial Advisors that such management believed that changes to the Existing
Master Services Agreement that are different from or in addition to the Base
Changes identified by EDS management would have been made even in the absence
of a Split-Off, which changes, taken as a whole, would have been more
favorable to General Motors and less favorable to EDS than the Base Changes
identified by EDS management. The EDS Team Financial Advisors noted that,
using the assumptions embodied in the projected cash flow models prepared by
EDS management, this would imply a smaller decrement between the Base Case and
the Weighted Average Case than is reflected either in the above analysis or in
the analysis below under "--Master Services Agreement."
Master Services Agreement. EDS management provided to the EDS Team Financial
Advisors projected financial data reflecting only goods and services provided
to General Motors and its affiliates under the Master Services Agreement.
Unlike the ten-year period covered in the consolidated company projections,
the period covered by these projections extended to the assumed termination of
the provision of goods and services under the Master Services Agreement. Based
on the projected financial data prepared by EDS management with respect to the
Master Services Agreement, the present value of the projected cash flows of
EDS attributable to goods and services provided to General Motors and its
affiliates under the Master Services Agreement as calculated under the
Weighted Average Case was, at discount rates from 11% to 13%, in a range from
$517 million to $654 million lower than the present value calculated under the
Base Case using the same discount rate in various scenarios. Because this
analysis dealt only with projected financial data with respect to goods and
services provided under the Master Services Agreement, the $769 million to
$1,121 million new business opportunities referred to under "--Consolidated
Company" are not reflected in this analysis. Based on information regarding
the historical financial and operating results of EDS and discussions with EDS
management, the EDS Team
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Financial Advisors noted that if neither the Base Changes nor any other
significant modifications to the terms of the Existing Master Services
Agreement would have been made in the absence of a Split-Off, then the
decrement in the present value of cash flows attributable to goods and
services projected by EDS management to be provided to General Motors and its
affiliates in accordance with the terms of the Existing Master Services
Agreement (both under analyses performed on a consolidated company basis for
EDS (including goods and services provided to General Motors and its
affiliates and to all other customers) and under analyses performed on a basis
reflecting only goods and services provided to General Motors and affiliates
in accordance with the terms of the Existing Master Services Agreement)
resulting from changes to the Existing Master Services Agreement arising as a
result of the Split-Off would have been significantly larger than under the
analyses conducted by the EDS Team Financial Advisors.
Consideration of Strategic Benefits. The EDS Team Financial Advisors were
advised by EDS management that it estimates (and the EDS Team Financial
Advisors took into account for purposes of their respective opinions), based
in part on an analysis prepared by McKinsey, that the value to EDS of the
removal of certain limitations on EDS' ability to participate in major
strategic alliances (including, among others, mergers and acquisitions which
can be effected using EDS Common Stock) prior to the Split-Off is at least
$500 million. However, in arriving at such estimates, EDS management noted
that the benefits derived from the resolution of such factors are inherently
subject to uncertainty and are not susceptible of precise quantification. As a
result, the effect of these separate benefits was not included in EDS' post-
Split-Off projections and is therefore not reflected in the analysis above.
In connection with their consideration of the strategic benefits analysis
prepared by EDS management, the EDS Team Financial Advisors considered EDS'
historic pursuit of strategic transactions, the nature of the impediments
which have in the past prevented the consummation of a major business alliance
as well as the fact that one of the principal business strategies of EDS after
the Split-Off, as articulated by EDS management, will be to pursue
opportunities for major strategic transactions.
Certain Other Analyses. Based on the projected financial data prepared by
EDS management, the EDS Team Financial Advisors analyzed the projected
earnings and earnings per share of EDS under the Base Case and the Weighted
Average Case. The EDS Team Financial Advisors also reviewed various multiples
of earnings based on historical and projected multiples applicable to the
Class E Common Stock, multiples applicable to certain other companies and
other factors. Management's projections for 1996, and pro forma calculation
for 1995, of EDS' earnings and earnings per share on a consolidated company
basis under the Weighted Average Case (including the benefits of new business
believed to be available to EDS only if the Split-Off is completed) was 3.6%
lower than under the Base Case for 1996 and was 5.2% lower than under the Base
Case on a pro forma basis for 1995. The financial effect of certain of the
changes to the Existing Master Services Agreement made pursuant to the Master
Services Agreement are not reflected in earnings projections for 1996 or in
pro forma 1995 earnings because such financial effect is projected to occur
following 1996.
Based on the projected financial data prepared by EDS management, the EDS
Team Financial Advisors also considered the financial effect of the increased
leverage of EDS on EDS' credit rating and other indicia of creditworthiness
following the Split-Off.
The EDS Team Financial Advisors considered various criteria that currently
appear to forestall inclusion of the Class E Common Stock in the Standard &
Poor's 500 Index, including status as a subsidiary of General Motors, trading
liquidity in the Class E Common Stock and the percentage holdings of Class E
Common Stock of the GM Hourly Plan Special Trust. The EDS Team Financial
Advisors noted that there could be no assurance that EDS would be included in
the Standard & Poor's 500 Index. However, based upon factors including
elimination of subsidiary status of EDS upon the Split-Off, and anticipated
improvements in liquidity and percentage ownership following the Split-Off,
the EDS Team Financial Advisors considered it very likely that following the
Split-Off, the EDS Common Stock will be included in the Standard & Poor's 500
Index and the EDS Team Financial Advisors rendered their respective opinions
on that basis. Based on a review of historical stock price impact when various
companies have been included in the Standard & Poor's 500 Index, the EDS
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Team Financial Advisors estimated the value of such inclusion to be in the
range of 1.5% to 2.5% of the market capitalization of the EDS Common Stock
after adjustment for the Derivative Stock Differential.
Certain Other Benefits and Detriments to EDS. The EDS Team Financial
Advisors considered certain potential benefits and detriments of the Split-Off
to EDS in addition to those discussed above. Factors considered by the EDS
Team Financial Advisors included, among other things, (i) the PBGC release of
EDS from the General Motors control group under certain circumstances
following the Split-Off, which would relieve EDS of a large potential
liability, (ii) the increased financial flexibility of EDS resulting from the
Split-Off and (iii) the ownership of a significant portion of the Class E
Common Stock before the Split-Off, and of the EDS Common Stock following the
Split-Off, by the GM Hourly Plan Special Trust. The EDS Team Financial
Advisors did not attempt to quantify the impact on the value of the Class E
Common Stock or the EDS Common Stock of the factors referred to in this
paragraph.
The foregoing summary does not purport to be a complete description all of
the analyses performed by the EDS Team Financial Advisors. The preparation of
fairness opinions is a complex process and is not susceptible to partial
analysis or summary description. Selecting portions of the EDS Team Financial
Advisors' analyses or any of the factors considered by the EDS Team Financial
Advisors, without considering the analyses and factors considered as a whole,
could create an incomplete or incorrect view of the processes underlying the
respective opinions of the EDS Team Financial Advisors. In arriving at their
respective opinions, the EDS Team Financial Advisors considered the results of
all such analyses. No company, security or transaction used in the analyses
described above as a comparison is identical to General Motors or EDS, the
Class E Common Stock or the EDS Common Stock, or the Split-Off. Accordingly, a
review of the results of the analyses and factors discussed above is not
mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of EDS, the
behavior of persons other than EDS, trading of the Class E Common Stock and
EDS Common Stock and a number of other factors and assumptions, many of which
are beyond the control of General Motors and EDS.
The analyses described above were prepared for the purposes of, and in
connection with, assisting the EDS Team in its review of the terms of the
Split-Off Transactions and the preparation by the EDS Team Financial Advisors
of their respective opinions to the General Motors Board as to the fairness,
from a financial point of view, of the financial effect of the Split-Off
Transactions taken as a whole to the holders of Class E Common Stock. These
analyses do not purport to be appraisals or to reflect the prices at which the
Class E Common Stock or EDS Common Stock should or will trade. Analyses based
on forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties
or their respective advisors, the EDS Team Financial Advisors assume no
responsibility if future results are materially different from those forecast.
The EDS Team selected the EDS Team Financial Advisors to render financial
advisory services to the EDS Team based upon their familiarity with General
Motors and its subsidiaries, including EDS, and their investment banking
experience and expertise, including expertise with regard to the information
technology business. As part of their investment banking business, the EDS
Team Financial Advisors regularly engage in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings,
competitive biddings, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate, estate and other
purposes.
Pursuant to separate engagement letters between General Motors and each of
Morgan Stanley and Lehman Brothers, each of Morgan Stanley and Lehman Brothers
will receive a fee of $7,500,000 in connection with the Transactions, payable
as follows: $1,000,000 was paid to each of Morgan Stanley and Lehman Brothers
on rendering their respective opinions and $6,500,000 is payable to each of
Morgan Stanley and Lehman Brothers on consummation of the Split-Off.
Therefore, a significant portion of the fees of the EDS Team Financial
Advisors is contingent on consummation of the Split-Off. The engagement
letters also provide for reimbursement of the EDS Team Financial Advisors for
certain out-of-pocket expenses, including certain fees and expenses of
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legal counsel, and indemnification of the EDS Team Financial Advisors against
certain expenses and liabilities (and EDS has agreed to exculpate the EDS Team
Financial Advisors) 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 EDS
Team Financial Advisors. See "Relationship Between General Motors and EDS--
Post-Split-Off Arrangements--Separation Agreement."
Lehman Brothers and Morgan Stanley have performed investment banking and
financial advisory services for General Motors, and Lehman Brothers has
performed such services for EDS, in the past and have received customary
compensation in connection therewith, including approximately $17,000,000 and
$10,400,000, respectively, during the last two years. In particular, in 1995,
at the time of General Motors' contribution of shares of Class E Common Stock
to the GM Hourly Plan Special Trust, Lehman Brothers received $5,000,000 from
EDS for financial advisory services. In addition, certain senior personnel
providing financial advice to the EDS Team and involved in rendering the
opinion of Morgan Stanley represented General Motors in connection with its
acquisition of EDS and the related creation and issuance of the Class E Common
Stock.
In March 1996, two of the senior investment bankers actively involved in the
transaction for Lehman Brothers in its capacity as financial advisor to the
EDS Team joined Morgan Stanley, at which time Morgan Stanley also began
advising the EDS Team. Since such time as Morgan Stanley also began acting in
this capacity, it and Lehman Brothers have performed their services in
cooperation, with Lehman Brothers relying to a significant degree on the due
diligence performed, and Morgan Stanley relying to a significant degree on the
work performed, by the same individuals. However, each firm performed its own
independent internal review and analysis in arriving at its opinion.
In the ordinary course of business, both Morgan Stanley and Lehman Brothers
actively trade in the debt and equity securities of General Motors, including
the Class E Common Stock, for their own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
REQUISITE VOTE FOR THE TRANSACTIONS
Consummation of the Transactions is conditioned upon receiving the consent
of the holders of (i) a majority of the voting power of all outstanding shares
of all three classes of General Motors' common stock, voting together as a
single class based on their respective voting rights, (ii) a majority of the
outstanding shares of $1 2/3 Common Stock, voting as a separate class, and
(iii) a majority of the outstanding shares of Class E Common Stock, voting as
a separate class. See "Solicitation of Written Consent of General Motors
Common Stockholders." In light of such requisite stockholder votes, as well as
the process by which the terms of the Split-Off were determined, General
Motors has not retained any unaffiliated representative to act solely on
behalf of its unaffiliated stockholders in negotiating the Split-Off or to
prepare a report for such stockholders as to the fairness thereof. See "--
Negotiating Teams."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes those U.S. federal income tax
considerations resulting from the Split-Off that materially affect General
Motors and its stockholders. This discussion is based on currently existing
provisions of the Code, existing and proposed Treasury Regulations thereunder
and current administrative rulings and court decisions, all of which are
subject to change. Any such change, which may or may not be retroactive, could
alter the tax consequences to General Motors or its stockholders as described
herein.
Stockholders of General Motors should be aware that this discussion does not
deal with all federal income tax considerations that may be relevant to
particular stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, banks, insurance companies, tax-
exempt organizations and non-United States persons. In addition, the following
discussion does not address the tax consequences of the Split-Off under U.S.
state or local and non-U.S. tax laws or the tax consequences of transactions
(if any) effectuated
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prior to or after the Split-Off (whether or not such transactions are
undertaken in connection with the Split-Off). ACCORDINGLY, STOCKHOLDERS OF
GENERAL MOTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S.
FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE SPLIT-OFF TO
THEM.
General Motors has received the Tax Ruling with regard to the U.S. federal
income tax consequences of the Split-Off to the effect that the Split-Off will
be treated as a tax-free exchange under Section 355 of the Code and that,
accordingly, for U.S. federal income tax purposes: (i) no gain or loss will be
recognized by General Motors upon the exchange of EDS Common Stock for Class E
Common Stock pursuant to the Split-Off, (ii) no gain or loss will be
recognized by (and no amount will be included in the income of) the holders of
Class E Common Stock upon the receipt of EDS Common Stock in exchange for
Class E Common Stock pursuant to the Split-Off, (iii) the basis of EDS Common
Stock received by each holder of Class E Common Stock pursuant to the Split-
Off will be the same as the basis of the Class E Common Stock held by such
holder immediately before the Split-Off, and (iv) the holding period of the
EDS Common Stock received by each holder of Class E Common Stock will include
the holding period of the Class E Common Stock surrendered by such stockholder
pursuant to the Split-Off, provided that such stock is held as a capital asset
on the date of the Split-Off.
The Tax Ruling does not specifically address how tax bases and holding
periods should be allocated among shares of EDS Common Stock received in the
Split-Off by holders who own two or more blocks of Class E Common Stock with
different per share bases and/or holding periods. Such holders are encouraged
to consult with their own tax advisors regarding the possible tax basis and
holding period consequences of the Split-Off.
The Tax Ruling, while generally binding on the IRS, is based upon certain
factual representations and assumptions described in the Tax Ruling, including
the representation that Class E Common Stock is stock of General Motors and
not of EDS, and the written application therefor. If any such factual
representations or assumptions are incorrect or untrue in any material
respect, the Tax Ruling may be invalidated. General Motors is not aware of any
facts or circumstances which would cause any such representations or
assumptions to be incorrect or untrue in any material respect. Nevertheless,
if General Motors consummates the Split-Off and the Split-Off is held to be
taxable, both General Motors and holders of Class E Common Stock would in all
probability incur material tax liabilities.
On March 19, 1996, the Clinton administration proposed new legislation that
would, under certain circumstances, cause a parent corporation to recognize
gain on the distribution of the stock of a subsidiary in a split-off
transaction. Even if such legislation were enacted, General Motors believes
that such legislation would not apply to the Split-Off.
Current Treasury Regulations require each General Motors stockholder who
receives EDS Common Stock pursuant to the Split-Off to attach to such
stockholder's federal income tax return for the year in which the Split-Off
occurs a detailed statement setting forth such data as may be appropriate in
order to show the applicability of Section 355 of the Code to the Split-Off.
At the time that the letter of transmittal regarding exchange of certificates
is sent to all current holders of Class E Common Stock, General Motors will
provide such information to each holder of Class E Common Stock receiving EDS
Common Stock in the Split-Off in order to enable each such holder to comply
with such regulations.
GM-PBGC AGREEMENT
General Motors and certain of its subsidiaries sponsor U.S. defined benefit
pension plans covered by Title IV of ERISA (the "GM Pension Plans"). As of
December 31, 1995, measured on an SFAS No. 87 basis, the GM Pension Plans were
underfunded, and the projected benefit obligations exceeded plan assets, by
approximately $3 billion in the aggregate. If any of the GM Pension Plans were
to terminate at a time that they had unfunded benefit liabilities, the PBGC
would have a statutory claim to recover such unfunded benefit liabilities. The
PBGC's claim would extend to the company or companies that sponsored the
terminated GM Pension Plan(s) and to all other persons within the sponsoring
company's "controlled group," as that term is defined under Title IV of ERISA.
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EDS is currently a company within General Motors' "controlled group" for
purposes of ERISA. As such, EDS would potentially be among the companies
against which the PBGC could have a claim to recover unfunded benefit
liabilities with respect to a GM Pension Plan if such GM Pension Plan were to
terminate at a time when it had unfunded benefit liabilities.
In March 1995, in connection with the contribution of approximately 173
million shares of Class E Common Stock and $4 billion in cash to the GM Hourly
Plan as described herein (see "Security Ownership of Certain Beneficial Owners
and Management of General Motors and EDS--GM Hourly Plan Special Trust"),
General Motors and the PBGC entered into the GM-PBGC Agreement, which
provides, among other things, for the PBGC to release EDS and EDS'
subsidiaries from all liabilities or obligations now existing or hereafter
arising under Title IV of ERISA with respect to the GM Pension Plans if a
transaction such as the Split-Off were to occur. Under the GM-PBGC Agreement,
the PBGC's releases become effective upon the occurrence of a "Qualified EDS
Transaction," provided that certain other conditions have not occurred. The
GM-PBGC Agreement defines "Qualified EDS Transaction" to mean any transaction
or series of transactions (including one by which Class E Common Stock is
exchanged, converted or redeemed for capital stock of EDS) by which EDS ceases
to be a member of General Motors' "controlled group," unless immediately after
the transaction, the GM Hourly Plan continues to hold certain types of
securities in certain specified amounts.
The PBGC's releases in connection with a Qualified EDS Transaction are
documented in two ways. Initial release instruments, which become effective
upon the occurrence of a Qualified EDS Transaction, provided that certain
conditions have not occurred, were delivered to GM and EDS by the PBGC on
March 24, 1995. In addition, under the GM-PBGC Agreement, a second set of
release instruments, which are not subject to any conditions (the
"Unconditional Releases") are to be delivered to GM and EDS by the PBGC
following the consummation of a Qualified EDS Transaction through the
certification procedure described below.
The GM-PBGC Agreement includes a procedure by which General Motors may
obtain certification that a proposed transaction constitutes a Qualified EDS
Transaction (the "Certification Process"). Under the Certification Process,
the PBGC is required to deliver written notice to General Motors within a
specified period of time if it disagrees with General Motors' determination
that a transaction proposed by General Motors constitutes or will constitute a
Qualified EDS Transaction. In the absence of such disagreement, the PBGC is
required to execute the Unconditional Releases and deliver them to an escrow
agent for delivery to GM and EDS upon notification of consummation of the
Split-Off and instruction from the PBGC.
General Motors has determined that the Split-Off, if and when consummated,
will constitute a Qualified EDS Transaction. General Motors has initiated the
Certification Process described above, and the PBGC has not notified General
Motors of any disagreement with such determination. The PBGC has delivered the
Unconditional Releases to an escrow agent for delivery to GM and EDS upon
notification of consummation of the Split-Off and instruction from the PBGC.
Such instruction must, under the GM-PBGC Agreement, be given by the PBGC no
more than two (or, in certain circumstances, fourteen) business days after
receipt of certain additional documentation from GM. In the Separation
Agreement, General Motors has agreed to deliver such documentation as soon as
practicable after the effective time of the Merger and to use commercially
reasonable efforts to do all things necessary pursuant to the GM-PBGC
Agreement to effect the delivery to EDS of the Unconditional Releases. See
"Relationship Between General Motors and EDS--Post-Split-Off Arrangements--
Separation Agreement." Accordingly, General Motors expects the PBGC's releases
of EDS and its subsidiaries to be effective immediately upon consummation of
the Split-Off, and further that the Unconditional Releases will be delivered
to EDS shortly after consummation of the Split-Off.
CERTAIN LITIGATION
Two suits, Solomon v. General Motors Corporation, et al. and TRV Holding
Company v. General Motors Corporation et al., were filed in Delaware Chancery
Court on May 13 and 18, 1994, respectively. Such actions have been
consolidated, and a consolidated amended complaint ("Solomon/TRV") was filed
on April 2, 1996. Another lawsuit, Ward et al., as Trustees for the Eisenberg
Children's Irrevocable Trust II v. General Motors
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Corporation, et al. ("Ward"), was filed in Delaware Chancery Court on November
15, 1995. Both of these actions purport to be class actions brought on behalf
of holders of Class E Common Stock against General Motors and its directors.
The complaints make essentially the same allegations, namely, that defendants
have breached and are continuing to breach their fiduciary duties to holders
of Class E Common Stock by proposing and pursuing the Split-Off, which
plaintiffs contend would unfairly benefit General Motors to the detriment of
such holders. Specifically, the complaints allege that the Split-Off unfairly
effects a disposition of EDS without providing for a recapitalization of the
Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio, as
currently provided in the General Motors Certificate of Incorporation upon a
disposition by GM of substantially all of the business of EDS and under
certain other circumstances. The actions allege that the shares of EDS Common
Stock to be received by holders of Class E Common Stock in the Split-Off are
substantially less valuable than the shares of $1 2/3 Common Stock that such
holders would receive in a recapitalization, and that the value of EDS will be
further eroded by the Special Inter-Company Payment and, according to
Solomon/TRV, by the terms of the IT Services Agreements. Ward seeks a
preliminary and permanent injunction against the Split-Off (or any other
disposition of EDS in the absence of a recapitalization of the Class E Common
Stock into $1 2/3 Common Stock at a 120% exchange ratio) and against any
equalizing payment from EDS to General Motors. Solomon/TRV seeks monetary
damages as well as injunctive relief against the Split-Off. General Motors
believes that the suits are without merit and intends to defend against them
vigorously.
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THE SPLIT-OFF
GENERAL
The common stockholders of General Motors are being asked to approve the
Transactions, including the adoption of the Merger Agreement whereby the
Split-Off of EDS from General Motors will be accomplished. Pursuant to the
Merger Agreement, among other things, (i) Mergeco will be merged with and into
General Motors, with General Motors being the surviving corporation, (ii) each
outstanding share of Class E Common Stock will be converted automatically into
one share of EDS Common Stock and (iii) provisions in the General Motors
Certificate of Incorporation regarding the Class E Common Stock will be
deleted (including the provisions that require Class E Common Stock to be
recapitalized into $1 2/3 Common Stock at a 120% exchange ratio upon a
disposition by General Motors of substantially all of the business of EDS and
under certain other circumstances) and certain other provisions therein will
be amended as described herein. As a result of the Merger, EDS will become an
independent, publicly held company. THE DESCRIPTION OF THE MERGER AGREEMENT
SET FORTH BELOW DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED AS
APPENDIX A TO THIS SOLICITATION STATEMENT/PROSPECTUS AND INCORPORATED HEREIN
BY REFERENCE.
Consummation of the Transactions is conditioned upon, among other things,
receiving the consent of the common stockholders of General Motors. Approval
of the Transactions is independent of the vote on the Amended EDS Incentive
Plan and will require the consent of the holders of (i) a majority of the
voting power of all outstanding shares of all three classes of General Motors'
common stock, voting together as a single class based on their respective
voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common
Stock, voting as a separate class, and (iii) a majority of the outstanding
shares of Class E Common Stock, voting as a separate class. See "Solicitation
of Written Consent of General Motors Common Stockholders." If the
Transactions, including the Merger Agreement, are so approved, the Merger will
become effective upon the filing of a certificate of merger with the Secretary
of State of the State of Delaware.
The Split-Off and related Transactions, including the consummation of the
Merger, the making of the Special Inter-Company Payment, the execution and
delivery of the Master Services Agreement and certain other IT Services
Agreements to be entered into in connection therewith and the Separation
Agreement and the consummation of the other transactions and events
contemplated by the Merger Agreement, are all part of a single plan. By voting
in favor of the Transactions, General Motors' common stockholders will be
ratifying each of the Transactions.
If the Transactions are not approved by General Motors common stockholders,
none of the Transactions will be consummated. If the Transactions are not
consummated, the Existing IT Services Agreements will continue, with such
changes beginning in 1996 as General Motors and EDS may agree or as the GM
Board, upon recommendation of the Capital Stock Committee, may from time to
time consider fair to all classes of General Motors common stockholders. In
this regard, EDS management believes that substantial changes would be made to
the Existing Master Services Agreement in 1996 even in the absence of the
Split-Off. GM management has determined, and has advised EDS management, that
in the absence of the Split-Off it would seek substantial changes in the
Existing IT Services Agreements, including implementation of substantially all
of the changes provided for by the Master Services Agreement. Neither the GM
Board nor the Capital Stock Committee has determined whether to require such
changes to the Existing IT Services Agreements if the Split-Off is not
consummated, but they anticipate considering such changes if such
circumstances arise. See "Risk Factors Regarding Non-Consummation of the
Split-Off--Changes in Terms of Existing IT Services Agreements."
THE GM BOARD HAS UNANIMOUSLY APPROVED THE TRANSACTIONS. THE GM BOARD HAS
DETERMINED THAT THE TRANSACTIONS ARE IN THE BEST INTERESTS OF, AND FAIR TO,
GENERAL MOTORS AND EACH CLASS OF GM COMMON STOCKHOLDERS. THE GM BOARD
RECOMMENDS THAT GENERAL MOTORS COMMON STOCKHOLDERS EXECUTE CONSENTS TO APPROVE
THE TRANSACTIONS, INCLUDING THE ADOPTION OF THE MERGER AGREEMENT.
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MERGER AGREEMENT
Effect of the Merger
Subject to the terms and conditions of the Merger Agreement, Mergeco will
merge with and into General Motors, with General Motors being the corporation
surviving the Merger. Promptly following the satisfaction or waiver of the
conditions to the Merger, the parties will file a certificate of merger with
the Secretary of State of the State of Delaware, at which time the Merger will
be effective (the "Effective Time"). The separate corporate existence of
Mergeco will then cease, and the internal corporate affairs of General Motors
(sometimes referred to in this discussion as the "Surviving Corporation") will
continue to be governed by the laws of the State of Delaware. By operation of
the Merger, at the Effective Time, Article Fourth of the General Motors
Certificate of Incorporation will be amended to remove Class E Common Stock as
a class of authorized General Motors capital stock, to delete provisions
therein regarding the Class E Common Stock and certain related provisions that
will no longer be relevant and to make certain additional changes updating
terms and provisions therein, such as reflecting the current name of Hughes
and changing certain provisions relating to any Preferred Stock that may be
issued by General Motors from time to time in the future. There are currently
no shares of Preferred Stock outstanding.
The changes to the General Motors Certificate of Incorporation relating to
the Preferred Stock will allow the GM Board to determine the specific rights,
preferences and limitations of each series of Preferred Stock if and when
issued in the discretion of the GM Board and will cause the Preferred Stock to
assume the characteristics of "blank-check" preferred stock, which the General
Motors Preference Stock already possesses. Such changes include the deletion
of a restrictive covenant limiting the payment of cash dividends on classes of
General Motors stock other than the Preferred Stock based on a net quick
assets test, the removal of a restriction on the placing of liens on General
Motors property, the elimination of certain voting rights of the Preferred
Stock and the deletion of a specified liquidation price of $100 per share of
Preferred Stock. There will continue to be six million shares of Preferred
Stock authorized under the General Motors Certificate of Incorporation
immediately after the Merger. Under certain circumstances, the issuance of
shares of such "blank-check" Preferred Stock could have the effect of
delaying, deferring or preventing certain corporate transactions involving a
change in control of General Motors, although the changes to the terms of the
Preferred Stock to be effected by the Merger are not being made for such
purpose. The terms of the three outstanding series of General Motors
Preference Stock will be unaffected by the Merger.
The General Motors Certificate of Incorporation, as so amended, will be the
certificate of incorporation of the Surviving Corporation. Article Fourth of
the General Motors Certificate of Incorporation, in the form proposed to be
amended, is included in Appendix A of this Solicitation Statement/Prospectus
as Exhibit A to the Merger Agreement. The By-Laws of General Motors will
continue to be the By-Laws of the Surviving Corporation, with appropriate
deletions of references to Class E Common Stock and EDS. The directors and
officers of General Motors in office immediately prior to the Effective Time
will be the directors and officers of the Surviving Corporation immediately
after the Effective Time.
Conversion of Class E Common Stock
At the Effective Time, each issued and outstanding share of Class E Common
Stock (each, a "Class E Share") will be converted into one share of EDS Common
Stock (each, an "EDS Share"). Accordingly, immediately after the Effective
Time, (i) for all purposes of determining the record holders of EDS Common
Stock, the holders of Class E Common Stock immediately prior to the Effective
Time shall be deemed to be holders of EDS Common Stock and (ii) subject to any
transfer of such stock, such holders shall be entitled to receive all
dividends payable on, and exercise voting rights and all other rights and
privileges with respect to, EDS Common Stock. EDS will agree in the Separation
Agreement to cause The Bank of New York, as exchange agent (the "Exchange
Agent"), to mail, as promptly as practicable, to each record holder of Class E
Shares as of the Effective Time a letter of transmittal for such holder to use
in surrendering the certificates which represented such holder's Class E
Shares in exchange for a certificate representing the number of EDS Shares to
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which such holder is entitled. Holders of Class E Shares will be instructed to
mail the certificates representing such shares to the Exchange Agent
accompanied by such letter of transmittal. HOLDERS OF CLASS E SHARES SHOULD
NOT RETURN SUCH CERTIFICATES WITH THE CONSENT CARD ENCLOSED WITH THIS
SOLICITATION STATEMENT/PROSPECTUS.
Conditions to Closing
Under the Merger Agreement, the obligation of General Motors to consummate
the Merger is subject to the satisfaction or waiver of the following
conditions: (i) the absence of any action, suit or proceeding that would be
reasonably likely to prevent consummation of the Merger, cause the Merger to
be rescinded following consummation or cause General Motors or any of its
officers or directors to become liable for any material damages; (ii) the
approval of the Transactions, including adoption of the Merger Agreement, by
(a) a majority of the voting power of all outstanding shares of all three
classes of General Motors' common stock, voting together as a single class
based on their respective voting rights, (b) a majority of the outstanding
shares of $1 2/3 Common Stock, voting as a separate class, and (c) a majority
of the outstanding shares of Class E Common Stock, voting as a separate class;
(iii) the absence of any notification from Merrill Lynch that the Merrill
Lynch Fairness Opinion has been withdrawn or from Lehman Brothers or Morgan
Stanley that either of their respective opinions has been withdrawn; (iv) the
absence of any notification from the IRS that the Tax Ruling has been
withdrawn or invalidated and of any determination by the GM Board that the
representations and assumptions underlying such ruling are not true and
correct in all material respects; (v) the merger of Electronic Data Systems
Intermediate Corporation and Electronic Data Systems Corporation,
respectively, into EDS; (vi) the receipt by Mergeco of cash in the amount of
the Special Inter-Company Payment; and (vii) the execution and delivery by
General Motors and EDS of the Master Services Agreement, the Separation
Agreement and a succession agreement with respect to the Registration Rights
Agreement.
Termination
The Merger Agreement may be terminated as follows: (i) by mutual written
consent of General Motors and Mergeco prior to the Effective Time; (ii) by
General Motors by giving written notice to Mergeco at any time prior to the
Effective Time in the event that the GM Board concludes that termination would
be in the best interests of General Motors and its stockholders; (iii) by
General Motors in the event that either the Merrill Fairness Opinion or either
of the respective opinions of Lehman Brothers or Morgan Stanley is withdrawn;
(iv) by General Motors in the event that GM has been notified by the IRS or
otherwise believes that the Split-Off would not be treated as a tax-free
exchange under Section 355 of the Code; and (v) by General Motors in the event
the Transactions are not approved by written consent of the holders of (a) a
majority of the voting power of all outstanding shares of all three classes of
General Motors' common stock, voting together as a single class based on their
respective voting rights, (b) a majority of the outstanding shares of $1 2/3
Common Stock, voting as a separate class, and (c) a majority of the
outstanding shares of Class E Common Stock, voting as a separate class.
Amendment
The Merger Agreement may be amended at any time and from time to time by a
writing executed by General Motors and Mergeco; provided, however, that any
such amendment made after the Merger Agreement is adopted by written consent
of the common stockholders of GM as described herein shall not (a) alter or
change the amount or kind of shares, securities, cash, property and/or rights
to be received in exchange for or on conversion of the Class E Common Stock,
(b) alter or change any term of the certificate of incorporation of the
Surviving Corporation or (c) alter or change any of the terms and conditions
of the Merger Agreement if such alteration or change would adversely affect
the holders of any class or series of General Motors capital stock.
NO APPRAISAL RIGHTS
The Delaware General Corporation Law, as amended (the "DGCL"), does not
provide appraisal rights to stockholders of General Motors in connection with
the Transactions. Appraisal rights will not be available to
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holders of Class E Common Stock because, among other things, the Class E
Common Stock is, and the EDS Common Stock will be, listed on the NYSE. All
other holders of GM capital stock will not be entitled to appraisal rights
because, among other things, each class of such stock is listed on the NYSE
and the holders thereof will not exchange or otherwise relinquish any such
stock pursuant to the Merger.
STOCK EXCHANGE LISTINGS FOR EDS COMMON STOCK
Application has been made to list the EDS Common Stock on the NYSE, and such
application has been granted pending notice of issuance. The trading symbol
for the EDS Common Stock on the NYSE will be "EDS." EDS intends to seek to
list the EDS Common Stock on the London Stock Exchange, with such listing to
be effective upon the consummation of the Split-Off.
ACCOUNTING TREATMENT
General Motors will not recognize any accounting gain or loss as a result of
the Split-Off. For accounting purposes, the assets and liabilities of EDS will
continue to be accounted for by EDS at their existing carrying values after
the consummation of the Split-Off. 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.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
For a description of the U.S. federal income tax consequences of the Split-
Off for General Motors and its stockholders, see "Special Factors--Certain
U.S. Federal Income Tax Considerations."
REGULATORY REQUIREMENTS
GM and EDS believe that no material U.S. federal or other regulatory
requirements remain to be complied with by GM or EDS, and no material
approvals thereunder must be obtained by GM or EDS, in order to consummate the
Split-Off. However, there may be certain regulatory (e.g., securities and
competition) requirements to be complied with and approvals to be obtained by
GM and EDS outside of the United States in connection with the consummation of
the Split-Off. GM and EDS are currently working together to evaluate and
comply in all material respects with such requirements and to obtain all such
approvals, and do not anticipate that any such foreign requirements will
hinder, delay or restrict in any material respect consummation of the
Transactions.
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RELATIONSHIP BETWEEN GENERAL MOTORS AND EDS
PRE-SPLIT-OFF RELATIONSHIP
General
EDS is currently a wholly owned subsidiary of General Motors, and the Class
E Common Stock, which is a security of General Motors, is designed to provide
financial returns based on the performance of EDS. See "Class E Common Stock."
Because of GM's multi-class capital structure, it is GM's policy that a
standard of fair dealing govern the prices, terms and conditions of commercial
transactions between EDS and General Motors. The Capital Stock Committee of
the GM Board is primarily responsible for reviewing, among other things, (i)
the principal business and financial relationships and transactions among
General Motors, EDS and Hughes, (ii) the dividend policies or practices of
General Motors and (iii) such other matters as have the potential to have
differing effects on holders of the three classes of General Motors common
stock, all to the extent such Committee may deem appropriate. The Capital
Stock Committee is comprised entirely of independent directors of General
Motors. In addition, a majority of the members of the GM Board are independent
directors. See "Class E Common Stock--Considerations Relating to Multi-Class
Common Stock Capital Structure."
The EDS Board is currently comprised of executive officers of EDS. As the
sole stockholder of EDS, General Motors controls the EDS Board and, subject to
Delaware law, is able to cause EDS to pay dividends and make advances to or
otherwise enter into such transactions as GM deems desirable and appropriate.
So long as General Motors is the sole stockholder of EDS, GM reserves the
right to cause EDS to pay dividends to GM in such amounts as GM determines are
desirable under the then prevailing facts and circumstances. Such amounts may
be the same as, greater than, or less than the cash dividends paid by General
Motors on the Class E Common Stock. There is no required fixed relationship,
on a per share or aggregate basis, between the cash dividends that may be paid
by GM to holders of the Class E Common Stock and the dividends or other
amounts that may be paid by EDS to GM. However, it has been the consistent
practice of the EDS Board to pay quarterly cash dividends on the outstanding
shares of EDS Common Stock in an aggregate amount equal to the quarterly
dividends per share paid by General Motors with respect to Class E Common
Stock multiplied by the Class E Dividend Base, which is the denominator of the
fraction used in allocating a portion of GM's earnings attributable to EDS to
the Class E Common Stock for dividend purposes as described herein. See "Class
E Common Stock."
Existing IT Services Agreements
General Motors and EDS are currently parties to the Existing Master Services
Agreement under which EDS is responsible for substantially all of the
worldwide IT services activities of General Motors and certain of its
affiliates. The Existing Master Services Agreement, which was effective as of
September 1, 1985 and was amended on May 29, 1987, establishes standard
provisions that govern the contractual arrangements between EDS and General
Motors with respect to a substantial portion of the IT services required by
General Motors. In accordance with the framework established by the Existing
Master Services Agreement, each GM subsidiary, division, group or other
organization within the scope of such agreement negotiates and enters into a
service agreement (a "Service Agreement") with EDS for the provision of IT
services. Generally, each Service Agreement incorporates the standard
provisions contained in the Existing Master Services Agreement (except to the
extent that the contracting parties otherwise agree) and contains separately
negotiated provisions regarding term, services to be provided, and payment for
services, as well as other matters required to be addressed in connection with
the applicable service or project. The Existing Master Services Agreement does
not have a fixed term, but provides 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. Each Service Agreement is effective for a fixed term,
although in most cases a Service Agreement may be terminated by either party
in the event of the termination of the Existing Master Services Agreement.
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Under the Existing Master Services Agreement, General Motors and EDS have
generally utilized one of three alternative pricing methods, as appropriate
for a particular service or project. The pricing method for a particular
service or project is negotiated by the parties. First, General Motors and EDS
have utilized fixed-price arrangements for Service Agreements where the scope
of work can be defined. Second, the parties have utilized a cost-plus
management fee method of pricing for EDS' services where the scope of work is
more difficult to define. Third, the parties have utilized uniform published
rates for the pricing of off-the-shelf, commercially available products and
services. The Existing Master Services Agreement provides that, in the absence
of separately negotiated pricing terms set forth in a Service Agreement or as
a default mechanism in the event that the parties are not able to reach
agreement, EDS will be compensated for its services on a cost-plus management
fee basis.
POST-SPLIT-OFF ARRANGEMENTS
General
General Motors will continue to have certain contractual relationships with
EDS after the Split-Off has been consummated. The Separation Agreement will
establish certain transitional and other arrangements deemed necessary in
connection with the Split-Off and the IT Services Agreements will provide for
the continuation of a long-term customer-supplier relationship, in each case
as described below. Additionally, GM will have a significant indirect stake in
EDS' financial performance for a substantial period of time following the
Split-Off as a result of the sizeable holdings of EDS Common Stock that the GM
Hourly Plan Special Trust will possess after the Split-Off. See "Security
Ownership of Certain Beneficial Owners and Management of General Motors and
EDS--GM Hourly Plan Special Trust." Appreciation or depreciation in the value
of such holdings will affect the level of General Motors' pension expense and
unfunded pension liability, which are actuarially determined and computed in
accordance with generally accepted accounting principles.
IT Services Agreements
Immediately prior to and as a condition of the consummation of the Merger,
General Motors and EDS will enter into the Master Services 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 will implement
certain contractual changes which modify or otherwise affect the provisions of
several existing Service Agreements. GM and EDS will also enter into
agreements whereby the rates charged by EDS for certain information processing
activities and communications services will be reduced.
The terms of the Master Services 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 Services Agreement ("MSA Services"). Under
the IT Services 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 will
be 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 Services Agreement.
Following the Split-Off, 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 Services 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 Services Agreement, is
qualified in its entirety by reference to the Master Services Agreement, the
form of which has been filed with the Commission as an exhibit to the
Registration Statement of which this Solicitation Statement/Prospectus is a
part. For a discussion of certain financial effects on General Motors and EDS
of the terms of the IT Services Agreements, see "Special Factors--Fairness
Opinions" and "EDS Management's Discussion and Analysis of Financial Condition
and Results of Operations."
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Term. The term of the Master Services Agreement will commence upon the
consummation of the Split-Off and will continue until the expiration of ten
years thereafter. The term of the Master Services Agreement may be extended
for an additional period or periods by mutual agreement between General Motors
and EDS. Prior to the Split-Off, the Existing Master Services 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 Services Agreement was deemed appropriate in connection with the Split-
Off because GM and EDS desire 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 Services Agreement.
Service Agreements. As previously noted, pursuant to the Existing Master
Services Agreement, GM business units and EDS have entered into a number of
Service Agreements setting forth the terms and provisions applicable to
specific services or projects undertaken by EDS on behalf of various GM
organizations. See "--Pre-Split-Off Relationship--Existing IT Services
Agreements." Such Service Agreements will remain in effect after the Split-Off
and, in many cases, will be extended or otherwise modified as provided in the
Master Services Agreement. In addition, it is contemplated that, under the
Master Services Agreement, GM business units and EDS will continue to
negotiate and enter into additional Service Agreements after the Split-Off
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 Services 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 Services Agreement, the terms
of the largest domestic Service Agreements (accounting for approximately $2.4
billion in annual revenues in 1995) currently in effect will be extended for
additional terms of between one and three years. In particular, the Service
Agreement with Delphi Automotive Systems will be 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) will each be 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 Services Agreement will establish 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 Services Agreement will contain 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 Services Agreement, services for certain GM units or
operations or in certain geographic areas will be specifically excluded from
the scope of work to be performed by EDS. In particular, such agreement
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will provide 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 Services Agreement relating to the
scope of services to be provided by EDS will be 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 Services Agreement will provide that
General Motors will be responsible for, and will decide and direct, its IT
strategies and requirements, including its computing and communications
architecture. EDS will be responsible for the performance of IT services
pursuant to the Master Services Agreement in furtherance of General Motors' IT
strategies and requirements.
Competitiveness. In accordance with the Master Services 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 Services
Agreement with respect to competitiveness will 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
Services 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 Services Agreement will provide 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 Services
Agreement and a modified cost-plus pricing methodology.
Pricing of Services. In general, under the Master Services Agreement, the
same methods of pricing will be available as are provided for under the
Existing Master Services Agreement. See "--Pre-Split-Off Relationship--
Existing IT Services Agreements." 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 Services 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 will be 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 will be 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 Services Agreement relating to market testing or
outsourcing. See "--Market Testing and Outsourcing" below.
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<PAGE>
Market Testing and Outsourcing. The Master Services Agreement will provide
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 Committee of GM's Board of Directors will no longer have 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 2005, 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 Services Agreement will establish
specified structural cost reduction targets for the first four years of the
Master Services Agreement. In each of the years 1996 through 1998, the annual
cost reduction targets will be $100 million. In 1999, the target will be $50
million. These cost reduction targets are generally somewhat higher than the
cost reduction targets set forth in the existing Service Agreements, which
they are intended to replace. Unlike the cost reduction targets in the
existing Service Agreements, however, the targets under the Master Services
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 Services 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 Existing IT Services Agreements provide for GM to pay EDS
on the 15th day of the month in which services are provided with respect to a
substantial portion of services, especially in North America. International
payment terms in the Existing IT Services Agreements are often more favorable
to GM and are 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.
Termination. The Master Services 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
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<PAGE>
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 Services 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
EDS Common Stock representing 50% or more of the aggregate voting power of the
outstanding shares of EDS 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 EDS Common Stock representing 30% or
more of the aggregate voting power of the outstanding shares of EDS 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 EDS Common Stock which represents 50% or more of the aggregate
voting power of the outstanding shares of EDS Common Stock being beneficially
owned by persons who did not either own such securities as EDS Common Stock
immediately prior to such transaction or receive such securities in respect of
the conversion or exchange of EDS Common Stock in such transaction.
In the event of a change of control, GM may elect to terminate the Master
Services Agreement if the GM Board of Directors 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 Services
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 Services Agreement, GM may terminate the Service
Agreements between EDS and such units; provided, that EDS may instead elect to
terminate the Master Services 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 Services
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 Services 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 will also enter 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 Services Agreement
(subject to possible termination at the end of a 2.5 year probationary
period). The Plant Floor Agreement, which will be subject to the Master
Services 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.
Separation Agreement
As a condition to the consummation of the Merger, General Motors and EDS
will enter into the Separation Agreement, which will establish certain
arrangements between General Motors and EDS deemed necessary in order to deal
with various business, legal and regulatory issues following the Split-Off,
and the Tax Allocation
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Agreement, which replaces both the Agreement for the Allocation of United
States Federal Income Taxes and the Agreement for the Allocation of United
States State and Local Income Taxes, between General Motors and EDS, each
entered into effective as of December 31, 1984. The Separation Agreement will
be entered into immediately prior to the consummation of the Merger. Set forth
below is a summary description of certain of the principal provisions of the
Separation Agreement and the Tax Allocation Agreement. Such description does
not purport to be complete and is qualified in its entirety by reference to
such agreements. The form of the Separation Agreement and a copy of the Tax
Allocation Agreement have been filed with the Commission as exhibits to the
Registration Statement of which this Solicitation Statement/Prospectus is a
part.
The Separation Agreement will contain covenants intended to protect the tax-
free status of the Split-Off. EDS will agree with General Motors that, until
after the two-year anniversary of the Effective Time, 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 EDS
Common Stock, unless either (a) General Motors has determined that any such
proposed transaction would constitute a tax-free reorganization under 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 at the
Effective Time (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 the six-month anniversary of the
Effective Time, 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 will agree 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 (not including for such purpose the
Tax Allocation 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. GM has agreed to indemnify the
members of the EDS Team, the officers and employees of EDS providing
assistance to the EDS Team, and the directors of EDS who granted any approval
or authorization for EDS in connection with the Split-Off, in each case, in
their capacity as such, against losses arising from the Split-Off in
accordance with the GM Bylaws, to the same extent as if such person were a
director or officer of GM; provided that such indemnification does not apply
to losses relating to (i) the EDS Certificate of Incorporation, the EDS Bylaws
or the EDS Rights Agreement, (ii) EDS employee and director compensation and
indemnification arrangements or (iii) EDS plans, proposals, intentions or
policies applicable after the Effective Time, including EDS' dividend policy.
EDS will reimburse GM for all amounts paid to or on behalf of the persons
entitled to indemnification as referred to in the preceding sentence.
Pursuant to the Separation Agreement, until the six-year anniversary of the
Effective Time, General Motors will provide EDS and its affiliates with
directors' and officers' liability, general liability and products liability
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insurance, with respect to applicable incidents, acts or omissions occurring
before the Effective Time, no less favorable to any covered person in coverage
and amount than the lesser of (i) the coverage in effect at the Effective Time
and (ii) the coverage then in effect for General Motors. Such insurance will
be subject to the payment by EDS of certain deductibles and retention amounts,
but EDS will make no annual premium payments for such coverage. EDS may
terminate any of such coverage at any time, subject to applicable notice
provisions.
The Separation Agreement allocates responsibility for the payment of fees
and expenses incurred by the parties in connection with the Split-Off. EDS
will pay the fees and expenses of the financial, accounting and legal advisors
retained by it or the EDS Team, including Lehman Brothers, Morgan Stanley,
KPMG Peat Marwick LLP, Baker & Botts, L.L.P., Prickett, Jones, Elliott,
Kristol & Schnee and Hughes & Luce, L.L.P. GM will pay the fees and expenses
of the financial, accounting, legal and other advisors retained by it or the
GM Team, including Merrill Lynch, Deloitte & Touche LLP, Kirkland & Ellis,
Richards, Layton & Finger, Milbank, Tweed, Hadley & McCloy, Weil, Gotshal &
Manges LLP, and McKinsey. Other than as provided in the preceding sentence,
the fees and expenses associated with the preparation, distribution to
stockholders and filing with the Commission of the materials associated with
this consent solicitation or associated with other securities law filings will
be shared equally by General Motors and EDS, except that GM shall pay the
first $3.0 million of such fees and expenses. EDS will pay all costs of
printing and engraving the certificates representing the EDS Common Stock and
the costs of listing the EDS Common Stock on any stock exchange. All other
costs and expenses of either party incurred in connection with the Split-Off
will be paid by such party. See "Estimated Fees and Expenses."
The Separation Agreement provides for General Motors to deliver to the PBGC
certain documentation required by the PBGC as soon as practicable after the
Effective Time and to use commercially reasonable efforts to do all things
necessary pursuant to the GM-PBGC Agreement to effect the delivery to EDS of
the Unconditional Releases. See "Special Factors--GM-PBGC Agreement." The
Separation Agreement also provides that General Motors will not amend or
modify the Transfer Agreement between General Motors and the GM Hourly Plan
Trustee in any material respect, or waive the benefit of any material term of
the Transfer Agreement, without the prior written consent of EDS. See
"Security Ownership of Certain Beneficial Owners and Management of General
Motors and EDS--GM Hourly Plan Special Trust." The Separation Agreement
provides that any employee who transferred between General Motors, EDS and
certain of their affiliates during the period between September 1, 1985 and
the Split-Off and continues in employment until his or her retirement will
receive certain reciprocal treatment under his or her original employer's
qualified retirement plan for service to the company to which such employee
transferred. Such employee's compensation and service will be recognized for
certain specific purposes under the qualified retirement plan of the company
from which he or she transferred. The reciprocal treatment provided by the
Separation Agreement will not apply to certain employees who transferred to or
from Hughes or certain other General Motors subsidiaries. The Separation
Agreement also includes certain agreements and arrangements with respect to
the provision of continuing access to certain information, the treatment of
confidential information and the establishment of lease arrangements for space
within certain GM facilities used or occupied by EDS. In addition, the
Separation Agreement contains representations and warranties as to certain
matters, including with respect to the Class E Common Stock and EDS Common
Stock to be outstanding immediately before the Effective Time, and the absence
of registration rights granted by GM that would apply to EDS Common Stock
after the Split-Off (other than those of the GM Hourly Plan Special Trust as
described under "Security Ownership of Certain Beneficial Owners and
Management of General Motors and EDS--GM Hourly Plan Special Trust").
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. To date, the parties have 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 for a period generally of two years after
the Effective Time 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
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prior to the Effective Time and out of the separation of GM and EDS. Such
allowance generally may not be utilized for items provided for in the
Separation Agreement or in the Tax Allocation Agreement.
Pursuant to the Separation Agreement, GM and EDS shall attempt in good faith
to resolve any disputes thereunder through negotiation, and have agreed that
any such disputes that cannot be resolved through negotiation shall be
litigated in the Delaware state courts (except that disputes with respect to
tax matters shall be submitted to arbitration).
The Tax Allocation Agreement, which applies to tax periods during which EDS
and its consolidated or combined subsidiaries (the "EDS Group") are part of
GM's consolidated federal, state and local income tax returns, generally
requires EDS to pay to GM in a timely manner the amount of federal, state and
local income taxes that the EDS Group would have paid had the EDS Group been a
separate group of corporations during such periods, filing its own
consolidated income tax returns. Any tax attributes arising in the tax periods
covered by the Tax Allocation Agreement that carry over to periods following
the Split-Off will be apportioned between GM and EDS on the basis of
applicable regulations or, absent specific guidance, on the basis of the
amount of such attributes that would have carried over and been available to
the EDS Group had it filed separate returns as described above. The Tax
Allocation Agreement also grants EDS certain control and participation rights
in any audit of GM by the Internal Revenue Service or state and local tax
authorities, and in any litigation arising therefrom, to the extent EDS would
be liable under the Tax Allocation Agreement with respect to the issues in
dispute.
PLANS AND PROPOSALS OF EDS
EDS DIVIDEND POLICY
The current dividend policy of the GM Board is to pay quarterly dividends on
Class E Common Stock, when, as 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. There is no fixed relationship, on a per share or aggregate basis,
between the cash dividends that may be paid by General Motors to holders of
Class E Common Stock and cash dividends or other amounts that may be paid by
EDS to General Motors. However, it has been the practice of the EDS Board to
pay quarterly cash dividends on the outstanding shares of EDS Common Stock in
an aggregate amount equal to the quarterly dividends per share paid by General
Motors with respect to Class E Common Stock, multiplied by the Class E
Dividend Base, which is the denominator of the fraction used in allocating a
portion of GM's earnings attributable to EDS to the Class E Common Stock for
dividend purposes as described herein. See "Class E Common Stock--Dividend
Policy."
EDS' dividend policy following the Split-Off will be determined by the EDS
Board. Under Delaware law and the EDS Certificate of Incorporation, the EDS
Board will not be required to declare dividends on any class of EDS capital
stock. EDS management intends to recommend to the EDS Board at its first
meeting following consummation of the Split-Off that EDS continue to pay
quarterly dividends through 1996 in an amount equal to $0.15 per share. The
EDS Board will not be required to follow such recommendation by EDS
management. The EDS Board will be free to adopt such dividend policy as it
deems appropriate and, 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.
EDS expects that it will adopt a dividend reinvestment plan, which will
become effective following the Split-Off.
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EDS UNAUDITED PRO FORMA CONSOLIDATED CAPITALIZATION
The following table sets forth the short-term debt and consolidated
capitalization of EDS as of December 31, 1995 and on a pro forma basis after
giving effect to the Transactions. This table should be read in conjunction
with EDS' Consolidated Financial Statements (including the notes thereto),
which are included as Appendix C to this Solicitation Statement/Prospectus,
and with the financial data set forth under "EDS 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 Transactions been consummated as of December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------
PRO
HISTORICAL FORMA
---------- --------
(IN MILLIONS)
<S> <C> <C>
Short-term debt:
Notes payable (current).................................. $ 247.8 $ 247.8
======== ========
Long-term debt:
Notes payable............................................ $1,852.8 $2,352.8
-------- --------
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; 483.7 million shares issued and outstanding. 517.7 --
Common stock, $.01 par value; two billion shares
authorized; 483.7 million shares issued and outstanding. -- 4.8
Additional paid-in capital............................... -- 512.9
Retained earnings........................................ 4,460.8 3,912.5
-------- --------
Total stockholders' equity............................. 4,978.5 4,430.2
-------- --------
Total capitalization................................... $6,831.3 $6,783.0
======== ========
</TABLE>
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GENERAL MOTORS UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are based on General Motors' Consolidated Financial Statements and
give effect to the Transactions as if they had been consummated as of January
1, 1995 (in the case of income statement data) or as of December 31, 1995 (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 General Motors'
Consolidated Financial Statements (including the notes thereto) in the GM 1995
Form 10-K, which is incorporated herein by reference, including the
information with respect to EDS in Exhibit 99(a) thereto. The pro forma
condensed consolidated financial statements are not necessarily indicative of
General Motors' future consolidated financial position or results of
operations or of what General Motors' consolidated financial position would
have been had the Transactions been consummated as of December 31, 1995 or
what the results of operations would have been had the Transactions been
consummated as of January 1, 1995.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
NET SALES AND REVENUES
Manufactured products............... $143,666.1 $ -- $143,666.1
Financial services.................. 11,664.0 -- 11,664.0
Computer systems services........... 8,531.0 (8,531.0)(a) --
Other income........................ 4,967.5 (25.1)(a) 4,942.4
---------- --------- ----------
Total Net Sales and Revenues....... 168,828.6 (8,556.1) 160,272.5
---------- --------- ----------
COSTS AND EXPENSES
Cost of sales and other operating
charges, exclusive of items listed
below.............................. 126,535.3 (5,234.2)(a)
(175.8)(b) 121,125.3
Selling, general, and administrative
expenses........................... 13,514.7 (964.9)(a)
15.0 (c) 12,564.8
Interest expense.................... 5,302.2 (120.8)(a) 5,181.4
Depreciation of real estate, plants,
and equipment...................... 8,554.4 (808.1)(a) 7,746.3
Amortization and other deductions... 5,145.7 -- 5,145.7
---------- --------- ----------
Total Costs and Expenses........... 159,052.3 (7,288.8) 151,763.5
---------- --------- ----------
Income from continuing operations
before income taxes and cumulative
effect of accounting change........ 9,776.3 (1,267.3) 8,509.0
United States, foreign, and other
income taxes....................... 2,843.8 (528.1)(a)
61.1 (d)
(2.3)(d) 2,374.5
---------- --------- ----------
Income from continuing operations
before cumulative effect of
accounting change.................. 6,932.5 (798.0) 6,134.5
Income from discontinued operations. -- 900.0 (a) 900.0 (e)
Cumulative effect of accounting
change............................. (51.8) -- (51.8)
---------- --------- ----------
Net income......................... 6,880.7 102.0 6,982.7
Preference shares tender offer
premium............................ 153.4 -- 153.4
Dividends on preference stocks...... 210.2 (103.5)(k) 106.7
---------- --------- ----------
Income on Common Stocks............ $ 6,517.1 $ 205.5 $ 6,722.6
========== ========= ==========
EARNINGS ATTRIBUTABLE TO COMMON
STOCKS
$1 2/3 par value before cumulative
effect of accounting change....... $ 5,508.8 $ 205.5
(104.5)(f) $ 5,609.8
Cumulative effect of accounting
change............................ (51.8) -- (51.8)
---------- --------- ----------
Net earnings attributable to $1 2/3
par value......................... $ 5,457.0 $ 101.0 $ 5,558.0
========== ========= ==========
Net earnings attributable to Class
H................................. $ 264.6 $ -- $ 264.6
========== ========= ==========
Class E from continuing operations. $ 795.5 $ (795.5)(a) $ --
Discontinued operations............ -- 795.5 (a)
104.5 (f) 900.0
Average number of shares of common
stocks outstanding (in millions)
$1 2/3 par value................... 749.7 -- 749.7
Class E............................ 404.6 (404.6)(a) --
Class H............................ 95.5 -- 95.5
EARNINGS PER SHARE ATTRIBUTABLE TO
COMMON STOCKS
$1 2/3 par value before cumulative
effect of accounting change....... $ 7.28 $ .20 $ 7.48
Cumulative effect of accounting
change............................ (0.07) -- (0.07)
---------- --------- ----------
Net earnings attributable to $1 2/3
per value......................... $ 7.21 $ .20 $ 7.41
========== ========= ==========
Net earnings attributable to Class
H................................. $ 2.77 $ -- $ 2.77
========== ========= ==========
Class E from continuing operations. $ 1.96 $ (1.96) $ --
Discontinued operations............ -- 1.66 1.66
.22 (f) .22
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
83
<PAGE>
GENERAL MOTORS UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
ASSETS ---------- ----------- ----------
<S> <C> <C> <C>
Cash and cash equivalents................. $ 11,044.3 $ (548.9)(a)
500.0 (g) $ 10,995.4
Other marketable securities............... 5,598.6 (76.4)(a) 5,522.2
---------- --------- ----------
Total cash and marketable securities.... 16,642.9 (125.3) 16,517.6
Finance receivables--net.................. 58,732.0 -- 58,732.0
Accounts and note receivable.............. 9,988.4 (3,008.9)(a) 6,979.5
Inventories............................... 11,529.5 (181.2)(a) 11,348.3
Contracts in process...................... 2,469.2 -- 2,469.2
Net equipment on operating leases......... 27,702.3 -- 27,702.3
Deferred income taxes..................... 19,028.3 691.7 (a)
(26.8)(l) 19,693.2
Property
Real estate, plants, and equipment--at
cost................................... 73,652.3 (6,237.5)(a) 67,414.8
Less accumulated depreciation........... 44,083.2 (3,065.7)(a) 41,017.5
---------- --------- ----------
Net real estate, plants, and
equipment............................ 29,569.1 (3,171.8) 26,397.3
Special tools--net...................... 8,170.7 -- 8,170.7
---------- --------- ----------
Total property...................... 37,739.8 (3,171.8)(a) 34,568.0
Intangible assets--net.................... 11,898.9 (1,155.4)(a) 10,743.5
Other assets--net......................... 21,392.1 (2,139.2)(a) 19,252.9
---------- --------- ----------
Total Assets.......................... $217,123.4 $(9,116.9) $208,006.5
========== ========= ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Accounts payable (principally trade)...... $ 11,898.8 $ (288.0)(a)
24.3 (h) $ 11,635.1
Notes and loans payable................... 83,323.5 (2,101.8)(a) 81,221.7
United States, foreign, and other income
taxes--deferred and payable.............. 3,231.6 (123.9)(a)
(9.2)(h) 3,098.5
Postretirement benefits other than
pensions................................. 41,595.1 -- 41,595.1
Pensions.................................. 6,842.3 (151.0)(a) 6,691.3
Other liabilities and deferred credits.... 46,886.6 (1,870.5)(a) 45,016.1
---------- --------- ----------
Total Liabilities....................... 193,777.9 (4,520.1) 189,257.8
Total Stockholders' Equity................ 23,345.5 (5,054.9)(a,i)
500.0 (g)
(15.1)(h) 18,748.7(j)
(26.8)(l)
---------- --------- ----------
Total Liabilities and Stockholders'
Equity............................... $217,123.4 $(9,116.9) $208,006.5
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
84
<PAGE>
GENERAL MOTORS UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTES TO GENERAL MOTORS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(a) Reflects the removal of the assets and liabilities of EDS, prior to
receipt of the Special Inter-Company Payment described in note (g) below, and
the reclassification of EDS' operating results to income from discontinued
operations. The measurement date for accounting purposes will be the date GM
stockholder approval is received.
(b) Reflects reductions in unit billings as provided for under the terms of
the IT Services Agreements as applied to actual usage for certain
communication and information processing charges.
(c) Reflects additional selling, general, and administrative costs expected
to be incurred as a result of the Split-Off.
(d) Income tax expense on pro forma adjustments was calculated at 38%, and
includes the benefits of certain tax credits.
(e) The General Motors pro forma income from discontinued operations
reconciles to EDS' Separate Consolidated Net Income as follows:
<TABLE>
<S> <C>
Pro forma income from discontinued operations................... $900.0
EDS' Separate Consolidated Net Income........................... 938.9
------
Effect of purchase accounting adjustments reflected in General
Motors Consolidated Financial Statements that are applicable
to EDS....................................................... $(38.9)
======
</TABLE>
(f) Represents the reclassification of the portion of EDS' Separate
Consolidated Net Income allocated to $1 2/3 Common Stock, offset by the impact
of the purchase accounting adjustments described in note (e) above.
(g) Reflects receipt by GM of Special Inter-Company Payment from EDS.
(h) Reflects one-time charges of approximately $24.3 million, net of income
tax effect of $9.2 million, for financial advisory, legal, registration fee,
printing and mailing costs related to the Split-Off. Such costs have been
excluded from the Unaudited Pro Forma Condensed Consolidated Statement of
Income.
(i) Stockholders' equity pro forma adjustments (as described in note (a)
above), excluding those items discussed in notes (g) and (h) above, for
General Motors reconciles to EDS' stockholder's equity, before pro forma
adjustment, as follows:
<TABLE>
<S> <C>
GM stockholders' equity pro forma adjustments................... $5,054.9
EDS stockholder's equity........................................ 4,978.5
--------
Effect of purchase accounting adjustments reflected in General
Motors Consolidated Financial Statements that are applicable to
EDS............................................................ $ 76.4
========
</TABLE>
(j) Pro forma stockholders' equity includes the impact of the 1996 issuance
of approximately 44.7 million shares of Class E Common Stock upon conversion
of approximately 3.2 million shares of Series C Preference Stock. On February
22, 1996, the remaining 6,784 outstanding shares of Series C Preference Stock
were redeemed. The impact of the redemption was not material to GM's
consolidated balance sheet.
(k) Reflects dividends on Series C Preference Stock, assuming conversion of
shares as of January 1, 1995.
(l) Reflects net deferred tax benefits allocated to EDS.
85
<PAGE>
EDS 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 Transactions as if they had been consummated as of January 1, 1995 (in
the case of income statement data) or as of December 31, 1995 (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 as Appendix C to this Solicitation
Statement/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 Transactions been consummated as of
December 31, 1995 or what the results of operations would have been had the
Transactions 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
GM and affiliates..................... $ 3,891.1 $(175.8)(a) $ 3,715.3
Outside customers..................... 8,531.0 8,531.0
--------- ------- ---------
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.
86
<PAGE>
EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
ASSETS ---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................ $ 548.9 $ $548.9
Accounts receivable...................... 3,169.0 3,169.0
Other current assets..................... 663.6 (13.4)(h) 650.2
--------- ------ ---------
Total current assets................... 4,381.5 (13.4) 4,368.1
Property and equipment, net................ 3,242.4 3,242.4
Investment in leases and other............. 1,573.5 (33.2)(h) 1,540.3
Software, goodwill, and other intangibles,
net....................................... 1,529.9 1,529.9
Other assets............................... 105.1 105.1
--------- ------ ---------
Total assets........................... $10,832.4 $(46.6) $10,785.8
========= ====== =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accrued liabilities...................... $ 1,704.5 $ 35.0 (j) $1,739.5
Other current liabilities................ 1,556.9 1,556.9
--------- ------ ---------
Total current liabilities.............. 3,261.4 35.0 3,296.4
Deferred income taxes...................... 739.7 (33.3)(g) 706.4
Notes payable.............................. 1,852.8 500.0 (f) 2,352.8
Stockholders' equity....................... 4,978.5(i) (500.0)(f)
33.3 (g)
(46.6)(h)
(35.0)(j) 4,430.2
--------- ------ ---------
Total liabilities and stockholders'
equity................................ $10,832.4 $(46.6) $10,785.8
========= ====== =========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
87
<PAGE>
EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONCLUDED)
NOTES TO EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Notes to EDS Unaudited Pro Forma Condensed Consolidated
Financial Statements relate to the individual adjustments required to reflect
the Transactions as if they had occurred on January 1, 1995 (in the case of
income statement data) or as of December 31, 1995 (in the case of balance
sheet data). Adjustments to EDS' consolidated balance sheet are based on EDS'
carryover basis as reported in EDS' Consolidated Financial Statements included
as Appendix C herein. 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.
(b) Reflects additional interest expense attributable to $500.0 million of
debt incurred to make the Special Inter-Company Payment, calculated based
on EDS' 1995 average long-term borrowing rate.
(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 EDS 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, adjusted for the
following: (i) GM's contribution of approximately 173.2 million shares of
Class E Common Stock to the GM 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 Series C Preference Stock. For purposes of computing pro
forma earnings per share for 1995, 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 GM 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, will be
converted to EDS Common Stock in the Merger.
(i) General Motors' equity in its 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 statement
excludes, the one-time charges of approximately $35.0 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.
88
<PAGE>
EDS SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following EDS selected consolidated historical financial data have been
derived from EDS' Consolidated Financial Statements. Such data should be read
in conjunction with the EDS consolidated financial statements (including the
notes thereto), which are included as Appendix C to this Solicitation
Statement/Prospectus, and "EDS Management's Discussion and Analysis of
Financial Condition and Results of Operations." The EDS 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.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1995 1994 1993 1992 1991
-------- --------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Systems and other contracts
revenues
General Motors and affiliates. $3,891.1 $ 3,547.2 $3,323.7 $3,348.5 $3,362.2
Outside customers............. 8,531.0 6,412.9 5,183.6 4,806.7 3,666.3
-------- --------- -------- -------- --------
Total revenues................ 12,422.1 9,960.1 8,507.3 8,155.2 7,028.5
-------- --------- -------- -------- --------
Costs and expenses
Cost of revenues.............. 9,601.6 7,529.4 6,390.6 6,205.8 5,415.1
Selling, general, and
administrative............... 1,291.5 1,187.1 1,005.4 969.3 761.9
-------- --------- -------- -------- --------
Total costs and expenses...... 10,893.1 8,716.5 7,396.0 7,175.1 6,177.0
-------- --------- -------- -------- --------
Operating income............... 1,529.0 1,243.6 1,111.3 980.1 851.5
Interest and other income, net. (62.0) 40.6 20.0 20.7 42.2
-------- --------- -------- -------- --------
Income before income taxes..... 1,467.0 1,284.2 1,131.3 1,000.8 893.7
Provision for income taxes..... 528.1 462.3 407.3 365.3 330.7
Cumulative effect of accounting
change(a)..................... -- -- -- -- (15.5)
-------- --------- -------- -------- --------
Separate Consolidated Net
Income (b).................... $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5
======== ========= ======== ======== ========
Average number of shares of
Class E Common Stock
outstanding
(Numerator) (b)............... 404.6 260.3 243.0 209.1 195.3
Class E Dividend Base
(Denominator) (b)............. 483.7 481.7 480.6 479.3 478.1
Available Separate Consolidated
Net Income (b)................ $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6
Earnings per share attributable
to Class E Common Stock (b)... 1.96 1.71 1.51 1.33 1.14
Dividends per share of Class E
Common Stock (b).............. 0.52 0.48 0.40 0.36 0.32
BALANCE SHEET DATA
Cash and marketable securities. $ 638.6 $ 757.8 $ 607.5 $ 587.9 $ 415.8
Current assets................. 4,381.5 3,354.1 2,506.8 2,157.0 1,945.6
Total assets (c)............... 10,832.4 8,786.5 6,942.1 6,123.5 5,703.2
Current liabilities............ 3,261.4 2,873.2 2,160.4 1,903.1 2,396.7
Long-term debt................. 1,852.8 1,021.0 522.8 561.1 281.9
Stockholder's equity (c)(d).... 4,978.5 4,232.5 3,617.4 3,063.4 2,610.3
OTHER DATA
Depreciation and amortization.. $1,107.8 $ 771.1 $ 626.8 $ 603.2 $ 524.4
Expenditures for property and
equipment..................... 1,261.5 1,186.0 816.4 639.0 673.2
</TABLE>
- --------
(a) Effective January 1, 1991, General Motors and its subsidiaries (including
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 $6.1 million, or $0.03 per share, was attributable to
Class E Common Stock.
(b) Calculated for purposes related to the Class E Common Stock, which will be
converted into EDS Common Stock on a one-for-one basis pursuant to the
Split-Off.
(c) Holders of 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 General
Motors (which include 100% of the stock of EDS).
(d) General Motors' equity in its indirect wholly owned subsidiary, EDS
(excluding the effects of purchase accounting adjustments relating to
General Motors' 1984 acquisition of EDS).
89
<PAGE>
EDS 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 Services Agreement will be
entered into between EDS and General Motors with respect to IT services to be
provided after the Split-Off and the Special Inter-Company Payment will be
made by EDS. If the Split-Off is not consummated, EDS will continue as an
indirect wholly owned subsidiary of GM and no Special Inter-Company Payment
will be made. Under such circumstances, the Existing IT Services Agreements
will continue with such changes as GM and EDS may from time to time agree upon
or as the GM Board upon recommendation of the Capital Stock Committee may from
time to time determine to be fair to all classes of GM common stockholders. No
agreement has been reached between GM and EDS regarding any changes to the
Existing IT Services Agreements that may take effect if the Split-Off is not
approved by GM common stockholders or is not consummated for any other reason.
GM management has advised EDS management that in such an eventuality it would
seek substantial changes in the Existing IT Services Agreements, including
implementation of substantially all of the changes provided for by the Master
Services Agreement. Neither the GM Board nor the Capital Stock Committee has
determined whether to require such changes to the Existing IT Services
Agreements if the Split-Off is not consummated, but they anticipate
considering such changes if such circumstances arise.
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 Existing IT Services Agreements.
Under the terms of the IT Services Agreements, certain of the Existing IT
Services Agreements applicable to particular units, sectors or other
organizations within General Motors will be 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 provide that certain significant changes will be made 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 will also be given the right to competitively bid
and, subject to certain restrictions, outsource a limited portion of its IT
service requirements to third party providers. In addition, beginning in 1997,
the payment terms relating to IT services provided by EDS will be revised over
a two-year period to extend the due dates for payments from General Motors.
See "Relationship between General Motors and EDS--Post Split-Off
Arrangements--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
90
<PAGE>
any, to which such measures will mitigate the possible adverse impact on its
operating margins. In general, there can be no assurance that the terms of the
IT Services Agreements would not have a material adverse effect in the long
term on the results of operations of EDS. For additional information regarding
the IT Services Agreements, see "Relationship Between General Motors and EDS--
Post-Split-Off Arrangements--IT Services Agreements" and "Business of EDS--
Revenues."
The Special Inter-Company Payment will be paid by EDS to GM at such time, if
any, as the Split-Off occurs. The amount of the Special Inter-Company Payment
will be $500.0 million. Interest costs related to the Special Inter-Company
Payment are expected to be approximately $.03 per share in 1996. In addition
to the Special Inter-Company Payment, EDS expects to incur approximately $35.0
million, or approximately $.05 per share in 1996, of one-time costs in
connection with the formulation and implementation of the Split-Off. Certain
of these costs will be incurred only if the Split-Off is consummated. In
arriving at the amount of the $500.0 million Special Inter-Company Payment,
the parties took into account the fact that in the 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 Transactions 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 is taking certain actions and
considering others to maintain and improve operating efficiencies and
accelerate EDS' move towards "user-centered" computing. In connection
therewith, EDS also announced the implementation of a voluntary early
retirement offer and involuntary severance arrangements affecting between
4,000 and 5,000 employees and designed to both reduce labor costs and change
the skill mix of EDS' workforce. Communication of terms of these arrangements
to employees began on April 1 and will continue during the second quarter of
1996. It is expected that substantially all of these workforce reductions
would be completed by December 1996.
As part of its overall goal to improve operating efficiencies, EDS is also
in the process of evaluating certain aspects of its business to identify any
redundant facilities and related assets which may no longer fit its long-term
strategic objectives. Accordingly, the actions under consideration could
include the elimination by EDS of certain business functions and consolidation
of certain related facilities.
EDS will incur a pre-tax non-recurring charge in the second quarter of 1996
in connection with the restructuring actions discussed above. The amount of
the aggregate charge (including the employee related actions, asset
writedowns, and other actions being considered) will depend on the number of
employees who elect to accept early retirement offers and the determination of
which EDS business functions and related facilities would be eliminated or
consolidated. EDS estimates that all such actions could result in an aggregate
pre-tax non-recurring charge in the second quarter of 1996 in the range of
$500.0 million to $750.0 million (between $.66 and $.99 per share, after tax).
A portion of the contemplated charge will be of a non-cash nature, the amount
of which has not yet been determined. EDS expects that any restructuring
actions implemented by it will result in savings commencing in the second half
of 1996. The restructuring activities discussed above are not contingent upon
approval or consummation of the Split-Off.
Statements about the effect of EDS' actions and the possible amount of a
non-recurring charge are forward-looking statements which by their nature are
subject to numerous uncertainties that could cause actual results to vary.
91
<PAGE>
RESULTS OF OPERATIONS
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>
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.
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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 of EDS." 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. 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 $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 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.
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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. 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 December 31, 1995, EDS held cash and cash equivalents of $548.9 million,
had working capital of $1,120.1 million, and a current ratio of 1.3-to-1. This
compares to $480.9 million in working capital and a 1.2-to-1 current ratio at
December 31, 1994.
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 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 9.6% in 1995, compared with 10.5% for 1994 and 11.1% for
1993. 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 1995 to
support business growth and as a result of 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 $2,100.6 million and $1,224.4 million at December 31, 1995 and
1994, respectively, which consisted of long- and short-term notes payable. The
total debt-to-capital ratio (which includes current notes payable as a
component of capital) was 29.7% at December 31, 1995, and 22.4% at December 31,
1994. The ratio of noncurrent debt-to-capital was 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
December 31, 1995, EDS had total committed lines of credit of $2,515.5 million.
Stockholder's equity was $4,978.5 million at December 31, 1995, and $4,232.5
million at December 31, 1994. Return on stockholder's equity was 20.4% in 1995,
compared with 20.9% in 1994 and 21.7% in 1993.
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
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Long-Lived Assets to Be Disposed Of, which will become 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.
As discussed above, EDS is in the process of evaluating certain aspects of
its business to identify any redundant facilities and related assets which may
no longer fit its long-term strategic objectives. Since this evaluation is not
expected to be completed until the second quarter of 1996, EDS believes the
effects of initially adopting SFAS No. 121 as of January 1, 1996 will be
immaterial to its consolidated financial statements.
The FASB has issued SFAS No. 123, Accounting for Stock-Based Compensation,
which will become effective for fiscal years beginning in 1996. EDS intends to
remain on Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, for the preparation of its basic consolidated financial
statements and provide pro forma disclosures as if the SFAS No. 123 fair value
method had been applied. Accordingly, EDS expects no impact on the basic
consolidated financial statements upon adoption of this Statement.
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
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 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.
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<PAGE>
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 $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 $251.3 million, $231.1
million, and $192.1 million in 1995, 1994, and 1993, respectively.
EDS expects that its principal uses of funds for the foreseeable future will
be for capital expenditures, debt repayment, working capital and costs
associated with the Split-Off, as well as the payment of the Special Inter-
Company Payment to General Motors. 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 Existing IT Services Agreements provide for GM to pay EDS on the 15th day
of the month in which services are provided with respect to a substantial
portion of services. Under the IT Services Agreements, there will be a
transition over a two-year period, beginning in 1997, to payment on the 20th
day of the month following service for all agreements which do not already have
payment terms at least that favorable to GM. See "Relationship Between General
Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements--Payment
Terms." These revised payment terms are expected to result in an increase in
EDS' working capital requirements. EDS will obtain the funds for this working
capital impact and for the Special Inter-Company Payment through borrowings
under its existing commercial paper or bank credit facilities. EDS currently
anticipates that it may seek to refinance such commercial paper or bank
borrowings as part of its general plan to extend maturities of its
indebtedness.
The competitive environment and changing market forces are increasing the
capital intensity of EDS' business. Increasing amounts of capital will be
required by EDS in order to make investments in acquisitions, joint ventures
and strategic alliances in other parts of the information industry and in new
product development. In addition, information technology customer contracts
frequently 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 is intended, among other things, to afford EDS more flexible
access to capital markets to meet its growing needs without regard to competing
considerations of GM and its affiliates. Following the Split-Off, EDS may over
time incur substantially more debt than it has while a subsidiary of GM. As a
result, EDS' financial leverage may increase in the future. To the extent that
EDS would become more highly leveraged following the Split-Off, EDS may be
required to pay higher interest rates on its outstanding borrowings. In order
to provide the funds necessary for EDS' future acquisition and expansion goals,
EDS expects that it might incur, from time to time, additional bank financing
and/or issue equity or debt securities, depending on market and other
conditions.
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BUSINESS OF EDS
GENERAL
EDS is a world leader in applying IT, with over 30 years of experience in
using advanced computer and communications technologies to meet the business
needs of its clients.
Electronic Data Systems Holding Corporation was incorporated in Delaware in
1994 for the purpose of holding the capital stock of Electronic Data Systems
Corporation, which was incorporated in Texas in 1962. General Motors acquired
all of the capital stock of Electronic Data Systems Corporation in October
1984. Prior to that time, Electronic Data Systems Corporation had been an
independent, publicly held corporation. In December 1995, Electronic Data
Systems Holding Corporation formed a new wholly owned subsidiary, Electronic
Data Systems Intermediate Corporation, a Delaware corporation, to which it
contributed all of the capital stock of Electronic Data Systems Corporation.
Thus, as of the date hereof, Electronic Data Systems Holding Corporation
owns all of the capital stock of Electronic Data Systems Intermediate
Corporation, which in turn owns all of the capital stock of Electronic Data
Systems Corporation. Immediately prior to the Split-Off, (i) Electronic Data
Systems Intermediate Corporation will be merged with and into Electronic Data
Systems Holding Corporation and (ii) Electronic Data Systems Corporation will
be merged with and into Electronic Data Systems Holding Corporation and,
pursuant to such merger, Electronic Data Systems Holding Corporation will be
renamed "Electronic Data Systems Corporation." Unless the context otherwise
requires, references herein to EDS give effect to the transactions described
in the preceding sentence and include Electronic Data Systems Corporation and
its subsidiaries.
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.
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.
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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.
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
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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 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.
. 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.
. 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.
. 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.
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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, 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 Regarding EDS after the Split-Off--
No Assurance of Strategic Alliances and Other Business Opportunities,"
"Special Factors--Purposes of the Split-Off" 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.
Contracts with respect to non-General Motors business 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' outside (non-General Motors)
business. As a percentage of total revenues, revenues attributable to EDS'
outside 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 DECEMBER
31,
----------------
BUSINESS AREA 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 "EDS 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),
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
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effect on EDS. See "Risk Factors Regarding EDS after the Split-Off--Dependence
on Major Customer; 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 General Motors and EDS--Post-Split-Off
Arrangements--IT Services Agreements."
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 as well as the ongoing nature of the Existing IT Services
Agreements. 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 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. See "Special
Factors--Purposes of the Split-Off."
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
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<PAGE>
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.
EMPLOYEES
As of December 31, 1995, EDS employed approximately 96,000 persons located
in the United States and approximately 40 other countries. None of EDS' United
States or Canadian employees is currently employed under an agreement with a
collective bargaining unit, and EDS believes that its relations with employees
are good. To maintain its technical expertise and its responsiveness to
evolving client needs, EDS provides its employees with extensive continuing
education and training, as well as leadership and professional development
programs.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
EDS holds a number of patents and pending patent applications in the United
States and in foreign countries. EDS' policy generally is to pursue patent
protection that it considers necessary or advisable for the patentable
inventions and technological improvements of its business. EDS also relies
significantly on trade secrets, copyrights, technical expertise and know-how,
continuing technological innovations and other means, such as confidentiality
agreements with employees, consultants and customers, to protect and enhance
its competitive position.
Some of the business areas in which EDS is engaged are highly patent-
intensive. Many of EDS' competitors have obtained, and may be expected to
obtain in the future, patents that cover or affect services or products
directly or indirectly related to those offered by EDS. EDS routinely receives
communications from third parties asserting patent or other rights covering
EDS' services or products. There can be no assurance that EDS is aware of all
patents containing claims that may post a risk of infringement by its services
or products. In addition, patent applications in the United States are
confidential until a patent is issued and, accordingly, EDS cannot evaluate
the extent to which its services or products may infringe claims contained in
pending patent applications. In general, if it were determined that one or
more of the services or products offered by EDS infringe patents held by
others, EDS would be required to cease developing or marketing such services
or products, to obtain licenses to develop or market such services from the
holders of the patents or to redesign such services or products in such a way
as to avoid infringing the patent claims. The extent to which EDS may be
required in the future to obtain licenses with respect to patents held by
others and the availability and cost of any such licenses are currently
unknown. There can be no assurance that EDS would be able to obtain such
licenses on commercially reasonable terms or, if it were unable to obtain such
licenses, that it would be able to redesign its services or products to avoid
infringement or that litigation would not ensue.
EDS management is not aware of any pending patent or proprietary right
disputes against EDS that would have a material adverse effect on EDS'
consolidated financial position or results of operations.
REGULATION
Various aspects of EDS' business are subject to federal and state regulation
noncompliance with which, depending upon the nature of the noncompliance, may
result in the suspension or revocation of any license or registration at
issue, the termination or loss of any contract at issue or the imposition of
contractual damages, civil fines or criminal penalties. EDS has experienced no
material difficulties in complying with the various laws and regulations
affecting its business.
REAL PROPERTY
As of December 31, 1995, EDS had approximately 442 locations operating in 41
states and 221 cities in the United States and approximately 257 additional
locations in 130 cities in approximately 40 countries outside the United
States. At such date, approximately 6.1 million square feet of space was owned
by EDS and an additional
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13.8 million square feet of space was leased. EDS' worldwide headquarters,
which is owned by EDS and located on a 363 acre campus in Plano, Texas,
contains approximately 3.5 million square feet of office and data center
space. EDS' two information management centers, which monitor the EDSNET(R)
global telecommunications network, are located in Plano, Texas and Stockley
Park, United Kingdom. EDS' large scale information processing centers ("IPCs")
are located throughout the United States and in each of Canada, Brazil,
France, Germany, the Netherlands, Spain and the United Kingdom. In addition,
EDS operates distributed service centers ("DSCs") at customer owned sites or
EDS owned or leased facilities throughout the world. DSCs generally support a
single or small number of customers with more specialized requirements than
those supported at the large scale, multiple customer IPCs.
Leased properties consist primarily of office, warehouse, DSC and non-U.S.
IPC facilities. Lease terms are generally five years or, with respect to
leases related to a specific customer contract, have a term concurrent with
that contract. Upon expiration of its leases, EDS does not anticipate any
difficulty in obtaining renewals or alternative space. In addition to the
leased property referred to above, EDS occupies office space at customer
locations throughout the world. Such space is generally occupied pursuant to
the terms of the respective customer contracts.
EDS management believes that its facilities are suitable and adequate for
its business; however, EDS periodically reviews its space requirements to
consolidate and dispose of or sublet facilities which are no longer required
in connection with its business and to acquire new space to meet the needs of
its business.
LEGAL PROCEEDINGS
From time to time EDS is involved in various litigation matters arising in
the ordinary course of its business. EDS management does not believe that
disposition of any current matter will have a material adverse effect on EDS'
consolidated financial position or results of operations.
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EDS MANAGEMENT AND EXECUTIVE COMPENSATION
DIRECTORS AND EXECUTIVE OFFICERS
The EDS Board currently has five members, all of whom are executive officers
of EDS. Effective as of the date of consummation of the Split-Off, three of
the current members of the EDS Board will resign as directors. In addition,
effective as of the same date, the total number of directors will be increased
to 10 and eight additional persons will commence to serve as directors. When
such persons commence to serve as directors, a majority of the members of the
EDS Board will consist of independent directors.
Set forth below are the names, ages and positions with EDS upon consummation
of the Split-Off of the persons expected to be directors and executive
officers of EDS immediately after such consummation.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Lester M. Alberthal, Jr.
........................ 52 Chairman of the Board and Chief Executive Officer
Gary J. Fernandes........ 52 Vice Chairman and Director
Jeffrey M. Heller........ 56 President, Chief Operating Officer and Director*
John R. Castle, Jr. ..... 53 Senior Vice President
Paul J. Chiapparone...... 56 Senior Vice President
Joseph M. Grant.......... 57 Senior Vice President and Chief Financial Officer
Dean Linderman........... 52 Senior Vice President
G. Stuart Reeves......... 56 Senior Vice President
James A. Baker, III...... 65 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>
- --------
*Election as director to be effective immediately after consummation of the
Split-Off.
The EDS Board will be divided into three classes serving staggered terms.
Directors in each class will be elected to serve for three-year terms and
until their successors are elected and qualified. Each year, the directors of
one class will stand for election as their terms of office expire. Messrs.
Groves, Heller and Hunt will be designated as Class I directors, with their
terms of office expiring in 1997; Messrs. Cheney, Fernandes, Kidder and Sosa
will be designated as Class II directors, with their terms of office expiring
in 1998; and Messrs. Alberthal and Baker and Dr. Rodin will be 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 will initially consist of Messrs. Groves, Hunt and Sosa. The
Compensation and Benefits Committee will initially consist of Messrs. Groves
and Kidder, who are "disinterested persons" within the meaning of Rule 16b-3
under the Exchange Act. The Governance Committee will initially consist of
Messrs. Baker and Cheney and Dr. Rodin, with the Chairman of the Board being
an ex-officio, non-voting member.
The Audit Committee will recommend to the EDS Board the independent public
accountants to be selected to audit EDS' annual financial statements. The
Audit Committee will also review 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 will establish remuneration levels
for senior executives of EDS, review the performance of the Chief Executive
Officer, review significant employee benefit programs and establish and
administer 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 will recommend 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 will recommend 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 persons expected
to be directors and executive officers of EDS upon the consummation of the
Split-Off.
Mr. Alberthal has been President of EDS since April 1986, Chief Executive
Officer since December 1986 and Chairman of the Board since June 1989. 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. Mr. Alberthal is on the Board of Directors of Baker Hughes
Incorporated.
Mr. Fernandes has been a Senior Vice President of EDS since October 1984 and
a director of EDS since October 1981. Mr. Fernandes has been elected as the
Vice Chairman of EDS effective upon 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, Westcott Communications, Inc., Amtech Corporation and
John Wiley & Sons, Inc.
Mr. Heller has been a Senior Vice President of EDS since October 1984 and a
director of Electronic Data Systems Corporation since April 1983. Mr. Heller
has been elected as the President and Chief Operating Officer and a director
of EDS effective upon consummation of the Split-Off. Mr. Heller has oversight
responsibility for EDS' Asia/Pacific operations, global communications
business units and technical services groups. Mr. Heller joined EDS in 1968
and has served in numerous technical management positions. Mr. Heller is a
director of Westcott Communications, Inc.
Mr. Castle has been a Senior Vice President of EDS 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 a Senior Vice President of EDS since April 1986. He
has oversight responsibility for EDS' business units serving General Motors
and other customers in the manufacturing industry. 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 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 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.
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Mr. Linderman has been a Senior Vice President of EDS since April 1986. He
has oversight for EDS' business units serving customers in the financial,
energy, travel and transportation, health care and insurance industries, as
well as EDS' operations in Canada, Mexico and Central and South America and
its employee development units. Mr. Linderman joined EDS in 1970 and has
served in numerous management positions.
Mr. Reeves has been a Senior Vice President since February 1987. Mr. Reeves
has oversight responsibilities for EDS' European operations. Mr. Reeves joined
EDS in 1967, and has held numerous technical and management positions.
Mr. Baker has been elected as a director of EDS effective upon 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. 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 elected as a director of EDS effective upon 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 elected as a director of EDS effective upon 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 part-time 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 elected as a director of EDS effective upon 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 elected as a director of EDS effective upon 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 elected as a director of EDS effective upon 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 elected as a director of EDS effective upon 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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<PAGE>
DIRECTOR COMPENSATION
Each non-employee director of EDS will receive annual cash compensation in
the amount of $35,000, and will also receive annual cash compensation in the
amount of $5,000 for serving as a committee chairman and $2,500 for attendance
at each meeting of the EDS Board and each committee thereof. Any director who
is also an employee of EDS or its affiliates will not be entitled to any
compensation for serving as a director of EDS.
Amended EDS Incentive Plan
In addition, each nonemployee director will receive, on an annual basis
pursuant to the Amended EDS Incentive Plan, (i) options to purchase 1,500
shares of EDS Common Stock at an exercise price equal to the fair market value
of such shares at the date of grant and (ii) 500 restricted shares of EDS
Common Stock, which options and restricted stock will vest ratably over a
three-year period. A nonemployee director may make an annual election to
receive, in lieu of all or any portion of the director's fees he or she would
otherwise receive in the next year, (i) non-qualified stock options to
purchase EDS Common Stock and/or (ii) a restricted stock award covering shares
of EDS Common Stock, in each case in accordance with the terms of the Amended
EDS Incentive Plan.
EDS Nonemployee Director Deferred Compensation Plan
The EDS Deferred Compensation Plan for Nonemployee Directors (the "EDS
Nonemployee Director Deferred Compensation Plan"), which has been adopted by
the EDS Board and approved and ratified by General Motors, permits nonemployee
directors to elect annually to defer all or a portion of their director's fees
and to have such deferred fees treated as if they had been, at the election of
the director, invested either in an interest bearing account or in units
denominated in EDS Common Stock. The EDS Nonemployee Director Deferred
Compensation Plan will be administered by a committee consisting of at least
two members of the EDS Board. Such committee shall initially be the
Compensation and Benefits Committee.
Fees deferred and treated as invested in an interest bearing account earn
interest from the effective date of the deferral until paid 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 pursuant to Section
1274(d) of the Code, compounded annually. Fees deferred and treated as
invested in EDS Common Stock shall be deemed to have purchased whole and
fractional shares of such stock on the effective date of the deferral at the
then fair market value of EDS Common Stock. At such time as dividends are paid
on EDS Common Stock, the interest bearing account established for a
nonemployee director who has elected to invest his or her fees in units
denominated in EDS Common Stock will be credited with an amount equal to the
deemed dividends thereon. Interest accrued on amounts accumulated in a
nonemployee director's interest bearing account will be credited to such
account on an annual basis.
All amounts accumulated in the account of a nonemployee director pursuant to
the EDS Nonemployee Director Deferred Compensation Plan, including any
interest or deemed dividends, will be paid to such nonemployee director
commencing upon (i) the date of termination of his or her status as a director
of EDS or (ii) the expiration of five years after such date. Any payments made
pursuant to the plan shall be in the form of cash, and a nonemployee director
may elect to receive the cash payments to which he or she is entitled (a) in a
lump sum, (b) in three equal consecutive annual installments or (c) in five
equal consecutive annual installments.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information on
compensation earned in 1995 by Mr. Alberthal and the four other most highly
compensated executive officers of EDS.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------
NAME AND RESTRICTED ALL
PRINCIPAL POSITION OTHER ANNUAL STOCK OTHER
DURING 1995 YEAR SALARY BONUS(A) COMPENSATION AWARDS(B) COMPENSATION(C)
------------------ ---- -------- ---------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Lester M. Alberthal,
Jr.,
Chairman of the Board,
President and Chief
Executive Officer...... 1995 $675,000 $1,000,000 $10,902 -- $33,126
Jeffrey M. Heller,
Senior Vice President.. 1995 385,000 550,000 11,498 -- 48,588
Gary J. Fernandes,
Senior Vice President.. 1995 330,000 575,000 2,113 -- 9,026
John R. Castle, Jr.,
Senior Vice President.. 1995 370,000 450,000 1,592 -- 8,048
Dean Linderman,
Senior Vice President.. 1995 335,000 450,000 2,766 -- 10,591
</TABLE>
- --------
(a) Represents bonuses earned by the named executives with respect to the year
ended December 31, 1995. 50%, 25% and 25% of the amount reported with
respect to each named executive will be paid during 1996, 1997 and 1998,
respectively, subject to certain conditions regarding the continuation of
the named executive's employment.
(b) As of December 31, 1995, the number and fair market value of the aggregate
units representing shares of unvested restricted Class E Common Stock held
by the named executive officers is: Mr. Alberthal, 480,000 shares,
$24,960,000; Mr. Heller, 340,000 shares, $17,680,000; Mr. Fernandes,
260,000 shares, $13,520,000; Mr. Castle, 155,000 shares, $8,060,000; and
Mr. Linderman, 290,000 shares, $15,080,000. All such restricted stock
units have been granted pursuant to the Existing EDS Incentive Plan and
are scheduled to vest (subject to earlier vesting based on the achievement
of performance goals by EDS) during the period from 1996 through the
earlier of normal retirement age or 2009. Certificates for the shares
underlying such units are issuable upon vesting. Dividend equivalents are
paid to the named executive officers with respect to such restricted stock
units in the amounts and at the time of the payment of dividends on the
Class E Common Stock.
(c) Consists of (i) payments by EDS of premiums under certain life insurance
policies the proceeds of which would be applied by EDS for the benefit of
the named executives' estates and (ii) the imputed value of outstanding
non-interest bearing loans to the named executives during 1995 for the
payment of withholding taxes required as a result of the vesting of units
representing restricted Class E Common Stock under the Existing EDS
Incentive Plan. See "--Existing EDS Incentive Plan--Advancement of
Withholding Tax Payments."
AMENDED EDS INCENTIVE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Amended EDS Incentive Plan in the form approved by the
GM Board and its Executive Compensation Committee and does not purport to be
complete. Such description is qualified in its entirety by reference to the
Amended EDS Incentive Plan, a copy of which is attached as Appendix D to this
Solicitation Statement/Prospectus.
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General
The Amended EDS Incentive Plan is intended to amend and restate the Existing
EDS Incentive Plan. On March 31, 1996, the GM Board and its Executive
Compensation Committee approved the Amended EDS Incentive Plan. The Amended
EDS Incentive Plan has also been ratified and approved by the EDS Board. If
the Amended EDS Incentive Plan is approved by the requisite votes of the
common stockholders of General Motors, it will become effective in its
entirety upon consummation of the Split-Off. If the Plan is not approved by
the requisite stockholder votes, it will nonetheless become effective upon
consummation of the Split-Off insofar as it relates to Nonemployee Directors
(as defined below) but will not become effective insofar as it relates to
Employees (as defined below). Furthermore, if the Amended EDS Incentive Plan
is not approved by the common stockholders of General Motors, the Existing EDS
Incentive Plan will remain in effect (with certain modifications intended,
among other things, to reflect the assumption of such plan by EDS upon the
consummation of the Split-Off) and an aggregate of 60,000,000 shares of EDS
Common Stock will be available for future awards to Employees thereunder. A
description of the terms and provisions of the Existing EDS Incentive Plan is
provided below under "--Existing EDS Incentive Plan."
The objectives of the Amended EDS Incentive Plan are to attract and retain
key employees of EDS and its subsidiaries, to attract and retain qualified
directors of EDS, to encourage the sense of proprietorship of such employees
and directors and to stimulate the active interest of such persons in the
development and financial success of EDS and its subsidiaries. These
objectives are to be accomplished by making awards ("Awards") under the
Amended EDS Incentive Plan and thereby providing participants with a
proprietary interest in the growth and performance of EDS and its
subsidiaries.
Key employees eligible for Awards under the Amended EDS Incentive Plan (the
"Employees") are those that hold positions of responsibility and whose
performance can have a significant effect on the success of EDS and its
subsidiaries. Directors eligible for automatic or elective Awards under the
Amended EDS Incentive Plan are those who are not employees of EDS or any of
its subsidiaries (the "Nonemployee Directors").
Awards to Employees under the Amended EDS Incentive Plan ("Employee Awards")
may be made in the form of grants of stock options ("Options"), stock
appreciation rights ("SARs"), restricted or non-restricted stock or units
denominated in stock ("Stock Awards"), cash awards ("Cash Awards"),
performance awards ("Performance Awards") or any combination of the foregoing.
Awards to Nonemployee Directors under the Amended EDS Incentive Plan
("Director Awards") will be in the form of grants of Options and restricted
Stock Awards.
The Amended EDS Incentive Plan provides for Awards to be made in respect of
a maximum of 60,000,000 shares of EDS Common Stock (in addition to the shares
that are the subject of awards outstanding as of the date upon which the
Amended EDS Incentive Plan becomes effective), of which 400,000 shares will be
available for Director Awards and the remainder will be available for Employee
Awards. Shares of EDS Common Stock which are the subject of Awards that are
forfeited or terminated, expire unexercised, are settled in cash in lieu of
EDS Common Stock or in a manner such that all or some of the shares covered
thereby are not issued or are exchanged for Awards that do not involve EDS
Common Stock will again immediately become available for Awards under the
Amended EDS Incentive Plan.
The Amended EDS Incentive Plan, as it applies to Employee Awards but not
with respect to Nonemployee Directors, will be administered by the
Compensation and Benefits Committee of the EDS Board, or such other committee
as may in the future be appointed by the EDS Board (the "Committee"). To the
extent required pursuant to Rule 16b-3 under the Exchange Act in order for the
grant of Employee Awards to be exempt under Section 16, the Committee will at
all times consist of at least two members of the EDS Board of Directors who
meet the requirements of the definition of "disinterested person" set forth in
Rule 16b-3(c)(2)(i).
Insofar as the Amended EDS Incentive Plan relates to Employee Awards, the
Committee will have the exclusive power to administer the Amended EDS
Incentive Plan and to take all actions which are specifically
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contemplated thereby or are necessary or appropriate in connection with the
administration thereof. Insofar as the Amended EDS Incentive Plan relates to
Employee Awards, the Committee will also have the exclusive power to interpret
the Amended EDS Incentive Plan and to adopt such rules, regulations and
guidelines for carrying out the purposes of the Amended EDS Incentive Plan as
it may deem necessary or proper in keeping with the objectives thereof. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Employee Award, accelerate the vesting or exercisability
of an Employee Award, eliminate or make less restrictive any restrictions
contained in an Employee Award, waive any restriction or other provision of
the Amended EDS Incentive Plan or in any Employee Award or otherwise amend or
modify an Employee Award in any manner that is either (i) not adverse to the
Employee holding the Employee Award or (ii) consented to by such Employee.
The Committee may delegate to the Chief Executive Officer and to other
senior officers of EDS its duties under the Amended EDS Incentive Plan, except
that no such delegation may be made in the case of actions with respect to
participants who are subject to Section 16 of the Exchange Act.
Employee Awards
The Committee will determine the type or types of Employee Awards made under
the Amended EDS Incentive Plan and will designate the Employees who are to be
recipients of such Awards. Each Employee Award may be embodied in an
agreement, which will contain such terms, conditions and limitations as are
determined by the Committee. Employee Awards may be granted singly, in
combination or in tandem. Employee Awards may also be made in combination or
in tandem with, in replacement of, or as alternatives to, grants or rights
under the Amended EDS Incentive Plan or any other employee plan of EDS or any
of its subsidiaries, including any acquired entity; provided, however, that no
Option may be issued in exchange for the cancellation of an Option with a
lower exercise price. All or part of an Employee Award may be subject to
conditions established by the Committee, which may include continuous service
with EDS and its subsidiaries, achievement of specific business objectives,
increases in specified indices, attainment of specified growth rates and other
comparable measurements of performance.
The types of Employee Awards that may be made under the Amended EDS
Incentive Plan are as follows:
Options. Options are rights to purchase a specified number of shares of EDS
Common Stock at a specified price. An option granted pursuant to the Amended
EDS Incentive Plan may consist of either an incentive stock option ("ISO")
that complies with the requirements of Section 422 of the Code or a non-
qualified stock option ("NQSO") that does not comply with such requirements.
ISOs must have an exercise price per share that is not less than the fair
market value of the EDS Common Stock on the date of grant. NQSOs must have an
exercise price per share that is not less than, but may exceed, the fair
market value of the EDS Common Stock on the date of grant. In either case, the
exercise price must be paid in full at the time an Option is exercised in cash
or, if the Employee so elects, by means of tendering EDS Common Stock or
surrendering another Award. The Committee will determine acceptable methods
for tendering EDS Common Stock or other Awards by an Employee to exercise an
Option; provided, however, that any EDS Common Stock or other Employee Award
may be so tendered only if it has been held by the Employee for at least six
months. Subject to the foregoing, the terms, conditions and limitations
applicable to any Options, including the term of any Options and the date or
dates upon which they become exercisable, will be determined by the Committee.
SARs. SARs are rights to receive a payment, in cash or EDS Common Stock,
equal to the excess of the fair market value or other specified valuation of a
specified number of shares of EDS Common Stock on the date the rights are
exercised over a specified strike price. An SAR may be granted under the
Amended EDS Incentive Plan to the holder of an Option with respect to all or a
portion of the shares of EDS Common Stock subject to such Option or may be
granted separately. The terms, conditions and limitations applicable to any
SARs, including the term of any SARs and the date or dates upon which they
become exercisable, will be determined by the Committee.
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Stock Awards. Stock Awards consist of restricted and non-restricted grants
of EDS Common Stock or units denominated in EDS Common Stock. The terms,
conditions and limitations applicable to any Stock Awards will be determined
by the Committee. Without limiting the foregoing, rights to dividends or
dividend equivalents may be extended to and made part of any Stock Award in
the discretion of the Committee.
Cash Awards. Cash Awards consist of grants denominated in cash. The terms,
conditions and limitations applicable to any Cash Awards will be determined by
the Committee.
Performance Awards. Performance Awards consist of grants made to an Employee
subject to the attainment of one or more performance goals. A Performance
Award will be paid, vested or otherwise deliverable solely upon the attainment
of one or more pre-established, objective performance goals established by the
Committee prior to the earlier of (i) 90 days after the commencement of the
period of service to which the performance goals relate and (ii) the elapse of
25% of the period of service, and in any event while the outcome is
substantially uncertain. A performance goal may be based upon one or more
business criteria that apply to the Employee, one or more business units of
EDS or EDS as a whole, and may include any of the following: increased
revenue, net income, stock price, market share, earnings per share, return on
equity, return on assets or decrease in costs. Subject to the foregoing, the
terms, conditions and limitations applicable to any Performance Awards will be
determined by the Committee.
EDS management intends to recommend to the Committee that Employee Awards
granted under the Amended EDS Incentive Plan be distributed among a
significant number of Employees and that the Committee balance the use of
Options and Stock Awards and include the use of a significant number of
Options.
The Amended EDS Incentive Plan contains certain limitations with respect to
Awards that may be made thereunder. In particular, the Amended EDS Incentive
Plan provides that the following limitations shall apply to any Employee
Awards made thereunder:
(i) no Participant may be granted, during any one-year period, Employee
Awards consisting of Options or SARs that are exercisable for more than
1,500,000 shares of Common Stock;
(ii) no Participant may be granted, during any one-year period, Employee
Awards consisting of shares of Common Stock or units denominated in such
shares (other than any Employee Awards consisting of Options or SARs)
covering or relating to more than 300,000 shares of Common Stock (the
limitation set forth in this clause (ii), together with the limitation set
forth in clause (i) above, being hereinafter collectively referred to as
the "Stock Based Awards Limitations"); and
(iii) no Participant may be granted Employee Awards consisting of cash or
in any other form permitted under the Amended EDS Incentive Plan (other
than Employee Awards consisting of Options or SARs or otherwise consisting
of shares of Common Stock or units denominated in such shares) in respect
of any one-year period having a value determined on the date of grant in
excess of $5,000,000.
Under the Existing EDS Incentive Plan, there are currently outstanding
restricted Stock Awards covering an aggregate of approximately 17,100,000
shares of Class E Common Stock. Upon the effectiveness of the Amended EDS
Incentive Plan in so far as it relates to Employees, such outstanding
restricted Stock Awards will be adjusted to reflect the Split-Off and prevent
any dilution or enlargement of the rights of the holders thereof. By virtue of
this adjustment and without necessity of any action on the part of the
participants, each outstanding restricted Stock Award will be modified so
that, effective as of the date of consummation of the Split-Off, the
securities to which each such Stock Award relates will be a number of shares
of EDS Common Stock equal to the number of shares of Class E Common Stock
subject to such Stock Award immediately prior to the consummation thereof.
Such adjustment will not have any effect on the vesting of, or restrictions on
resale applicable to, any outstanding restricted Stock Award. Furthermore, the
holder of each restricted Stock Award shall continue to be subject to any non-
competition restrictions provided for in the Existing EDS Incentive Plan which
were applicable thereto prior to the effectiveness of the Amended EDS
Incentive Plan.
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Director Awards
Under the Amended EDS Incentive Plan, each Nonemployee Director will receive
the Awards described below, which will be granted either automatically or at
the option of the Nonemployee Director in lieu of director's fees.
Nonemployee Director Options. On the date of the consummation of the Split-
Off, each Nonemployee Director will automatically receive a grant of NQSOs
that provide for the purchase of 1,500 shares of EDS Common Stock. In
addition, on the first business day of the month following the date on which
each annual meeting of the stockholders of EDS is held (each, an "Annual
Director Award Date"), each Nonemployee Director will automatically receive a
grant of NQSOs that provide for the purchase of 1,500 shares of EDS Common
Stock. A Nonemployee Director who is elected after the date of the
consummation of the Split-Off otherwise than by election at an annual meeting
of stockholders of the Company will automatically receive, on the date of his
or her election, a grant of NQSOs that provides for the purchase of a number
of shares of EDS Common Stock equal to the product of (i) 1,500 and (ii) a
fraction the numerator of which is the number of days between the election of
such Nonemployee Director and the next scheduled Annual Director Award Date
and the denominator of which is 365. The term of the NQSOs granted to
Nonemployee Directors will be for a period of ten years from the date of
grant. The exercise price of such NQSOs will be equal to the fair market value
of the EDS Common Stock on the date of grant. Such exercise price must be paid
in full in cash at the time a NQSO is exercised. All NQSOs granted to
Nonemployee Directors under the Amended EDS Incentive Plan will become
exercisable in increments of one-third of the total number of shares of EDS
Common Stock that are subject thereto on the first, second and third
anniversaries of the date of grant. All unvested NQSOs granted to a
Nonemployee Director will be forfeited if the Nonemployee Director resigns
from the EDS Board without the consent of a majority of the other directors.
In addition a Nonemployee Director may make an annual election to receive,
in lieu of all or any portion of the director's fees he or she would otherwise
receive in the next year (including both annual retainer and meeting fees), a
number of NQSOs equal to the product of (x) three times (y) a fraction the
numerator of which is equal to the dollar amount of fees the Nonemployee
Director elects to forego in the next year in exchange for NQSOs and the
denominator of which is equal to the fair market value of EDS Common Stock on
the date of the election. The terms of the NQSOs received by a Nonemployee
Director pursuant to such election will be the same as those of the NQSOs
automatically granted as described above.
Nonemployee Director Restricted Stock Grants. On the date of the
consummation of the Split-Off, each Nonemployee Director will automatically
receive a restricted Stock Award covering 500 shares of EDS Common Stock. In
addition, on each Annual Director Award Date, each Nonemployee Director will
automatically receive a restricted Stock Award covering 500 shares of EDS
Common Stock. A Nonemployee Director who is elected after the date of the
consummation of the Split-Off otherwise than by election at an annual meeting
of stockholders of the Company will automatically receive, on the date of his
or her election, a restricted Stock Award covering a number of shares of EDS
Common Stock equal to the product of (i) 500 and (ii) a fraction the numerator
of which is the number of days between the election of such Nonemployee
Director and the next scheduled Annual Director Award Date and the denominator
of which is 365. The shares of EDS Common Stock that are the subject of any
such restricted Stock Award (i) will vest ratably in increments equal to one-
third of the total number of shares of EDS Common Stock subject thereto on the
first, second and third anniversaries of the date of grant and (ii) will vest
fully upon the failure of the Nonemployee Director to be reelected as a
director of EDS, the death of the Nonemployee Director or the resignation of
the Nonemployee Director by reason of disability or at the request of a
majority of the other directors of EDS. All unvested shares of EDS Common
Stock that are the subject of such restricted Stock Award will be forfeited if
the Nonemployee Director resigns from the EDS Board without the consent of a
majority of the other directors.
In addition, a Nonemployee Director may make an annual election to receive,
in lieu of all or any portion of the director's fees he or she would otherwise
receive in the next year (including both annual retainer and meeting fees), a
restricted Stock Award covering a number of shares of EDS Common Stock having
a fair market
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value equal to 110% of a fraction the numerator of which is equal to the
dollar amount of fees the Nonemployee Director elects to forego in the next
year in exchange for restricted Stock Awards and the denominator of which is
equal to the fair market value of EDS Common Stock on the date of the
election. The terms of the restricted Stock Awards received by a Nonemployee
Director pursuant to such election will be the same as those of the restricted
Stock Awards automatically granted as described above.
Other Provisions
With the approval of the Committee, payments in respect of Employee Awards
may be deferred, either in the form of installments or a future lump sum
payment, by any Employee. At the discretion of the Committee, an Employee may
be offered an election to substitute an Award for another Award or Awards of
the same or different type.
EDS will have the right to deduct applicable taxes from any Employee Award
payment and withhold, at the time of delivery or vesting of cash or shares of
EDS Common Stock under the Amended EDS Incentive Plan, an appropriate amount
of cash or number of shares of EDS Common Stock, or combination thereof, for
the payment of taxes. The Committee may also permit withholding to be
satisfied by the transfer to EDS of shares of EDS Common Stock previously
owned by the holder of the Employee Award for which withholding is required.
The Committee may provide for loans, on either a short term or demand basis,
from EDS to an Employee or Nonemployee Director to permit the payment of taxes
required by law.
The EDS Board may amend, modify, suspend or terminate the Amended EDS
Incentive Plan for the purpose of addressing any changes in legal requirements
or for any other purpose permitted by law, except that (i) no amendment that
would impair the rights of any Employee or Nonemployee Director with respect
to any Award may be made without the consent of such Employee or Nonemployee
Director and (ii) no amendment requiring stockholder approval in accordance
with Rule 16b-3 under the Exchange Act will be effective until such approval
has been obtained.
No Award or any other benefit under the Amended EDS Incentive Plan
constituting a "derivative security" within the meaning of Rule 16a-1(c) under
the Exchange Act will be assignable or otherwise transferable except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder.
In the event of any subdivision or consolidation of outstanding shares of
EDS Common Stock, declaration of a stock dividend payable in shares of EDS
Common Stock or other stock split, the Amended EDS Incentive Plan provides for
the Committee to make appropriate adjustments to (i) the number of shares of
EDS Common Stock reserved under the Amended EDS Incentive Plan, (ii) the
number of shares of EDS Common Stock covered by outstanding Awards in the form
of EDS Common Stock or units denominated in EDS Common Stock, (iii) the
exercise or other price in respect of such Awards, (iv) the appropriate fair
market value and other price determinations for Awards in order to reflect
such transactions, (v) the number of shares of Common Stock covered by Options
automatically granted to Nonemployee Directors, (vi) the number of shares
covered by restricted Stock Awards automatically granted to Nonemployee
Directors and (vii) the Stock Based Awards Limitations. Furthermore, in the
event of any other recapitalization or capital reorganization of EDS, any
consolidation or merger of EDS with another corporation or entity, the
adoption by EDS of any plan of exchange affecting the EDS Common Stock or any
distribution to holders of EDS Common Stock of securities or property (other
than normal cash dividends or stock dividends), the EDS Board will make
appropriate adjustments to the amounts or other items referred to in clauses
(ii), (iii), (iv), (v), (vi) and (vii) above to give effect to such
transactions, but only to the extent necessary to maintain the proportionate
interest of the holders of the Awards and to preserve, without exceeding, the
value thereof.
Tax Implications of Awards
Set forth below is a summary of the federal income tax consequences to
Employees, Nonemployee Directors and EDS as a result of the grant and exercise
of Awards under the Amended EDS Incentive Plan. This summary
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is based on statutory provisions, Treasury regulations thereunder, judicial
decisions, and IRS rulings in effect on the date hereof.
Nonqualified Stock Options; Stock Appreciation Rights; Incentive Stock
Options. Employees and Nonemployee Directors will not realize taxable income
upon the grant of a NQSO or an SAR. Upon the exercise of an SAR or NQSO, the
Employee or Nonemployee Director will recognize ordinary income (subject, in
the case of Employees, to withholding by EDS) in an amount equal to the excess
of (i) the amount of cash and the fair market value of the EDS Common Stock
received, over (ii) the exercise price (if any) paid therefor. The Employee or
Nonemployee Director will generally have a tax basis in any shares of EDS
Common Stock received pursuant to the exercise of an SAR, or pursuant to the
cash exercise of an NQSO, that equals the fair market value of such shares on
the date of exercise. Subject to the discussion under "--Certain Tax Code
Limitations on Deductibility" below, EDS (or a subsidiary) will generally be
entitled to a deduction for U.S. federal income tax purposes that corresponds
as to timing and amount with the compensation income recognized by the
Employee or Nonemployee Director under the foregoing rules.
Employees will not have taxable income upon the grant of an ISO. Upon the
exercise of an ISO, the Employee will not have taxable income, although the
excess of the fair market value of the shares of EDS Common Stock received
upon exercise of the ISO ("ISO Stock") over the exercise price will increase
the alternative minimum taxable income of the Employee, which may cause such
Employee to incur alternative minimum tax. The payment of any alternative
minimum tax attributable to the exercise of an ISO would be allowed as a
credit against the Employee's regular tax liability in a later year to the
extent the Employee's regular tax liability is in excess of the alternative
minimum tax for that year.
Upon the disposition of ISO Stock that has been held for the requisite
holding period (generally, at least two years from the date of grant and one
year from the date of exercise of the ISO), the Employee will generally
recognize capital gain (or loss) equal to the difference between the amount
received in the disposition and the exercise price paid by the Employee for
the ISO Stock. However, if an Employee disposes of ISO Stock that has not been
held for the requisite holding period (a "disqualifying disposition"), the
Employee will recognize ordinary income in the year of the disqualifying
disposition to the extent that the fair market value of the ISO Stock at the
time of exercise of the ISO (or, if less, the amount realized in the case of
an arm's-length disqualifying disposition to an unrelated party) exceeds the
exercise price paid by the Employee for such ISO Stock. The Employee would
also recognize capital gain to the extent the amount realized in the
disqualifying disposition exceeds the fair market value of the ISO stock on
the exercise date. If the exercise price paid for the ISO Stock exceeds the
amount realized in the disqualifying disposition (in the case of an arm's-
length disposition to an unrelated party), such excess would generally
constitute a capital loss.
EDS and its subsidiaries will generally not be entitled to any federal
income tax deduction upon the grant or exercise of an ISO, unless the Employee
makes a disqualifying disposition of the ISO Stock. If an Employee makes such
a disqualifying disposition, EDS (or a subsidiary) will then, subject to the
discussion below under
"--Certain Tax Code Limitations on Deductibility," be entitled to a tax
deduction that corresponds as to timing and amount with the compensation
income recognized by the Employee under the rules described in the preceding
paragraph.
Under current rulings, if an Employee or Nonemployee Director transfers
previously held shares of EDS Common Stock (other than ISO Stock that has not
been held for the requisite holding period) in satisfaction of part or all of
the exercise price of an NQSO or ISO, the Employee or Nonemployee Director
will recognize income with respect to the EDS Common Stock received in the
manner described above, but no additional gain will be recognized as a result
of the transfer of such previously held shares in satisfaction of the NQSO or
ISO exercise price. Moreover, that number of shares of EDS Common Stock
received upon exercise which equals the number of shares of previously held
EDS Common Stock surrendered therefor in satisfaction of the NQSO or ISO
exercise price will have a tax basis that equals, and a holding period that
includes, the tax basis and holding period of the previously held shares of
EDS Common Stock surrendered in satisfaction of the NQSO or
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ISO exercise price. Any additional shares of EDS Common Stock received upon
exercise will have a tax basis that equals the amount of cash (if any) paid by
the Employee or Nonemployee Director.
Cash Awards; Stock Unit Awards; Stock Awards. An Employee will recognize
ordinary compensation income upon receipt of cash pursuant to a Cash Award or
Performance Award or, if earlier, at the time such cash is otherwise made
available for the Employee to draw upon it. An Employee will not have taxable
income upon the grant of a Stock Award in the form of units denominated in EDS
Common Stock ("Stock Unit Award"), but rather will generally recognize
ordinary compensation income at the time the Employee receives EDS Common
Stock or cash in satisfaction of such Stock Unit Award in an amount equal to
the fair market value of the EDS Common Stock or cash received. In general, an
Employee or Nonemployee Director will recognize ordinary compensation income
as a result of the receipt of EDS Common Stock pursuant to a Stock Award or
Performance Award in an amount equal to the fair market value of the EDS
Common Stock when such stock is received; provided, however, that if the stock
is not transferable and is subject to a substantial risk of forfeiture when
received, the Employee or Nonemployee Director will recognize ordinary
compensation income in an amount equal to the fair market value of the EDS
Common Stock when it first becomes transferable or is no longer subject to a
substantial risk of forfeiture, unless the Employee or Nonemployee Director
makes an election to be taxed on the fair market value of the EDS Common Stock
when such stock is received.
An Employee will be subject to withholding for federal, and generally for
state and local, income taxes at the time the Employee recognizes income under
the rules described above with respect to EDS Common Stock or cash received
pursuant to a Cash Award, Performance Award, Stock Award or Stock Unit Award.
Dividends that are received by an Employee or Nonemployee Director prior to
the time that the EDS Common Stock is taxed to the Employee or Nonemployee
Director under the rules described in the preceding paragraph are taxed as
additional compensation, not as dividend income. The tax basis of an Employee
or Nonemployee Director in the EDS Common Stock received will equal the amount
recognized by the Employee as compensation income under the rules described in
the preceding paragraph, and the Employee's holding period in such shares will
commence on the date income is so recognized.
Certain Tax Code Limitations on Deductibility. In order for the amounts
described above to be deductible by EDS (or a subsidiary), such amounts must
constitute reasonable compensation for services rendered or to be rendered and
must be ordinary and necessary business expenses. The ability of EDS (or a
subsidiary) to obtain a deduction for future payments under the Amended EDS
Incentive Plan could also be limited by Section 280G of the Code, which
prevents the deductibility of certain excess parachute payments made in
connection with a change in control of an employer. The ability of EDS (or a
subsidiary) to obtain a deduction for amounts paid under the Amended EDS
Incentive Plan could also be affected by Section 162(m) of the Code, which
limits the deductibility, for U.S. federal income tax purposes, of
compensation paid to certain employees of EDS to $1 million with respect to
any such employee during any taxable year of EDS. However, certain exceptions
apply to this limitation in the case of performance-based compensation. It is
intended that the approval of the Amended EDS Incentive Plan by the common
stockholders of General Motors and the description of the Amended EDS
Incentive Plan contained herein will satisfy certain of the requirements for
the performance-based exception, and after the consummation of the Split-Off,
EDS will be able to comply with the requirements of the Code and the Treasury
Regulation Section 1.162-27 with respect to the grant and payment of certain
performance-based awards (including certain options and SARs) under the
Amended EDS Incentive Plan so as to be eligible for the performance-based
exception. However, it may not be possible in all cases to satisfy all of the
requirements for the exception and EDS may, in its sole discretion, determine
that in one or more cases it is in its best interests to not satisfy all of
the requirements for the performance-based exception.
EXISTING EDS INCENTIVE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Existing EDS Incentive Plan. The following description,
which gives effect to the EDS Assumption Amendments (as hereinafter defined),
does not purport to be complete and is qualified in its entirety by reference
to the Existing
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EDS Incentive Plan, a copy of which is filed as an exhibit to the Registration
Statement of which this Solicitation Statement/Prospectus is a part.
General
If the Amended EDS Incentive Plan is not approved by the stockholders of
General Motors, the Existing EDS Incentive Plan will continue in effect after
the Split-Off and will not be amended and restated as described above under
"--Amended EDS Incentive Plan." However, the committee charged with
administering the Existing EDS Incentive Plan will adopt certain amendments to
the Existing EDS Incentive Plan (the "EDS Assumption Amendments") which are
intended to reflect the assumption of the Existing EDS Incentive Plan by EDS
upon consummation of the Split-Off. Among other things, the EDS Assumption
Amendments provide that, effective upon the consummation of the Split-Off, (i)
the Existing EDS Incentive Plan will be administered by the Compensation and
Benefits Committee of EDS, or such other committee as may in the future be
appointed by the EDS Board, (ii) each outstanding award under the Existing EDS
Incentive Plan will be adjusted so that, effective as of the date of
consummation of the Split-Off, the securities to which each such award relates
will be a number of shares of EDS Common Stock equal to the number of shares
of Class E Common Stock subject to such award immediately prior to the
consummation thereof, (iii) future awards made under the Existing EDS
Incentive Plan will be in the form of EDS Common Stock rather than Class E
Common Stock, (iv) future awards may be made under the Existing EDS Incentive
Plan in respect of a maximum of 60,000,000 shares of EDS Common Stock and (v)
all references to General Motors contained in the Existing EDS Incentive Plan
will be deleted.
The purpose of the Existing EDS Incentive Plan is to provide corporate
officers and key employees of EDS and its subsidiaries with a strong incentive
for individual creativity and contribution to ensure the future growth of EDS.
The Existing EDS Incentive Plan is designed to reward employees making
important contributions to the success of EDS by enabling such persons to
acquire shares of EDS Common Stock.
Key employees, including officers and directors, of EDS are eligible to
participate in the Existing EDS Incentive Plan. However, (i) no member of the
EDS Board is entitled to participate in the Existing EDS Incentive Plan unless
he or she is also a full time employee of EDS; (ii) no member of the
Compensation and Benefits Committee of EDS is eligible to participate in the
Existing EDS Incentive Plan; (iii) no person is eligible to participate in the
Existing EDS Incentive Plan if he or she owns, directly or indirectly, more
than 5% of the total combined voting power of all classes of stock of EDS and
(iv) not more than 32,000,000 shares of EDS Common Stock may be sold, awarded
or covered by rights or options granted under the Existing EDS Incentive Plan
to any one participant.
The Existing EDS Incentive Plan covers (i) the sale of shares subject to
restrictions ("Restricted Stock"), (ii) the grant of rights, subject to
restrictions ("Restricted Stock Units"), to acquire shares which may or may
not be subject to restrictions ("Unit Stock"), (iii) the award of bonus shares
that may or may not be subject to restrictions ("Bonus Stock") and (iv) the
grant of options (including ISOs) to acquire shares which may or may not be
subject to restrictions ("Option Stock").
An aggregate of 60,000,000 shares of EDS Common Stock (in addition to the
shares that are the subject of awards outstanding as of the date upon which
the EDS Assumption Amendments become effective) will be available for awards
under the Existing EDS Incentive Plan after giving effect to the EDS
Assumption Amendments. If shares of Restricted Stock, Unit Stock, Bonus Stock
or Option Stock issued pursuant to the Existing EDS Incentive Plan are
repurchased by or redelivered to EDS in connection with the restrictions
imposed on such shares pursuant to the Existing EDS Incentive Plan, such
repurchased and redelivered shares shall again become available for sale,
award or grant under the Existing EDS Incentive Plan. To the extent that any
Restricted Stock Units terminate in connection with the restrictions imposed
on such units (other than pursuant to the delivery of shares in respect
thereof) or any options granted under the Existing EDS Incentive Plan
terminate or expire unexercised in whole or in part, the shares of EDS Common
Stock then so covered will again become available for sale, award or grant
under the Existing EDS Incentive Plan.
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Upon the effectiveness of the EDS Assumption Amendments, the Existing EDS
Incentive Plan will be administered and interpreted by the Benefits and
Compensation Committee of the EDS Board. No member of such committee shall be
eligible, or shall have been eligible at any time within one year prior to his
appointment to the Committee, for selection as a person to whom EDS Common
Stock may be sold or awarded or to whom either rights to acquire shares or
options may be granted pursuant to the Existing EDS Incentive Plan.
The committee charged with administering the Existing EDS Incentive Plan has
full authority, in its discretion, to determine those corporate officers and
key employees who shall participate in the Existing EDS Incentive Plan and the
number of shares of EDS Common Stock to be sold or awarded to each participant
and the number of shares of EDS Common Stock to be covered by either rights to
acquire shares or options granted to each participant. Recommendations for
individual awards are made to such committee by the President of EDS. Such
committee may adopt rules and regulations for the administration of the
Existing EDS Incentive Plan to the extent it deems advisable and has full
discretionary authority to amend such rules and regulations. All
determinations made by such committee are conclusive except that, to the
extent required by law or by the EDS Certificate of Incorporation or Bylaws,
the terms of any sale or award of shares or any grant of either rights to
acquire shares or options under the Existing EDS Incentive Plan and the
sufficiency of the consideration therefor are subject to ratification by the
EDS Board prior to such sale, award or grant.
Awards
The types of awards that may be made under the Existing EDS Incentive Plan
are as follows:
Restricted Stock. Shares of Restricted Stock may be sold pursuant to the
Existing EDS Incentive Plan at a nominal price which does not exceed 10% of
the fair market value of the shares at the time of grant. All shares of
Restricted Stock sold pursuant to the Existing EDS Incentive Plan are subject
to specified restrictions, certain of which may be modified in the applicable
award agreement.
Restricted Stock Units. Restricted Stock Units may be granted pursuant to
the Existing EDS Incentive Plan without cash consideration. Each Restricted
Stock Unit entitles the holder thereof to receive the shares covered by such
unit at such time, in such amounts and subject to such conditions as specified
in the applicable award agreement.
Bonus Stock. Shares of Bonus Stock may be awarded pursuant to the Existing
EDS Incentive Plan without cash consideration. The committee administering the
Existing EDS Incentive Plan is authorized to determine, and set forth in the
applicable award agreement, whether such shares of Bonus Stock are awarded
free of, or subject to, any restrictions.
Stock Options. Stock options may be granted pursuant to the Existing EDS
Incentive Plan and shall have such terms and conditions as the committee
administering such plan in its sole discretion shall determine, including the
period during which they may be exercised and the conditions under which they
may be terminated. The exercise price of a stock option shall not be less than
100% of the fair market value of the underlying shares of EDS Common Stock on
the date the option is granted.
Each Award made pursuant to the Existing EDS Incentive Plan is subject to
certain non-competition restrictions that apply for such period of time and in
such geographic area as is specified in the applicable award agreement. Such
non-competition restrictions generally provide that if within the specified
period of time and geographic areas a participant engages in certain
competitive activities (such as (i) participating in any activity as or for a
competitor of EDS, which is the same or similar to the activities in which the
participant was involved as an employee of EDS, (ii) hiring or attempting to
hire any employee of EDS, (iii) soliciting the business of any customer of EDS
or (iv) participating in any activity for a customer of EDS, which is the same
or similar to the activities in which the participant was involved as an
employee of EDS), the participant may be obligated to (a) immediately resell
and deliver to EDS, upon demand, all shares of Restricted Stock, Unit Stock,
Bonus Stock or Option Stock sold or awarded to the participant as to which the
participant is still the direct or indirect
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beneficial owner at the cash price per share, if any, paid by the participant;
and (b) pay to EDS an amount in cash with respect to each share of Restricted
Stock, Unit Stock, Bonus Stock and Option Stock not still so held equal to the
fair market value of each such share on the first date on which such share is
no longer held less the price paid by him for such share. Additionally, if a
participant engages in such activities, any option outstanding under the
Existing EDS Incentive Plan that is held by such participant shall
automatically terminate and shall no longer be exercisable, and all Restricted
Stock Units then held shall automatically terminate.
Other Provisions
The EDS Board or the committee administering the Existing EDS Incentive Plan
may amend such plan at any time, provided that, without the approval of the
stockholders of EDS entitled to vote thereon, no such amendment shall become
effective if it would (i) increase the number of shares of EDS Common Stock
which may be sold or awarded under the Existing EDS Incentive Plan; or (ii)
modify the requirements as to eligibility for participation in such plan.
Unless earlier terminated by the EDS Board or the committee administering
the Existing EDS Incentive Plan, such plan shall terminate on October 17,
2004. Although no shares of EDS Common Stock may be sold or issued (except to
the extent issued in connection with rights or options previously granted
under such plan) or rights or options granted after such date, such
termination shall not affect any restrictions previously imposed on shares
issued, or alter the rights of participants with respect to rights or options
granted or shares issued, pursuant to the Existing EDS Incentive Plan.
In the event of any change in the number, class or rights of shares subject
to the Existing EDS Incentive Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, issuance of rights to subscribe or other change in
capital structure), the Existing EDS Incentive Plan provides for the committee
administering such plan to make appropriate adjustments to the maximum number
of shares subject to the Existing EDS Incentive Plan and the number of shares
and price per share subject to any outstanding award or grant as the committee
shall find to be equitable to prevent dilution or enlargement of such rights.
Advancement of Withholding Tax Payments
Under current EDS policy, holders of Restricted Stock Units granted under
the Existing Incentive Plan are required to reimburse EDS for the applicable
withholding taxes paid by EDS in respect of the vesting of such units within
60 days of such payment by EDS. In the event that such holder is restricted
from selling shares of Class E Common Stock (or, following the Split-Off, EDS
Common Stock) by virtue of such holder's being in possession of material non-
public information regarding EDS, EDS has historically extended the date for
the reimbursement of such payment until such restriction is terminated. As of
March 15, 1996, the indebtedness of Messrs. Alberthal, Castle, Chiapparone,
Fernandes, Grant, Heller, Linderman and Reeves in respect of such advancement
of payments for withholding taxes was $964,009, $365,659, $698,075, $531,867,
$299,175, $698,075, $971,929, and $598,350, respectively, and the largest
amount of such indebtedness outstanding at any time since January 1, 1995 for
such executive officers was $964,009, $365,659, $698,075, $531,867, $299,175,
$938,601, $971,929, and $598,350, respectively.
Tax Implications to EDS
EDS would generally be entitled to a deduction with respect to awards
granted under the Existing EDS Incentive Plan in the manner, and subject to
the limitations, described above under "Amended EDS Incentive Plan--Tax
Implications of Awards." However, notwithstanding the fact that approval of
the Amended EDS Incentive Plan by the common stockholders of General Motors is
not obtained, the deduction limitations set forth in Section 162(m) of the
Code would not apply to shares of Restricted Stock, shares of Bonus Stock,
Restricted Stock Units or options which are granted on or prior to the date of
the first regularly scheduled stockholder meeting of EDS that occurs after
December 2, 1995.
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EDS RETIREMENT PLAN
The following table indicates the estimated annual benefits payable upon
retirement to Messrs. Alberthal, Castle, Fernandes, Heller and Linderman, for
the specified compensation and years of service classifications, under the
combined formulas of the Amended and Restated EDS Retirement Plan (the "EDS
Retirement Plan") and the EDS Supplemental Executive Retirement Plan (the "EDS
Supplemental Plan"). The EDS Supplemental Plan is a non-qualified, unfunded
retirement plan intended to pay benefits to certain executive level employees
whose benefits under the EDS Retirement Plan are limited under the Code.
Benefits under the EDS Supplemental Plan can be reduced, suspended or
eliminated at any time by the EDS 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>
$ 400,000 $ 32,428 $ 64,856 $ 97,284 $129,712 $162,140 $194,568
$ 600,000 $ 49,128 $ 98,256 $147,384 $196,512 $245,640 $294,768
$ 800,000 $ 65,828 $131,656 $197,484 $263,312 $329,140 $394,968
$1,000,000 $ 82,528 $165,056 $247,584 $330,112 $412,640 $495,168
$1,200,000 $ 99,228 $198,456 $297,684 $396,912 $496,140 $595,368
$1,400,000 $115,928 $231,856 $347,784 $463,712 $579,640 $695,568
</TABLE>
As of December 31, 1995, the average annual base salary for the highest five
years over the last 10-year period and the eligible years of credited service
for each of the named executive officers was as follows: Mr. Alberthal,
$1,277,167--28 years; Mr. Castle, $682,667--seven years; Mr. Fernandes,
$635,250--27 years; Mr. Heller, $729,334--28 years; and Mr. Linderman,
$643,167--25 years. The annual base salary for the most recent year considered
in the calculation of such average annual base salary is set forth in the
Summary Compensation Table set forth above under the column labeled "Salary."
"Earnings" under the EDS Retirement Plan generally refer to total annual
cash compensation (up to $150,000 for 1995 as limited by the Code) for
services rendered to EDS and its participating subsidiaries, together with any
salary reduction contributions to the EDS Deferred Compensation Plan, and
shall exclude extraordinary compensation (such as overseas living allowances,
relocation allowances and benefits under any employee benefit plan, such as
the Stock Incentive Plan). Benefits under the EDS 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 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.
To be eligible to participate in the EDS Supplemental Plan, an executive
level employee must, among other requirements, be a participant in EDS'
executive bonus plan and a participant in the EDS Retirement Plan and have met
the eligibility requirements for the receipt of benefits thereunder. The
benefit payable under the EDS Supplemental Plan for normal retirement,
together with the benefit payable under the EDS Retirement Plan, will
generally equal (i) 50% of the average 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 as determined under the Code. Such benefits are payable
in the form of a single or joint survivor life annuity.
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STOCK PURCHASE PLAN
The EDS Board has adopted, and General Motors as the sole stockholder of EDS
has approved, the 1996 Electronic Data Systems Corporation Stock Purchase Plan
(the "EDS Stock Purchase Plan"), subject to consummation of the Split-Off. The
EDS Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. All full-time employees of EDS and
certain subsidiaries are eligible to participate in the EDS Stock Purchase
Plan. An aggregate of approximately 57,500 shares of EDS Common Stock would be
reserved for issuance under the EDS Stock Purchase Plan following consummation
of the Split-Off, subject to adjustment in accordance with the terms of the
EDS Stock Purchase Plan.
Under the EDS Stock Purchase Plan, the EDS Board and/or the Compensation and
Benefits Committee may determine the effective date of an offering and the
purchase period thereunder and establish the purchase price and the maximum
number of shares that each eligible employee may purchase, which number will
be based on a percentage of the employee's compensation with a maximum
individual investment as specified in the Code.
All eligible employees who enroll in an offering receive options to purchase
shares of EDS Common Stock at a price that is not less than the lesser of (i)
85% of the fair market value of the stock on the offering date or (ii) an
amount which under the terms of the offering is not less than 85% of such fair
market value at the time the right to purchase is exercised. Shares of EDS
Common Stock purchased under the Plan may not be sold or transferred within
two years of the date of purchase unless they are first offered to EDS at the
lesser of (i) the price originally paid for the shares or (ii) the fair market
value per share of EDS Common Stock on the date the shares are offered to EDS.
EDS will make no cash contributions to the EDS Stock Purchase Plan, but will
bear the expenses of administration. The EDS Stock Purchase Plan will be
administered by the Compensation and Benefits Committee, which will have
authority to resolve all questions relating to the administration of the Plan.
A participating employee will not recognize income at the time rights to
purchase shares are granted to him or her or when the employee exercises such
rights and purchases shares of EDS Common Stock at the end of an offering. If
an employee sells or otherwise disposes of the shares acquired under the Plan
(i) more than two years after the date of purchase and (ii) more than two
years after the date of the grant and more than one year after the date of
exercise, or if the employee dies before disposing of the shares, ordinary
income (compensation) should be included in the employee's gross income,
limited to the lesser of (a) the excess of the fair market value at the time
of sale or other disposition or at death over the amount paid for the shares
under the option or (b) the excess of the fair market value of the shares at
the time the option was granted over the purchase price (determined as if the
option were exercised on the date of grant). Any gain upon sale or other
disposition in excess of the lesser of the amounts in (a) or (b) above would
be treated as a long-term capital gain. If the employee meets requirement (ii)
above but not (i), he or she should recognize ordinary income (compensation)
as described in the first sentence of this paragraph, if any, and, in
addition, long-term capital loss equal to the difference between the amount
paid by EDS to repurchase the stock and the sum of the price paid by the
employee for the stock plus the amount of ordinary income, if any, recognized
by the employee on the disposition.
EDS will recognize no income, gain, deduction or loss with respect to the
grant or exercise of rights to purchase shares under the EDS Stock Purchase
Plan.
In the event of a disqualifying disposition (the sale or disposition of a
share prior to the expiration of the two-year period after the date of grant
or the one year period after the date of exercise), the employee should
recognize ordinary income (compensation) in the year of the disqualifying
disposition to the extent of the excess, if any, of the fair market value of
the stock at the date the option was exercised over the price paid for the
stock under the option with the difference between the amount paid by EDS for
repurchase of the stock and the sum of the price paid by the employee for the
stock plus the amount of ordinary income, if any, recognized by the employee
on the disposition treated as a long-term or short-term capital loss depending
on the length of the
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holding period. In the event of such a disqualifying disposition, EDS would be
accorded a deduction, assuming certain compliance requirements are met, equal
to the amount of the compensation includible by the employee.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
EDS management intends to recommend to the EDS Board at its first meeting
following consummation of the Split-Off that EDS enter into certain change of
control employment agreements ("Employment Agreements") with each of its
executive officers and certain of its other officers (each, an "Executive").
EDS management expects that the Employment Agreements to be recommended to the
EDS Board will 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 with EDS will be continued for specified
period of time ranging from three to five years (the "Employment Period") and
will contain the other terms and provisions described below.
The employment rights of the Executives under the Employment Agreements
would be triggered by either a "Change of Control" or a "Potential Change of
Control" (as such terms are defined in the Employment Agreements). Following a
Potential Change of Control, the employment period may terminate (but the
Employment Agreement will remain in 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 determines that a Change of Control is not likely or
(b) the Executive, upon proper notice to EDS, elects to terminate his
Employment Period as of any anniversary of the Potential Change of Control. A
"Change of Control" generally includes the occurrence on or after the date of
the Split-Off of any of the following: (i) any person, other than an exempt
person (including EDS and its subsidiaries and employee benefit plans),
becoming a beneficial owner of 15% or more of the shares of EDS Common Stock
or voting stock of EDS then outstanding (including as a result of the Split-
Off); (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 members of the EDS Board; (iii) the approval by the EDS 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 certain 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 the EDS stockholders of a liquidation or dissolution of EDS,
unless such liquidation or dissolution is part of a plan of liquidation or
dissolution 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 certain exempt persons)
would own 15% or more of the common stock or voting stock of such company and
(z) at least a majority of the board of directors of such company would
consist of the then incumbent members of the EDS Board. The acquisition of EDS
Common Stock in the Split-Off by the GM Hourly Plan is an exempt transaction
that will not constitute a Change of Control. A "Potential Change in 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 a contested 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.
Under the Employment Agreements, EDS would agree that throughout the
Employment Period, each Executive's position, authority, duties and
responsibilities will not be diminished from the most significant held or
exercised by, or assigned to, such Executive at any time during the 90-day
period immediately prior to the commencement of the Employment Period.
Additionally, all forms of the Executive's compensation, including salary,
bonus, regular salaried employee plans, stock options, restricted stock and
other awards, will continue on a basis no less favorable than as the same
exist during the same period.
The Employment Agreements would provide that an Executive's Employment
Period terminates (i) automatically upon the Executive's death or after 180
days of the Executive's continuing Disability (as defined in the Employment
Agreements), (ii) at EDS' option if the Executive is terminated for "Cause"
(as defined in
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the Employment Agreements) and (iii) at the Executive's option at any time for
"Good Reason" or for any reason during the 180-day period beginning 60 days
(or 180 days in the case of agreements with less than a five-year term) after
a Change of Control (a "Window Period"). For purposes of EDS' option to
terminate the Employment Period, "Cause" is defined in the Employment
Agreement to mean (i) dishonesty by the Executive which results in substantial
personal enrichment at the expense of EDS or (ii) demonstratively willful
repeated violations of the Executive's obligations under the Employment
Agreement, which violations are intended to result and do result in material
injury to EDS. For purposes of an Executive's option to terminate the
Employment Period, "Good Reason" generally means (i) a diminution of the
executive officer's job duties; (ii) EDS' failure to comply with the
requirements of the Employment Agreement; (iii) the transfer of an Executive's
work location; (iv) a purported termination of the Executive's employment by
EDS which is not in compliance with the Employment Agreement; (v) the failure
of a successor to honor the Employment Agreement or (vi) a failure to reelect
the Executive to the EDS Board if such Executive was a member of the EDS Board
immediately prior to the commencement of the Employment Period.
If an Executive's employment is terminated for any reason during a Window
Period, by reason of death or Disability during a Window Period, or for Good
Reason at any time, the Executive (or the Executive's legal representatives)
will be entitled to receive the following: (i) the employee benefits the
Executive has earned as of the date of termination; (ii) the Executive's then
current salary and bonus throughout the remainder of the Employment Period;
(iii) the cash value of the Executive's retirement and 401(k) benefits to the
end of the Employment Period; (iv) under certain circumstances, a pro rata
portion of the grants of options, restricted stock and other compensatory
awards the Executive would have received had his employment continued; and (v)
continued coverage under employee 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 the term thereof 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 the Employment Period commences. Upon the death of an Executive
(other than during a Window Period), the Executive's legal representatives
will be entitled to receive the following: (i) the employee benefits earned by
the Executive 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 compensatory 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 the Employment Period commences. Upon
termination of an Executive's employment with EDS due to Disability, the
Executive will be entitled to receive the same amounts and benefits as would
be provided upon the termination of the Executive's employment 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 the Executive has earned as of the date of termination of the
Executive's employment with EDS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation information with respect to the named executives for 1995
reflects compensation earned while EDS was a wholly owned subsidiary of
General Motors. During that period, EDS' compensation committee was composed
of John F. Smith, Jr., Harry J. Pearce and J. Michael Losh, all of whom are
officers of General Motors. In connection with the Split-Off, such persons
will resign from such positions and it is anticipated that Ray J. Groves and
C. Robert Kidder will be appointed to the Compensation and Benefits Committee
of EDS.
INDEMNIFICATION AGREEMENTS
EDS has entered into Indemnification Agreements (the "Indemnification
Agreements") with its directors, nominees for director and certain of its
officers (the "Indemnitees"), a form of which is filed with the
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Commission as an exhibit to the Registration Statement of which this
Solicitation Statement/Prospectus is a part. Under the terms of the
Indemnification Agreements, EDS 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 EDS 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 EDS 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 EDS (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 EDS, (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 EDS 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 EDS 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, EDS 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 EDS or otherwise, in advance of any determination with respect to
entitlement to indemnification
and within 15 days after the receipt by EDS 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 EDS 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 EDS 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 EDS.
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CLASS E COMMON STOCK
INTRODUCTION
Class E Common Stock is one of three classes of General Motors common stock.
The other two classes of common stock are $1 2/3 Common Stock and Class H
Common Stock. On the Record Date, approximately 485.7 million shares of Class
E Common Stock, held by approximately 268,123 record holders, were issued and
outstanding. Upon consummation of the Split-Off, each outstanding share of
Class E Common Stock will be converted into one share of EDS Common Stock, and
persons who held Class E Common Stock will become holders of EDS Common Stock.
See "The Split-Off," "EDS Capital Stock" and "Comparison of Class E Common
Stock and EDS Common Stock."
Holders of 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 General
Motors (which include 100% of the stock of EDS). Class E Common Stock is
designed to provide holders with financial returns based on the performance of
EDS. The intent of this design objective is achieved through (i) allocations
under the General Motors Certificate of Incorporation of the earnings of GM
attributable to EDS between amounts available for the payment of dividends on
Class E Common Stock and amounts available for the payment of dividends on the
$1 2/3 Common Stock and (ii) the announced current dividend practices and
policies of the GM Board, all as more fully described herein. General Motors,
not EDS, is the issuer of Class E Common Stock. The GM Board is free to change
dividend practices and policies with respect to Class E Common Stock, or any
other class of General Motors common stock, at any time.
PRICE RANGE AND DIVIDENDS
The Class E Common Stock is 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, and the dividends paid per share on the Class E Common Stock in
such periods. The last reported sale price of the Class E Common Stock on the
NYSE on April 12, 1996 was $52.75 per share.
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW DIVIDENDS PAID
- ------------- ------ ------ --------------
<S> <C> <C> <C>
1994
First Quarter.................................... $36.88 $27.50 $0.12
Second Quarter................................... 38.00 32.88 0.12
Third Quarter.................................... 38.50 33.00 0.12
Fourth Quarter................................... 39.50 34.75 0.12
1995
First Quarter.................................... $41.38 $36.88 $0.13
Second Quarter................................... 45.25 38.38 0.13
Third Quarter.................................... 47.50 41.50 0.13
Fourth Quarter................................... 52.63 43.88 0.13
1996
First Quarter.................................... $58.00 $50.00 $0.15
Second Quarter (through April 12, 1996).......... 56.75 52.25 --
</TABLE>
DIVIDEND POLICY
Subject to the rights of the holders of General Motors Preferred Stock (if
any) and General Motors Preference Stock, under the General Motors Certificate
of Incorporation, dividends on Class E Common Stock may 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, determined as described
herein, of GM attributable to EDS earned after General Motors' acquisition of
EDS. The portion of General Motors' earnings attributable to EDS that is
included in the amount available for the payment of dividends on Class E
Common Stock (which amount is also used to calculate earnings per share
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of Class E Common Stock) is determined by a fraction, the numerator of which
is 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 shall never be greater than one. The amount so
allocated is referred to in the 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 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 earnings used for computation
of Available Separate Consolidated Net Income of EDS (i.e., net income) by the
denominator of the fraction described above. The denominator is sometimes
referred to herein as the "Class E Dividend Base."
Neither the February 1996 redemption of the Series C Preference Stock nor
any conversion of shares of Series C Preference Stock into shares of Class E
Common Stock prior to such redemption was dilutive of earnings attributable to
Class E Common Stock for financial reporting purposes, as such shares affected
the numerator but not the denominator of the fraction used in determining
Available Separate Consolidated Net Income of EDS. After giving effect to the
issuance of shares of Class E Common Stock upon the conversion of shares of
Series C Preference Stock prior to such stock's redemption for a full quarter,
such fraction would be approximately equal to one.
The denominator used in determining the Available Separate Consolidated Net
Income of EDS is adjusted as deemed appropriate by the GM Board to reflect
subdivisions or combinations of the 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 the General Motors
Certificate of Incorporation. In this regard, the GM Board has generally
caused the denominator to decrease as shares of Class E Common Stock are
purchased by EDS and to increase as shares of Class E Common Stock are used
for EDS employee benefit plans or acquisitions.
Dividend policy is one of the matters reviewed by the Capital Stock
Committee of the GM Board. See "Relationship Between General Motors and EDS--
Pre-Split-Off Relationship" and "--Considerations Relating to Multi-Class
Common Stock Capital Structure." The current dividend policy of the GM Board
is to pay quarterly dividends on Class E Common Stock, when, as 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
the current dividend policy, the quarterly dividend on the Class E Common
Stock was $0.13 per share for 1995. In February 1996, the GM Board increased
the quarterly dividend on Class E Common Stock from $0.13 per share to $0.15
per share.
Under Delaware law and the General Motors Certificate of Incorporation, the
GM Board is not required to declare dividends on any class of General Motors
common stock. If and to the extent the GM Board chooses to declare dividends
on any or all of the classes of its common stock, neither Delaware law nor the
General Motors Certificate of Incorporation requires that there be any
proportionate or other fixed relationship between the amount of dividends
declared with respect to such different classes of common stock. The GM Board
reserves the right to reconsider from time to time its practices and policies
regarding dividends on General Motors' common stocks and to increase or
decrease the dividends paid on General Motors' common stocks on the basis of
General Motors' consolidated financial position, including liquidity, and
other factors, including, with regard to Class E Common Stock, the earnings
and consolidated financial position of EDS. Under the current dividend
practices and policies of the GM Board, dividends on Class E Common Stock are
not materially affected by developments involving the performance (operations,
liquidity or financial condition) of General Motors (excluding EDS).
Information concerning General Motors and its consolidated financial
performance, including Management's Discussion and Analysis, may be found in
the documents incorporated herein by reference, including the GM 1995 Form 10-
K. There is no fixed relationship, on a per share or aggregate basis, between
the cash dividends that may be paid by General Motors to holders of Class E
Common Stock and cash dividends
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or other amounts that may be paid by EDS to General Motors. However, it has
been the practice of the EDS Board to pay quarterly cash dividends on the
outstanding EDS common stock in an aggregate amount equal to the quarterly
dividends per share paid by General Motors on Class E Common Stock multiplied
by the Class E Dividend Base. See "Risk Factors Regarding General Motors after
the Split-Off--Loss of Potential Availability of EDS Funds and Assets" and
"Relationship Between General Motors and EDS--Pre-Split-Off Relationship."
VOTING RIGHTS
Under the General Motors Certificate of Incorporation, holders of Class E
Common Stock may cast one-eighth of a vote per share on all matters submitted
to General Motors stockholders for a vote, while holders of $1 2/3 Common
Stock may cast one vote per share and holders of Class H Common Stock may cast
one-half of a vote per share. Holders of all three classes of common stock
vote together as a single class on all matters, except that separate class
votes are required for certain amendments to the General Motors Certificate of
Incorporation, including any amendment which adversely affects the rights,
powers or privileges of any class, which must also be approved by the holders
of that class voting separately as a class.
LIQUIDATION RIGHTS
In the event of the liquidation, dissolution or winding up of the business
of General Motors, whether voluntary or involuntary, the General Motors
Certificate of Incorporation provides that, after the holders of the Preferred
Stock (if any) and Preference Stock receive the full preferential amounts to
which they are entitled, holders of the Class E Common Stock, $1 2/3 Common
Stock and Class H Common Stock will receive the assets remaining for
distribution to the General Motors stockholders on a per share basis in
proportion to the respective per share liquidation units of such classes and
will have no direct claim against any particular assets of General Motors or
any of its subsidiaries. Subject to adjustment, as described below, each share
of Class E Common Stock, $1 2/3 Common Stock and Class H Common Stock would
currently be entitled to liquidation units of approximately one-eighth
(0.125), one (1.0) and one-half (0.5), respectively. Holders of 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 General Motors (which include 100% of the
stock of EDS).
RECAPITALIZATION
Under the General Motors Certificate of Incorporation, all outstanding
shares of Class E Common Stock may be recapitalized as shares of $1 2/3 Common
Stock (i) at any time after December 31, 1995, in the sole discretion of the
GM Board (provided that, during each of the five full fiscal years preceding
the exchange, the aggregate cash dividends on the Class E Common Stock have
been no less than the product of the Payout Ratio (as defined below) for such
year multiplied by the Available Separate Consolidated Net Income of EDS for
the prior fiscal year) or (ii) automatically, if at any time General Motors
disposes of substantially all of the business of EDS. In the event of such a
recapitalization, each holder of Class E Common Stock would receive shares of
$1 2/3 Common Stock having a market value, as of the valuation date provided
for in the General Motors Certificate of Incorporation, equal to 120% of the
market value of such holder's Class E Common Stock on such valuation date.
Based on the dividends paid on Class E Common Stock in 1991 through 1995, the
condition described in clause (i) above that would permit a recapitalization
in the discretion of the GM Board during 1996 has been satisfied. As a result
of the Merger, the General Motors Certificate of Incorporation will be amended
so that the Split-Off will not result in any recapitalization of Class E
Common Stock at the 120% exchange ratio. Holders of EDS Common Stock will have
no rights comparable to such recapitalization rights.
No fractional shares of $1 2/3 Common Stock would be issued in any such
exchange. In lieu thereof, a holder of shares of Class E Common Stock would
receive cash equal to the product of (A) the fraction of a share of $1 2/3
Common Stock to which the holder would otherwise have been entitled,
multiplied by (B) the average market price per share of $1 2/3 Common Stock on
such valuation date.
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The "Payout Ratio" equals the lesser of (A) 0.25 or (B) the quotient of (x)
the total cash dividends paid on $1 2/3 Common Stock for such fiscal year,
divided by (y) the net income of General Motors for such fiscal year, minus
the Available Separate Consolidated Net Income of EDS for such fiscal year and
the Available Separate Consolidated Net Income of Hughes for such fiscal year.
SUBDIVISION OR COMBINATION
If General Motors subdivides (by stock split or otherwise) or combines (by
reverse stock split or otherwise) the outstanding shares of the $1 2/3 Common
Stock, the Class E Common Stock or the Class H Common Stock, the voting and
liquidation rights of shares of Class E Common Stock and Class H Common Stock
relative to $1 2/3 Common Stock will be appropriately adjusted. In the event
of the issuance of shares of Class E Common Stock or Class H Common Stock as a
dividend on shares of $1 2/3 Common Stock, the liquidation rights of the
applicable class of Common Stock would be adjusted so that the relative
aggregate liquidation rights of each stockholder would not be changed as a
result of such dividend.
CONSIDERATIONS RELATING TO MULTI-CLASS COMMON STOCK CAPITAL STRUCTURE
Class E Common Stock is one of three classes of General Motors common stock.
The General Motors Certificate of Incorporation restricts the power of the GM
Board to declare and pay dividends on any one of the three classes of common
stock to certain defined amounts which are attributable to each separate class
of common stock and based on the legally available retained earnings of
General Motors. For dividend purposes, this restriction serves to preserve the
interest in retained earnings of holders of each class of GM common stock in
relation to the interests therein of holders of the other two classes.
However, this restriction does not result in a physical segregation of the
assets of General Motors, EDS or Hughes, nor does it result in the
establishment of separate accounts or dividend or liquidation preferences with
respect to such assets for the benefit of the holders of any of the three
separate classes of General Motors common stock. Holders of Class E Common
Stock and Class H Common Stock have no direct rights in the equity or assets
of EDS or Hughes, but rather, together with holders of $1 2/3 Common Stock,
have certain liquidation rights in the equity and assets of General Motors
(which include 100% of the stock of both EDS and Hughes).
The existence of multiple classes of common stock with separate dividend
rights as provided for in the General Motors Certificate of Incorporation can
give rise to potential divergences among the interests of the holders of each
of the separate classes of General Motors common stock with respect to various
intercompany transactions and other matters. In this regard, the GM Board, in
the discharge of its fiduciary duties, principally through its Capital Stock
Committee (comprised entirely of independent directors of General Motors),
oversees the policies, programs and practices of General Motors which may
impact the potentially divergent interests of the three classes of General
Motors common stock.
The By-Laws of General Motors, in defining the role of the Capital Stock
Committee, provide that such Committee shall oversee those matters in which
the three classes of stockholders may have divergent interests, particularly
as they relate to: (a) the business and financial relationships between
General Motors or any of its units and EDS, between General Motors or any of
its units and Hughes, and between EDS and Hughes; (b) dividends in respect of,
disclosures to stockholders and the public concerning, and transactions by
General Motors or any of its subsidiaries in, shares of Class E Common Stock
or Class H Common Stock; and (c) any matters arising in connection therewith,
all to the extent the Committee may deem appropriate, and to recommend such
changes in such policies, programs and practices as the Committee may deem
appropriate. In performing this function, the Capital Stock Committee's role
is not to make decisions concerning matters referred to its attention, but
rather to oversee the process by which decisions concerning such matters are
made. The Committee does this with a view towards, among other things,
assuring a process of fair dealing among General Motors, EDS and Hughes as
well as fairness to the interests of all GM stockholders in the resolution of
such matters. The Capital Stock Committee had a significant role in reviewing
the terms of the Transactions to ensure the fairness thereof to all classes of
General Motors common stock. See "Special Factors--Background of the Split-
Off" and "Recommendations of the Capital Stock Committee and the GM Board;
Fairness of the Transactions."
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EDS CAPITAL STOCK
Under the EDS Certificate of Incorporation, the authorized capital stock of
EDS is 2,200,000,000 shares, of which 2,000,000,000 shares are EDS Common
Stock, par value $0.01 per share, and 200,000,000 shares are preferred stock,
par value $0.01 per share (the "EDS Preferred Stock").
The following descriptions (i) are summaries and do not purport to be
complete and (ii) give effect to the consummation of the Split-Off. See "The
Split-Off" and "Comparison of Class E Common Stock and EDS Common Stock."
Reference is also made to the more detailed provisions of, and such
descriptions are qualified in their entirety by reference to, the EDS
Certificate of Incorporation and the EDS Bylaws, copies of which are filed
with the Commission as exhibits to the Registration Statement of which this
Solicitation Statement/Prospectus is a part.
EDS COMMON STOCK
Holders of EDS Common Stock will be 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 EDS Preferred Stock, if
any. Except as may be provided in connection with any EDS Preferred Stock or
as may otherwise be required by law or the EDS Certificate of Incorporation,
the EDS Common Stock will be the only capital stock of EDS entitled to vote in
the election of directors. The EDS Common Stock will not have cumulative
voting rights. Immediately prior to the consummation of the Split-Off, General
Motors was the only holder of record of EDS Common Stock.
Subject to the prior rights of holders of EDS Preferred Stock, if any,
holders of the EDS 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
the EDS 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 EDS
Preferred Stock are entitled by the express terms of such series.
The outstanding shares of EDS Common Stock are fully paid and nonassessable.
The EDS Common Stock will not have any preemptive, subscription or conversion
rights. Additional shares of authorized EDS 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.
EDS PREFERRED STOCK
The EDS Board is empowered, without approval of the stockholders, to cause
shares of EDS 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 liquidation,
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 EDS Preferred
Stock described under "EDS Rights Agreement" below is a series of EDS
Preferred Stock that has been authorized by the EDS Board.
Although EDS has no current plans to issue EDS Preferred Stock, the issuance
of shares of EDS 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 EDS 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 EDS
Preferred Stock having sufficient voting rights to provide a required
percentage vote of the stockholders. In
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addition, under certain circumstances, the issuance of EDS Preferred Stock
could adversely affect the voting power of the holders of the EDS 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 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.
EDS RIGHTS AGREEMENT
There will be attached to each share of EDS 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 EDS 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 (i) is a summary and does not
purport to be complete and (ii) gives effect to the consummation of the Split-
Off. Reference is also made to the more detailed provisions of, and such
description is qualified in its entirety by reference to, the EDS Rights
Agreement, a copy of which is filed with the Commission as an exhibit to the
Registration Statement of which this Solicitation Statement/Prospectus is a
part.
Initially, the Rights will be attached to all certificates representing
outstanding shares of EDS Common Stock, including the shares of EDS Common
Stock issued in the Split-Off, and no separate certificates for the Rights
("Rights Certificates") will be distributed. The Rights will separate from the
EDS 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 EDS 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),
will not be an Acquiring Person solely as a result of its acquiring EDS Common
Stock in the Split-Off but may thereafter become an Acquiring Person if it
shall purchase or otherwise become the beneficial owner of additional shares
of EDS Common Stock constituting 1% or more of the then outstanding shares of
EDS Common Stock unless the Hourly Plan is not then the beneficial owner of
10% or more of the then outstanding shares of EDS Common Stock. Until the
Distribution Date, (a) the Rights will be evidenced by the certificates
representing EDS Common Stock and will be transferred with and only with such
certificates, (b) certificates representing EDS Common Stock will contain a
notation incorporating the EDS Rights Agreement by reference and (c) the
surrender for transfer of any certificate for EDS 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 EDS 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
EDS Common Stock issued prior to the Distribution Date will be issued with
Rights. Shares of EDS 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 EDS 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
EDS Common Stock at a price and on terms that a majority of the
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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
EDS Common Stock (or, in certain circumstances, cash, property or other
securities of EDS) having a Current Market Price (as defined in the EDS 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 by any Acquiring Person (or by certain related parties)
will be null and void in the circumstances set forth in the EDS 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 EDS
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 EDS Preferred Stock, (ii) if holders of the
Series A EDS Preferred Stock are granted certain rights or warrants to
subscribe for Series A EDS Preferred Stock or certain convertible securities
at less than the current market price of the Series A EDS Preferred Stock, or
(iii) upon the distribution to holders of the Series A EDS 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 EDS Preferred
Stock on the last trading date prior to the date of exercise. Pursuant to the
EDS 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 EDS 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 EDS 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 EDS 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 EDS Common Stock and/or other equity securities
deemed to have the same value as one share of EDS 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 EDS Rights Agreement may be amended
by the EDS Board prior to the Distribution Date. Thereafter, the provisions of
the EDS 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
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(excluding the interests of any Acquiring Person), or to shorten or lengthen
any time period under the EDS 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 EDS 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 EDS Common Stock, and noncash dividends payable in kind
in an amount per share equal to 100 times any noncash dividend or other
distribution declared on the EDS Common Stock. In the event of the
liquidation, dissolution or winding up of EDS, holders of any such Series A
EDS Preferred Stock will be entitled to receive (after satisfaction of or
provision for liabilities and any preferential amounts payable with respect to
any EDS Preferred Stock ranking senior to the Series A EDS 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 EDS Common Stock. In the event of any merger,
consolidation or other transaction in which shares of EDS Common Stock are
exchanged, holders of shares of Series A EDS 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 EDS Common Stock. Any Series A EDS
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 EDS Common Stock (determined on the basis of an
average closing price over a specified ten trading day period). Holders of
Series A EDS Preferred Stock will have 100 votes per share and, except as
otherwise provided in the EDS Certificate of Incorporation or required by law,
shall vote together with holders of EDS Common Stock as a single class. The
rights of the Series A EDS Preferred Stock as to dividends, liquidation and
voting are protected by anti-dilution provisions. Whenever dividend payments
on the Series A EDS 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 EDS 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 EDS 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 EDS Preferred Stock except dividends
paid ratably on the Series A EDS 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 EDS Preferred Stock are in arrears
for six quarters, the holders of the Series A EDS 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 prior to the consummation of the Split-Off 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 EDS DIRECTORS' LIABILITY
The EDS 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.
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The inclusion of this provision in the EDS 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 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 Merger 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 EDS 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 150 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 EDS Bylaws. It is currently
anticipated that the deadline for receipt of such notices with respect to EDS'
1997 Annual Meeting of Stockholders will be on March 6, 1997.
The EDS Certificate of Incorporation provides that, except as may be
provided by the EDS Certificate of Incorporation or in the resolution or
resolutions providing for the issuance of any series of EDS 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 "EDS Management
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and Executive Compensation-- Directors and Executive Officers." A director of
EDS may be removed only for cause.
The EDS 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 EDS 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.
The EDS 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
EDS Certificate of Incorporation). The GM Hourly Plan, and any trustee of or
other fiduciary with respect to such plan (when acting in such capacity), will
not be a Related Person solely as a result of its acquiring EDS Common Stock
in the Split-Off but may thereafter become a Related Person if it shall
purchase or otherwise become 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 EDS 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 EDS 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 EDS Certificate of Incorporation and the EDS
Bylaws, together with the EDS 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
EDS Common Stock in connection therewith. For a description of certain other
factors that could limit such changes in control and offers, see "Risk Factors
Regarding EDS after the Split-Off--Certain Limitations on Changes in Control
of EDS." This could be the case notwithstanding that a majority of EDS'
stockholders might benefit from such a change in control or offer.
EDS TRANSFER AGENT AND REGISTRAR
The Bank of New York will serve as the Transfer Agent and Registrar for the
EDS Common Stock.
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COMPARISON OF CLASS E COMMON STOCK AND EDS COMMON STOCK
GENERAL
Upon consummation of the Split-Off, each outstanding share of Class E Common
Stock will be converted into one share of EDS Common Stock, holders of Class E
Common Stock will become stockholders of EDS rather than of General Motors,
and the Class E Common Stock will cease to exist. See "The Split-Off." As
stockholders of EDS, such holders' rights will continue to be governed by
Delaware law and will be governed by the EDS Certificate of Incorporation and
the EDS Bylaws, which differ in certain material respects from the General
Motors Certificate of Incorporation and the General Motors By-Laws, as
summarized below. For a more detailed description of the terms of the Class E
Common Stock and the EDS Common Stock and the applicable provisions of
Delaware law and the Certificate of Incorporation and Bylaws of both General
Motors and EDS, see "Class E Common Stock" and "EDS Capital Stock." See also
"Risk Factors Regarding EDS after the Split-Off--No Prior Public Market for
EDS Common Stock; No Assurance as to Market Price." The following discussion
relating to the EDS Common Stock, the EDS Certificate of Incorporation and the
EDS Bylaws give effect to the consummation of the Split-Off.
DIVIDEND POLICY
Under the General Motors Certificate of Incorporation, dividends on the
Class E Common Stock may be declared and paid 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, determined as described in "Class E Common Stock." The current dividend
policy of the GM Board is to pay quarterly dividends on Class E Common Stock,
when, as and if declared by the GM Board, at an annual rate equal to
approximately 30% of Available Separate Consolidated Net Income of EDS for the
prior year. Under this dividend policy, the quarterly dividend on Class E
Common Stock for 1995 was $0.13 per share. In February 1996, the GM Board
increased the quarterly dividend on Class E Common Stock to $0.15 per share.
Dividend policy with respect to EDS capital stock will be determined by the
EDS Board, which is not obligated to declare any dividends on any class of EDS
capital stock. For a description of EDS' currently anticipated dividend policy
following the Split-Off, see "Plans and Proposals of EDS--EDS Dividend
Policy."
VOTING RIGHTS
Holders of Class E Common Stock may cast one-eighth of a vote per share on
all matters submitted to a vote of GM stockholders under the General Motors
Certificate of Incorporation and vote together as a single class with holders
of the $1 2/3 Common Stock and Class H Common Stock on all matters (including
the election of directors), with specified exceptions. Holders of EDS Common
Stock will be entitled to one vote per share under the EDS Certificate of
Incorporation with respect to all matters submitted to a vote of EDS
stockholders.
Holders of EDS Common Stock will have the right to vote directly on matters
relating to EDS, while holders of Class E Common Stock vote directly on
matters relating to General Motors. Except as may be provided in connection
with any EDS Preferred Stock or as may otherwise be required by law or the EDS
Certificate of Incorporation, the EDS Common Stock will be the only capital
stock of EDS entitled to vote in the election of directors.
LIQUIDATION RIGHTS
The General Motors Certificate of Incorporation provides that upon the
liquidation, dissolution or winding up of General Motors, after the holders of
General Motors Preferred Stock (if any) and Preference Stock receive the full
preferential amounts to which they are entitled, each holder of Class E Common
Stock will share in the distribution of the available remaining assets of
General Motors (as distinguished from EDS) with all other holders of GM common
stock in proportion to their respective liquidation units of approximately
one-eighth (0.125) per share of Class E Common Stock, one (1.0) per share of
$1 2/3 Common Stock and one-half (0.5) per share of Class H Common Stock.
Under the EDS Certificate of Incorporation, holders of EDS Common Stock will
receive the assets of EDS available for distribution to its stockholders in
the event of its liquidation, dissolution or winding up, provided that
preferential or participating amounts owing to the holders of any EDS
Preferred Stock have been paid or set aside for payment previously.
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RECAPITALIZATION
Holders of EDS Common Stock will have no comparable right to that which they
possess as holders of Class E Common Stock with respect to the potential
recapitalization of their Class E Common Stock into $1 2/3 Common Stock at a
120% exchange ratio, as currently provided by the General Motors Certificate
of Incorporation upon a disposition by General Motors of substantially all of
the business of EDS and under certain other circumstances. Holders of EDS
Common Stock will, however, have the potential to realize premiums over
prevailing market prices for EDS Common Stock in connection with certain
corporate transactions, including tender offers for EDS Common Stock and
change in control transactions involving EDS, although there can be no
assurance in this regard. See "--Certain Limitations on Changes in Control of
EDS." Such premiums, if any, will not be limited by any formula in the EDS
Certificate of Incorporation comparable to that relating to the
recapitalization of Class E Common Stock in the General Motors Certificate of
Incorporation.
CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF EDS
The EDS Certificate of Incorporation and the EDS 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 meetings, which are not present in the General
Motors Certificate of Incorporation or the General Motors By-Laws and which
could have the effect of delaying, deferring or preventing a change in control
of EDS and of limiting any opportunity to realize premiums over prevailing
market prices for EDS Common Stock in connection therewith. The EDS Rights
Agreement, which also has no equivalent at General Motors, could have the same
effect. EDS, like General Motors, is subject to Section 203 of the DGCL.
Furthermore, in order to preserve the tax-free status of the Split-Off,
under the Separation Agreement, EDS will be prohibited, until after the two-
year anniversary of the Effective Time 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 EDS 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 the six-month anniversary of the
Effective Time, 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 General Motors
and EDS--Post-Split-Off Arrangements--Separation Agreement." The Master
Services Agreement will also provide General Motors with certain termination
rights upon the occurrence of certain changes in control of EDS. See
"Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT
Services Agreements."
In addition, the GM Hourly Plan Special Trust is a party to the Registration
Rights Agreement, which contains certain restrictions on its ability to
transfer the shares of Class E Common Stock held by it (including by tendering
into a tender offer), which restrictions will continue to apply to its
holdings of EDS Common Stock after the consummation of the Split-Off. General
Motors and the GM Hourly Plan Special Trust are also parties to the Transfer
Agreement, which is intended to preserve the tax-free status of the Split-Off
and which contains restrictions on the ability of the GM Hourly Plan Special
Trust to transfer Class E Common Stock and to vote in favor of certain
business combinations involving EDS, which restrictions will apply to the EDS
Common Stock for a period generally of two years after the Split-Off. See
"Security Ownership of Certain Beneficial Owners and Management of General
Motors and EDS--GM Hourly Plan Special Trust." The contractual restrictions to
which the shares of EDS Common Stock owned by the GM Hourly Plan Special Trust
are subject, as well as the terms of the Separation Agreement and the IT
Services Agreements, could have the effect of making more difficult or
discouraging certain change in control transactions involving EDS, including
tender offers for EDS Common Stock, that could give the holders of EDS Common
Stock the opportunity to realize a premium over the then prevailing market
price of such stock.
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SOLICITATION OF WRITTEN CONSENT OF GENERAL MOTORS
COMMON STOCKHOLDERS
MATTERS TO BE CONSIDERED
Transactions
This Solicitation Statement/Prospectus is being furnished to General Motors
common stockholders in connection with the solicitation by the GM Board of
written consents approving the Transactions, including the adoption of the
Merger Agreement, pursuant to which, among other things, (i) Mergeco will be
merged with and into General Motors, with General Motors being the surviving
corporation, (ii) each outstanding share of Class E Common Stock will be
converted automatically into one share of EDS Common Stock and (iii)
provisions in the General Motors Certificate of Incorporation regarding the
Class E Common Stock (including the provisions that require Class E Common
Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio
upon a disposition by GM of substantially all of the business of EDS and under
certain other circumstances) will be deleted and certain other provisions
therein will be amended as described herein. The full text of the Merger
Agreement, including the attached Article Fourth of the General Motors
Certificate of Incorporation, as proposed to be amended, is attached as
Appendix A to this Solicitation Statement/Prospectus and is incorporated
herein by reference. See "The Split-Off."
Consummation of the Transactions is conditioned upon, among other things,
receiving the consent of the common stockholders of General Motors. Approval
of the Transactions is independent of the vote on the Amended EDS Incentive
Plan and will require the consent of the holders of (i) a majority of the
voting power of all outstanding shares of all three classes of General Motors
common stock, voting together as a single class based on their respective
voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common
Stock, voting as a separate class, and (iii) a majority of the outstanding
shares of Class E Common Stock, voting as a separate class. If the
Transactions, including the Merger Agreement, are so approved, the Merger will
become effective upon the filing of a certificate of merger with the Secretary
of State of the State of Delaware.
Amended EDS Incentive Plan
This Solicitation Statement/Prospectus is also being furnished by General
Motors to solicit written consents of General Motors common stockholders to
approve the Amended EDS Incentive Plan, which amends and restates the Existing
EDS Incentive Plan. Approval of the Amended EDS Incentive Plan is independent
of the vote on the Transactions and will require the consent of the holders of
(i) a majority of the voting power of all outstanding shares of all three
classes of General Motors common stock, voting together as a single class
based on their respective voting rights, and (ii) a majority of the
outstanding shares of Class E Common Stock, voting as a separate class. The
full text of the Amended EDS Incentive Plan is attached as Appendix D to this
Solicitation Statement/Prospectus and is incorporated herein by reference. See
"EDS Management and Executive Compensation--Amended EDS Incentive Plan."
Approval of the Amended EDS Incentive Plan by the common stockholders of
General Motors is being sought to ensure that the deductibility by EDS, for
U.S. federal income tax purposes, of certain performance-based awards made
under the Plan will not be limited by Section 162(m) of the Code. Section
162(m) restricts a publicly traded company from claiming and receiving a
deduction, for U.S. federal income tax purposes, in respect of compensation
paid to certain employees in an amount in excess of $1 million for any such
employee during any taxable year. An exception applies to this limitation,
however, in the case of certain performance-based compensation. It is intended
that approval of the Amended EDS Incentive Plan by the common stockholders of
General Motors will satisfy certain requirements for such performance-based
exception. See "EDS Management and Executive Compensation--Amended EDS
Incentive Plan--Certain Tax Code Limitations on Deductibility."
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ACTION BY WRITTEN CONSENT
Transactions
In lieu of a special meeting of General Motors common stockholders, action
on the Transactions, including the Merger Agreement, will be taken by written
consent. The Transactions will be consummated on a date to be determined by
GM, which is expected to be as soon as practicable after consents have been
received and not revoked from holders of the number of outstanding shares of
$1 2/3 Common Stock, Class E Common Stock and Class H Common Stock required
for their approval, but which will not in any event be sooner than 20 business
days after the date of mailing of this Solicitation Statement/Prospectus.
Notwithstanding the foregoing, no consent shall be effective to approve the
Transactions unless, within 60 days of the earliest dated consent to the
Transactions delivered to General Motors, the number of consents required to
approve the Transactions are delivered to General Motors.
Amended EDS Incentive Plan
If written consents have been received and not revoked from holders of the
number of outstanding shares of $1 2/3 Common Stock, Class E Common Stock and
Class H Common Stock required for the approval of the Amended EDS Incentive
Plan prior to the consummation of the Split-Off, the Amended EDS Incentive
Plan will become effective in its entirety upon such consummation.
Notwithstanding the foregoing, no consent shall be effective to approve the
Amended EDS Incentive Plan unless, within 60 days of the earliest dated
consent to the Amended EDS Incentive Plan delivered to General Motors, the
number of consents required to approve the Amended EDS Incentive Plan are
delivered to General Motors. If the Amended EDS Incentive Plan is not approved
by the common stockholders of General Motors, such plan will nonetheless
become effective upon consummation of the Split-Off insofar as it relates to
Nonemployee Directors (as defined in "EDS Management and Executive
Compensation--Amended EDS Incentive Plan") but will not become effective
insofar as it relates to employees of EDS and its subsidiaries. Furthermore,
if the Amended EDS Incentive Plan is not approved by the common stockholders
of General Motors, the Existing EDS Incentive Plan will remain in effect. See
"EDS Management and Executive Compensation--Existing EDS Incentive Plan."
General
Only General Motors common stockholders of record on April 10, 1996 (the
Record Date) are entitled to consent with respect to each of the two proposals
being submitted for General Motors common stockholder consent. On the Record
Date, there were outstanding approximately 755.3 million shares of $1 2/3
Common Stock held by approximately 614,126 holders of record, approximately
485.7 million shares of Class E Common Stock held by approximately 268,123
holders of record and approximately 97.9 million shares of Class H Common
Stock held by approximately 260,893 holders of record. When voting together as
a single class in connection with each of the two proposals, holders of record
of $1 2/3 Common Stock are entitled to one vote per share, holders of record
of Class E Common Stock are entitled to one-eighth of a vote per share and
holders of record of Class H Common Stock are entitled to one-half of a vote
per share.
As of the Record Date, directors and officers of General Motors held an
aggregate of 660,285 outstanding shares of $1 2/3 Common Stock, 233,465
outstanding shares of Class E Common Stock, and 173,061 outstanding shares of
Class H Common Stock. As of the Record Date, persons expected to be directors
and executive officers of EDS upon consummation of the Split-Off held an
aggregate of 20 outstanding shares of $1 2/3 Common Stock, 787,502 outstanding
shares of Class E Common Stock, and 10 outstanding shares of Class H Common
Stock. In each case, such holdings constituted, as of the Record Date, less
than 1% of the outstanding shares of each class of GM common stock. See
"Security Ownership of Certain Beneficial Owners and Management of General
Motors and EDS."
The GM Board has unanimously recommended that each of the two proposals
being submitted for General Motors common stockholder consent be approved. To
the best of General Motors' knowledge, all of General
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Motors' directors and executive officers currently intend to consent to each
of the two proposals and, except as described under "Summary--The
Transactions" and "Special Factors--Background of the Split-Off" and
"Recommendations of the Capital Stock Committee and the GM Board; Fairness of
the Transactions," none of General Motors' executive officers who are not
directors have made any recommendations with respect to either proposal.
As of the Record Date, the GM Hourly Plan Special Trust beneficially owned
approximately 149.5 million shares of Class E Common Stock (or approximately
31% of the Class E Common Stock outstanding). The GM Hourly Plan Trustees, as
independent fiduciaries within the meaning of ERISA, have the authority and
discretion to direct the voting of such shares, including in connection with
each of the two proposals described herein. As of the date hereof, the GM
Hourly Plan Trustees have not informed General Motors of their intent with
respect to such proposals. For information regarding the procedures by which
shares held in savings and incentive plans of General Motors will be voted,
see "--Consents" below.
CONSENTS
The shares represented by each executed consent submitted with respect to
the proposal to approve the Transactions, including the adoption of the Merger
Agreement, will be deemed to have approved the Transactions. The shares
represented by each executed consent submitted with respect to the proposal to
approve the Amended EDS Incentive Plan will be deemed to have approved the
Amended Incentive Plan. Approval of the Amended EDS Incentive Plan is
independent of the vote on the Transactions. Failure to execute and submit a
consent to either proposal will have the effect of a vote against such
proposal. In addition, under the rules of the NYSE, brokers who hold shares in
street names may not consent on behalf of customers to non-routine proposals
such as those to approve the Transactions, including the adoption of the
Merger Agreement, and to approve the Amended EDS Incentive Plan, without
specific instructions from such customers. Thus, "broker non-votes" with
respect to either the proposal to approve the Transactions, including the
adoption of the Merger Agreement, or the proposal to approve the Amended EDS
Incentive Plan will have the effect of a vote against such proposal.
If a General Motors common stockholder is a participant in the General
Motors Savings-Stock Purchase Program for Salaried Employees in the United
States, the General Motors Personal Savings Plan for Hourly-Rate Employees in
the United States, the General Motors Canadian Savings-Stock Purchase Program,
the EDS Deferred Compensation Plan, the EDS Puerto Rico Savings Plan, the
Hughes Salaried Employees' Thrift and Savings Plan, the Hughes Tucson
Bargaining Employees' Thrift and Savings Plan, the Hughes California Hourly
Employees' Thrift and Savings Plan, the Hughes Thrift and Savings Plan, the
Saturn Individual Savings Plan for Represented Members, the Saturn Personal
Choices Savings Plan for Non-Represented Members or the GMAC Mortgage
Corporation Savings Incentive Plan, each consent will also serve as a voting
instruction for the trustees, plan committees or independent fiduciaries of
those plans. With respect to the General Motors Savings-Stock Purchase Program
for Salaried Employees in the United States, the General Motors Personal
Savings Plan for Hourly-Rate Employees in the United States, the Saturn
Individual Savings Plan for Represented Members, the Saturn Personal Choices
Savings Plan for Non-Represented Members and the EDS Deferred Compensation
Plan, if voting instructions are not received for shares in such plans, those
shares will be voted by the trustee, plan committee or independent fiduciary.
For the remainder of the plans, shares in such plans will not be voted unless
the consent is executed and returned.
If a General Motors common stockholder participates in any of these plans or
maintains other accounts under a different name (e.g., with and without a
middle initial), such stockholder may receive more than one set of
solicitation materials. To ensure that all shares are voted, such stockholder
must execute and return every consent received.
Brokers, dealers, banks, voting trustees and their nominees who desire a
supply of this solicitation material for transmittal by them to beneficial
owners should write to General Motors Corporation, c/o Morrow & Co., Inc., 909
Third Avenue, 20th Floor, New York, NY 10022-4799.
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Any consent given pursuant to this solicitation with respect to either of
the two proposals being submitted for General Motors common stockholder
consent may be revoked by the person giving it at any time before unrevoked
consents representing the requisite number of shares required to approve the
corporate action with respect to such proposal are delivered to General
Motors. Consents may be revoked by filing with the Secretary of General Motors
a written notice of revocation or another form of written consent bearing a
date later than the date of the consent. Any such notice of revocation or
written consent should be sent to General Motors Corporation, 3044 West Grand
Boulevard, Detroit, Michigan 48202-3091, Attention: Secretary.
General Motors and EDS will bear the cost of preparing and mailing
Solicitation Statement/Prospectus materials to General Motors common
stockholders. General Motors will solicit written consents by mail, and the
directors, officers and employees of General Motors may also solicit written
consents by telephone, telegram or personal interview. These persons will
receive no additional compensation for such services. In addition, General
Motors has retained Morrow & Co., Inc. to assist in soliciting written
consents. General Motors has agreed to pay Morrow & Co., Inc. a fee of
$125,000 and reasonable out-of-pocket expenses. Arrangements will be made to
furnish copies of solicitation materials to fiduciaries, custodians and
brokerage houses for forwarding to beneficial owners of $1 2/3 Common Stock,
Class E Common Stock and Class H Common Stock.
139
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GENERAL
MOTORS AND EDS
GENERAL MOTORS
The following table sets forth, as of February 29, 1996, beneficial
ownership of all classes of common stock of General Motors for each current
director, the Chief Executive Officer and the four other most highly
compensated executive officers of General Motors and all current directors and
officers of General Motors as a group. As of the date hereof, all of the
outstanding common stock of EDS was owned by General Motors. Upon consummation
of the Split-Off, each outstanding share of Class E Common Stock will be
automatically converted into one share of EDS Common Stock.
Each of the individuals/groups listed below is the owner of less than one
percent of the outstanding shares and voting power of any class of common
stock of General Motors (based on the number of shares of the applicable class
outstanding on the Record Date), except that the GM Hourly Plan owns 30.9% of
the outstanding shares and voting power of the Class E Common Stock (2.2% of
the combined voting power of the $1 2/3 Common Stock, Class E Common Stock,
and Class H Common Stock). The Capital Group Companies, Inc. is the parent of
six investment management companies which beneficially own 5.3% of the
outstanding shares and voting power of the Class H Common Stock (0.3% of the
combined voting power of the $1 2/3 Common Stock, Class E Common Stock, and
Class H Common Stock). No managed account by itself owns 5% or more of the
Class H Common Stock. Except as otherwise noted in the footnotes, each
individual has sole voting and investment power with respect to the shares
beneficially owned and the totals of shares owned by the individual nominees
and all directors and officers as a group. These shares do not include any
shares of $1 2/3 Common Stock, Class E Common Stock or Class H Common Stock
held by the pension and profit sharing plans or endowment funds of other
corporations or by educational and charitable institutions of which such
directors and officers serve as directors or trustees.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY DEFERRED STOCK
DIRECTORS CLASS OF STOCK OWNED STOCK UNITS TOTAL OPTIONS(A)
- --------- -------------------- ------------ ----------- ------ ----------
<S> <C> <C> <C> <C> <C>
A. L. Armstrong (b)..... $1 2/3 Common Stock 1,500 13,477 14,977 -0-
Class E Common Stock 112 3,848 3,960 -0-
Class H Common Stock 48 1,586 1,634 -0-
J. H. Bryan (b)......... $1 2/3 Common Stock 2,000 2,758 4,758 -0-
T. E. Everhart (b)(c)... $1 2/3 Common Stock 400 5,644 6,044 -0-
Class E Common Stock -0- 3,944 3,944 -0-
Class H Common Stock -0- 1,098 1,098 -0-
C. T. Fisher, III $1 2/3 Common Stock 14,766 6,735 21,501 -0-
(b)(d)(e)..............
Class E Common Stock 224 1,924 2,148 -0-
Class H Common Stock 58 2,120 2,178 -0-
J. W. Marrion, Jr. (b).. $1 2/3 Common Stock 1,000 5,627 6,627 -0-
A. D. McLaughlin (b).... $1 2/3 Common Stock 923 1,131 2,054 -0-
Class E Common Stock -0- 226 226 -0-
Class H Common Stock -0- 560 560 -0-
H. J. Pearce (f)........ $1 2/3 Common Stock 11,124 25,001 36,125 123,138
Class E Common Stock 4,332 -0- 4,332 22,300
Class H Common Stock 21,858 8,402 30,260 35,284
E. T. Pratt, Jr.
(b)(d)(g).............. $1 2/3 Common Stock 200 16,491 16,691 -0-
Class E Common Stock 40 14,416 14,456 -0-
Class H Common Stock 10 11,432 11,442 -0-
</TABLE>
140
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY DEFERRED STOCK
DIRECTORS CLASS OF STOCK OWNED STOCK UNITS TOTAL OPTIONS(A)
- --------- -------------------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
J. G. Smale (b)......... $1 2/3 Common Stock 16,000 4,538 20,538 -0-
Class E Common Stock 200 -0- 200 -0-
Class H Common Stock 200 -0- 200 -0-
J. F. Smith, Jr. (f).... $1 2/3 Common Stock 58,992 55,117 114,109 497,200
Class E Common Stock 27,328 -0- 27,328 -0-
Class H Common Stock 17,897 12,759 30,656 -0-
L. W. Sullivan (b)...... $1 2/3 Common Stock 100 1,654 1,754 -0-
Class E Common Stock -0- 108 108 -0-
Class H Common Stock -0- 117 117 -0-
D. Weatherstone (b)..... $1 2/3 Common Stock 6,000 10,599 16,599 -0-
Class E Common Stock -0- 6,881 6,881 -0-
Class H Common Stock -0- 564 564 -0-
T. H. Wyman (b)(d)...... $1 2/3 Common Stock 1,000 4,764 5,764 -0-
Class E Common Stock 500 412 912 -0-
Class H Common Stock 250 765 1,015 -0-
<CAPTION>
OTHER NAMED EXECUTIVES
- ----------------------
<S> <C> <C> <C> <C> <C>
C. M. Armstrong (h)(i).. $1 2/3 Common Stock 4,950 -0- 4,950 25,000
Class H Common Stock 34,508 9,578 44,086 242,500
L. R. Hughes (f)........ $1 2/3 Common Stock 18,254 27,413 45,667 175,046
Class E Common Stock 13,793 -0- 13,793 -0-
Class H Common Stock 7,609 6,232 13,841 -0-
G. R. Wagoner, Jr. (f).. $1 2/3 Common Stock 13,379 27,094 40,473 160,457
Class E Common Stock 8,881 -0- 8,881 -0-
Class H Common Stock 4,599 6,232 10,831 -0-
All directors and
officers of General
Motors as a group...... $1 2/3 Common Stock 660,285 568,939 1,229,224 4,250,629
Class E Common Stock 233,465 31,759 255,224 22,300
Class H Common Stock 173,061 136,446 309,507 309,584
GM Hourly Plan Special
Trust.................. Class E Common Stock 149,537,219 -0- 149,537,219 -0-
c/o United States Trust
Company of New York
114 West 47th Street
New York, NY 10036
The Capital Group
Companies, Inc......... Class H Common Stock 5,070,200 -0- 5,070,200 -0-
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- --------
(a) General Motors common stocks that may be acquired within 60 days through
exercise of stock option.
(b) Deferred Stock Units--Under a plan adopted by the GM Board, non-employee
directors of General Motors are required to retain a portion of the annual
retainer in deferred stock units of General Motors common stock. Directors
may also elect to defer receipt of all or a portion of their remaining
compensation by converting amounts deferred into units of any class of
General Motors common stock. In anticipation of the Split-Off, after
January 1, 1996 no further amounts could be deferred into Class E Common
Stock units.
141
<PAGE>
Further, under the Director Long-Term Stock Incentive Plan, directors have
been credited with General Motors common stock units related to their
length of service on the GM Board. Under both plans, these stock units are
credited with dividend equivalents in the form of additional stock units of
the same class. Distribution of amounts deferred is not available until age
70, following termination of service on the GM Board, and will be paid in
cash based on the number of stock units and the market price of the shares
at the time of payment.
(c) Does not include 32,000 shares of $1 2/3 Common Stock, 16,700 shares of
Class E Common Stock and 1,400 shares of Class H Common Stock held in the
endowment fund of the California Institute of Technology (the "Institute")
or the Beckman Foundation Equity Index Portfolio, the IDS Beckman
Foundation portfolio and the Sarofim Beckman Foundation portfolio which it
oversees. Dr. Everhart is a member of the Institute's 11-member Investment
Committee which has the power to acquire or dispose of the financial
investments of the Institute.
(d) Deferred Stock Units--Under a plan adopted by the Hughes Board of
Directors (the "Hughes Board"), members of the Hughes Board who are not
employees of either General Motors of Hughes may elect to defer receipt of
all or a portion of their compensation as a director of Hughes. Provisions
of the Hughes deferral plan are identical in all significant respects to
provisions of the GM plan described in footnote (b) above, except that the
portion required to be retained will be in the form of Class H Common
Stock.
(e) Includes 11,378 shares of $1 2/3 Common Stock held in a trust of which Mr.
Fischer is a co-trustee and in which he, among other family members, has a
residuary interest; 1,688 shares of $1 2/3 Common Stock held in two trusts
in which Mr. Fischer has a one-seventh remainderman interest; and 500
shares of $1 2/3 Common Stock held in one trust of which Mr. Fisher is a
co-trustee and the beneficiary is a relative of Mr. Fisher.
(f) "Shares Beneficially Owned" includes shares credited under the General
Motors Savings-Stock Purchase Program ("S-SPP"). Under this program,
participants may contribute up to 15% of eligible salary, subject to
maximum limits established by the Code. "Deferred Stock Units" include
shares under the General Motors Benefit Equalization Plan-Savings ("BEP-
S"). This Plan is a non-qualified "excess benefit" plan that is exempt
from ERISA and the Code limitations, and provides executives with the full
GM matching contribution without regard to such limitations. Amounts
credited under the Plan are maintained in share units of $1 2/3 Common
Stock. Upon distribution of an employee's S-SPP account, all amounts in
the executive's BEP-S account will be paid in cash. Deferred stock units
also include undelivered incentive awards which will vest upon the
occurrence of certain events and which are subject to forfeiture under
certain circumstances.
(g) Does not include shares held by a family member for which Mr. Pratt
disclaims voting or investment power.
(h) Includes 280 shares of $1 2/3 Common Stock held by Mr. Armstrong's wife.
Beneficial ownership of these shares is expressly disclaimed.
(i) "Shares Beneficially Owned" includes shares credited under the Hughes
Salaried Employees' Thrift and Savings Plan. Under this program,
participants may contribute of to 12% of eligible salary, subject to
maximum limits established by the Code. "Deferred Stock Units" include
shares under the Hughes Salaried Employees' Excess Benefits Plan. This
plan is a non-qualified "excess benefit" plan that is exempt from ERISA
and the Code limitations, and provides executives with the full Hughes
matching contribution without regard to such limitations. Amounts credited
under the plan are maintained in share units of Class H Common Stock. Upon
distribution of an employee's Excess Savings account, all amounts will be
paid in cash.
142
<PAGE>
EDS
The following table sets forth certain information regarding the beneficial
ownership of Class E Common Stock as of March 15, 1996, by each of the persons
expected to be a director of EDS immediately after consummation of the Split-
Off, by each other executive officer identified under the Executive
Compensation table above and by all persons expected to be directors and
executive officers of EDS upon consummation of the Split-Off as a group. None
of such persons beneficially owns any $1 2/3 Common Stock or Class H Common
Stock other than Mr. Alberthal, who beneficially owns 20 shares of $1 2/3
Common Stock and 10 shares of Class H Common Stock. Upon consummation of the
Split-Off, each outstanding share of Class E Common Stock will be
automatically converted into one share of EDS Common Stock, and the persons
shown herein as holding Class E Common Stock will own an identical number of
shares of EDS Common Stock and approximately the same percentage of the
outstanding shares of such class. Each of the individuals/groups listed below
is the owner of less than one percent of the outstanding shares and voting
power of the Class E Common Stock (based on the number of shares of Class E
Common Stock outstanding on the Record Date).
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(A)
------------------------ ------------
<S> <C>
Lester M. Alberthal, Jr........................ 109,062
Gary J. Fernandes.............................. 52,000
Jeffrey M. Heller.............................. 321,092
John R. Castle, Jr............................. 35,394
Dean Linderman................................. 79,856
James A. Baker, III............................ -0-
Richard B. Cheney.............................. -0-
Ray J. Groves.................................. -0-
Ray L. Hunt.................................... -0-
C. Robert Kidder............................... 1,000
Judith Rodin................................... -0-
Enrique J. Sosa................................ -0-
Directors and executive officers of EDS as a
group
(15 persons).................................. 787,751
</TABLE>
- --------
(a) Excludes units granted under the Existing EDS Incentive Plan to Messrs.
Alberthal, Fernandes, Heller, Castle and Linderman and all officers and
directors as a group representing 422,000, 228,000, 298,000, 133,000,
248,000 and 1,743,000 shares of unvested restricted Class E 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 1997 through the earlier of normal retirement age or 2009.
GM HOURLY PLAN SPECIAL TRUST
Of the approximately 485.7 million shares of Class E Common Stock
outstanding as of the Record Date, approximately 149.5 million shares, or
approximately 31%, were owned by the GM Hourly Plan Special Trust. The GM
Hourly Plan Special Trust acquired the substantial majority of such shares
pursuant to General Motors' contribution to the GM Hourly Plan, on March 13,
1995, of 173.2 million shares of Class E Common Stock.
All of the contributed shares, together with an additional approximately
16.9 million shares of Class E Common Stock held by the GM Hourly Plan Special
Trust at the time of the contribution, are subject to the restrictions on
transfer in and other terms of a Registration Rights Agreement, dated March
12, 1995 (the "Registration Rights Agreement"), between General Motors and the
GM Hourly Plan Trustees. Upon consummation of the Split-Off, EDS will succeed
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
143
<PAGE>
Agreement applicable to the Class E Common Stock held by the GM Hourly Plan
Special Trust will apply to the EDS Common Stock into which such Class E
Common Stock is converted (for purposes of this discussion, the "Registrable
Securities"). Under the Registration Rights Agreement, the GM Hourly Plan
Special Trust may only transfer Registrable Securities 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 GM Hourly Plan Special Trust
must be reasonably designed to achieve a broad public distribution of the
securities being offered. Subject to certain limitations, the issuer of the
Registrable Securities may postpone the filing or effectiveness of any
registration statement requested by the GM Hourly Plan Special Trust or the
making of any demand transfer at any time the issuer determines that such
action would interfere with any proposal or plan by the issuer to engage in
any material acquisition, merger, tender offer, securities offering or other
material transaction or would require such issuer to make a public disclosure
of previously non-public material information. The Registration Rights
Agreement prohibits the GM Hourly Plan Special Trust from making a negotiated
transfer (i) of more than 2% of the Registrable Securities 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 Registrable
Securities. Following the consummation of the Split-Off, the GM Hourly Plan
Special Trust will be permitted two demand transfers in any twelve-month
period. Restrictions on the GM Hourly Plan Special Trust's transfer of
Registrable Securities under the Registration Rights Agreement will terminate
when the GM Hourly Plan Special Trust owns less than 2% of the EDS Common
Stock then outstanding.
The Registration Rights Agreement also imposes certain restrictions on the
ability of the GM Hourly Plan Special Trust to tender its shares of
Registrable Securities in a third-party tender offer until such Trust owns
7.5% or less of the EDS Common Stock on a fully diluted basis (after which
time it may freely tender into any tender offer for EDS Common Stock). Until
such time, in the event of a tender offer for EDS Common Stock, the right of
the GM Hourly Plan Special Trust to tender its Registrable Securities will
depend on whether EDS has in effect a stockholders rights plan (such as the
EDS Rights Agreement). In general, the GM 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 GM 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 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 GM Hourly Plan Special Trust, and (ii) the GM 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 GM Hourly Plan Special Trust), then the GM Hourly Plan Special
Trust may tender shares in such tender offer, unless EDS gives notice to the
GM 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 GM Hourly Plan Special Trust will have the
option to cause EDS to purchase the number of shares that would have been
purchased from the GM Hourly Plan Special Trust in the tender offer if the GM
Hourly Plan Special Trust had been permitted to tender, at the price per
share, payable in cash, offered in the tender offer.
Pursuant to the Registration Rights Agreement, on June 12, 1995, General
Motors registered under the Securities Act an underwritten public offering of
40,550,000 shares (including an over-allotment option of 5,550,000 shares,
which was exercised in full) of Class E Common Stock owned by the GM Hourly
Plan Special
144
<PAGE>
Trust. In the same offering, General Motors also registered 2,000,000 shares
of Class E Common Stock owned by the GM Salaried Plan Trust. All such shares
were sold to the public at a price per share of $42.375. General Motors
received none of the proceeds from this offering of Class E Common Stock. The
GM Hourly Plan Special Trust and the GM Salaried Plan Trust received aggregate
proceeds from the offering, before deducting expenses, of $1,672,484,750 and
$82,490,000, respectively.
The GM Hourly Plan Special Trust has also agreed, pursuant to a Transfer
Agreement dated as of March 12, 1995 (the "Transfer Agreement") between
General Motors and the GM Hourly Plan Trustees, that for a period that
generally terminates on the second anniversary of the Split-Off, 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 GM Hourly Plan Special
Trust additionally agreed to certain transfer restrictions intended to
preserve the tax-free status of the Split-Off. Such restrictions generally
terminate on the second anniversary of the Merger and do not apply to sales
pursuant to public offerings meeting certain criteria. 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."
The GM Hourly Plan Trustees have been appointed, as fiduciaries within the
meaning of ERISA, to manage the shares of Registrable Securities owned by the
GM Hourly Plan Special Trust. The GM Hourly Plan Trustees have responsibility
to manage prudently the shares of Registrable Securities held by the GM Hourly
Plan Special Trust, in a manner consistent with maximizing the value of the GM
Hourly Plan Special Trust's investment in Registrable Securities and in
accordance with the GM Hourly Plan Trustees' determination of the extent to
which the GM Hourly Plan Special Trust 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 GM Hourly Plan
Trustees have the authority and discretion to cause the GM Hourly Plan Special
Trust to hold such shares or sell all or any portion thereof from time to time
as they may deem appropriate, and to direct the voting of and the exercise of
all other rights relating to such shares. The GM Hourly Plan Trustees have
notified GM and EDS of their intent to manage the disposition of shares of EDS
Common Stock in a manner consistent with maintaining an orderly market for the
EDS Common Stock, although there can be no assurance in this regard. GM and
EDS have been advised that, in order to discharge their fiduciary duties, the
GM Hourly Plan Trustees continually look for attractive opportunities to sell
a portion of their holdings of Class E Common Stock (and following the Split-
Off, EDS Common Stock) consistent with their stated objectives of maximizing
value for the GM Hourly Plan and maintaining an orderly market for such stock.
There can be no assurance as to the timing or size of any offerings of shares
owned by the GM Hourly Plan Special Trust since, subject to the terms of the
Registration Rights Agreement and the Transfer Agreement, the GM Hourly Plan
Trustees have the right to sell such shares at any time. The sale of shares by
the GM Hourly Plan Special Trust will depend on, among other things, market
conditions, the price of, and demand for, such shares, and other factors
outside the control of EDS. The Department of Labor exemption obtained at the
time of the contribution of the shares of Registrable Securities to the GM
Hourly Plan Special Trust does not impose any time constraints on the GM
Hourly Plan Special Trust for any dispositions of such shares. The
compensation of the GM Hourly Plan Trustees is not contingent in any way on
the sale or continued holding of shares of Registrable Securities by the GM
Hourly Plan Special Trust.
The Finance Committee of the GM Board is named fiduciary of the GM Hourly
Plan pursuant to the provisions of ERISA, and a portion of the assets of the
GM Hourly Plan (not including the shares of Registrable Securities owned by
the GM 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.
145
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
GENERAL MOTORS CORPORATION
AND
GM MERGECO CORPORATION
DATED AS OF APRIL , 1996
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of April , 1996 (the "Agreement") by and between
General Motors Corporation, a Delaware corporation ("General Motors"), and GM
Mergeco Corporation, a Delaware corporation ("Mergeco"). General Motors and
Mergeco are referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of Mergeco with and into
General Motors. The Class E Stockholders will receive Holding Common Stock in
exchange for their shares of Class E Common Stock pursuant to the Merger.
Mergeco has been formed for the purpose of effectuating the split-off of
Holding from General Motors and certain related transactions. The Parties
expect that the Merger will further certain of their business objectives
(including, without limitation, the split-off of Holding from General Motors
in a tax-free transaction).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the covenants herein contained, the
Parties agree as follows:
Section 1. Definitions
"Agreement" has the meaning set forth in the preface above.
"Class E Common Stock" means the Class E Common Stock, $0.10 par value per
share, of General Motors.
"Class E Stockholder" means any holder of record of Class E Common Stock.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Delaware Certificate of Merger" has the meaning set forth in Section 2(c)
below.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended.
"EDS" means Electronic Data Systems Corporation, a Texas corporation and a
wholly owned subsidiary of Interco.
"Effective Time" has the meaning set forth in Section 2(d)(i) below.
"General Motors" has the meaning set forth in the preface above.
"General Motors Common Stocks" means collectively the $1 2/3 Par Value
Common Stock, par value $1 2/3 per share, of General Motors (the "$1 2/3
Common Stock"); the Class H Common Stock, par value $0.10 per share, of
General Motors; and the Class E Common Stock.
"Holding" means Electronic Data Systems Holding Corporation, a Delaware
corporation and a wholly owned subsidiary of General Motors.
"Holding Common Stock" means the common stock, $0.01 par value per share, of
Holding.
"Interco" means Electronic Data Systems Intermediate Corporation, a Delaware
corporation and a wholly owned subsidiary of Holding.
"IRS" means the Internal Revenue Service.
A-1
<PAGE>
"Master Services Agreement" means the Master Services Agreement to be entered
into immediately prior to the Closing and after the consummation of the
Reincorporation Merger by and between General Motors and Holding.
"Mergeco" has the meaning set forth in the preface above.
"Mergeco Share" means any share of the Common Stock, no par value, of
Mergeco.
"Merger" has the meaning set forth in Section 2(a) below.
"Parties" has the meaning set forth in the preface above.
"Person" means 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).
"Registration Rights Agreement" means the Registration Rights Agreement dated
March 12, 1995 between General Motors and United States Trust Company of New
York and its affiliate, U.S. Trust Company of California, N.A., as trustees of
the General Motors Special Hourly Employees Pension Trust under the General
Motors Hourly-Rate Employees Pension Plan.
"Reincorporation Merger" has the meaning set forth in Section 3(e) below.
"Requisite Stockholder Approval" means the consent of the holders of (i) a
majority of the voting power of all outstanding shares of the General Motors
Common Stocks, voting together as a single class based on their respective
voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common
Stock, voting as a separate class, and (iii) a majority of the outstanding
shares of Class E Common Stock, voting as a separate class.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Separation Agreement" means the Separation Agreement to be entered into
immediately prior to the Closing and after the consummation of the
Reincorporation Merger by and between General Motors and Holding.
"Special Inter-Company Payment" means $500 million in cash.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of
the directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
"Tax Allocation Agreement" means the Amended and Restated Agreement for the
Allocation of United States Federal, State and Local Income Tax to be entered
into prior to the Closing by and between General Motors and Holding.
"Transactions" means collectively (i) the split-off of Holding from General
Motors in connection herewith, (ii) the consummation of the Merger pursuant
hereto, (iii) the making of the Special Inter-Company Payment to Mergeco, (iv)
the execution and delivery by General Motors and Holding of the Master Services
Agreement, the Tax Allocation Agreement and the Separation Agreement in
connection herewith and (v) the consummation of the other transactions and
events contemplated hereby.
A-2
<PAGE>
Section 2. Basic Transaction.
(a) The Merger. On the terms and subject to the conditions of this
Agreement, Mergeco will merge with and into General Motors (the "Merger") at
the Effective Time. General Motors shall be the corporation surviving the
Merger (the "Surviving Corporation").
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis,
200 East Randolph Street, Chicago, Illinois, on such date as General Motors
may determine (the "Closing Date"), which date shall be after the day on which
all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself) are satisfied
or waived.
(c) Actions at the Closing. At the Closing, General Motors will cause to be
filed with the Secretary of State of the State of Delaware, as provided in
Section 251 of the Delaware General Corporation Law, a Certificate of Merger
(the "Delaware Certificate of Merger").
(d) Effect of Merger.
(i) General. The Merger shall become effective at such time (the
"Effective Time") as General Motors files the Delaware Certificate of
Merger with the Secretary of State of the State of Delaware. The Merger
shall have the effect set forth in Section 259 of the Delaware General
Corporation Law. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of either General Motors or Mergeco in
order to carry out and effectuate the transactions contemplated by this
Agreement.
(ii) Certificate of Incorporation. At the Effective Time, Article Fourth
of the Certificate of Incorporation of General Motors will be amended to
read in its entirety as set forth on Exhibit A hereto and the Certificate
of Incorporation of General Motors as in effect at and as of immediately
prior to the Effective Time, with Article Fourth as so amended and with all
Certificates of Designations then in effect, shall be the Certificate of
Incorporation of the Surviving Corporation.
(iii) Bylaws. The Bylaws of General Motors as in effect at and as of
immediately prior to the Effective Time will remain the Bylaws of the
Surviving Corporation without any modification or amendment as a result of
the Merger.
(iv) Directors and Officers. The directors and officers of General Motors
in office at and as of immediately prior to the Effective Time will remain
the directors and officers of the Surviving Corporation (retaining their
respective positions and terms of office).
(v) Conversion of Class E Common Stock. At and as of the Effective Time,
by virtue of the Merger and without any action on the part of any holder of
any capital stock of General Motors, each share of Class E Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2(d)(vi)) shall be
converted into one fully paid and nonassessable share of Holding Common
Stock. Upon such conversion, all such shares of Class E Common Stock shall
be canceled and shall cease to exist. Accordingly, from and after the
Effective Time, (i) for all purposes of determining the record holders of
Holding Common Stock, the holders of Class E Common Stock immediately prior
to the Effective Time shall be deemed to be holders of Holding Common Stock
and (ii) subject to any transfer of such stock, each such holder shall be
entitled to receive all dividends payable on, and exercise voting rights
and all other rights and privileges with respect to, Holding Common Stock.
Each such holder shall be entitled, upon proper surrender (in accordance
with the requirements of the letter of transmittal and other instructions
provided to such holder following the Effective Time) of the certificate or
certificates representing the shares of Class E Common Stock formerly held
by it, to receive one or more certificates representing the shares of
Holding Common Stock then held by it. All classes and series of General
Motors capital stock, other than Class E Common Stock, shall remain
unaffected as a result of the Merger, except as otherwise set forth in
Exhibit A hereto.
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(vi) Treasury Shares. Each share of Class E Common Stock held by General
Motors as treasury stock immediately prior to the Effective Time shall be
canceled and retired and shall cease to exist, and no stock or other
consideration shall be delivered in exchange therefor.
(vii) Mergeco Shares. Each Mergeco Share issued and outstanding
immediately prior to the Effective Time shall be canceled and retired and
shall cease to exist and no stock or other consideration shall be delivered
in exchange therefor.
(e) Closing of Transfer Records. After the Effective Time, transfers of
shares of Class E Common Stock outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Corporation.
Section 3. Conditions to Obligation to Close. The obligation of General
Motors to consummate the Merger is subject to satisfaction of the following
conditions:
(a) no action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would be reasonably
likely to (A) prevent consummation of any of the transactions contemplated by
this Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (C) cause any of General
Motors or its officers or directors to become liable for any material damages
(and no such injunction, judgment, order, decree, ruling, or charge shall be
in effect);
(b) the Transactions, including the adoption of this Agreement, shall have
received the Requisite Stockholder Approval;
(c) there shall have been no notification from Merrill Lynch, Pierce, Fenner
& Smith Incorporated that its opinion dated March 31, 1996 to General Motors'
board of directors that, as of that date and on the basis of and subject to
the assumptions, limitations and other matters set forth therein, the
Financial Effects of the Transactions (as defined in such opinion) are fair,
from a financial point of view, to General Motors and, accordingly, to General
Motors' common stockholders after consummation of the Merger, namely the
holders of the $1 2/3 Common Stock and the Class H Common Stock, has been
withdrawn or from Lehman Brothers Inc. or Morgan Stanley & Co. Incorporated
that either of their respective opinions, each dated March 31, 1996, to
General Motors' board of directors to the effect that, as of such date, based
on and subject to the assumptions, limitations and other matters set forth
therein, the financial effect of the Split-Off Transactions (as defined in
such opinion) taken as a whole is fair, from a financial point of view, to the
holders of Class E Common Stock, has been withdrawn;
(d) there shall have been no notification from the IRS that its ruling that
the transactions contemplated in the Merger constitute a tax-free distribution
under Section 355 of the Code has been withdrawn or invalidated, and no
determination by the GM Board that the representations and assumptions
underlying such ruling are not true and correct in all material respects;
(e) Interco shall have merged into Holding and thereafter EDS shall have
merged into Holding (together, the "Reincorporation Merger");
(f) Mergeco shall have received the Special Inter-Company Payment from
Holding; and
(g) General Motors and Holding shall have executed and delivered the Master
Services Agreement, the Separation Agreement, the Tax Allocation Agreement and
a succession agreement with respect to the Registration Rights Agreement.
Section 4. Termination.
(a) Termination of Agreement. The Parties may terminate this Agreement (with
the prior authorization of its board of directors, if applicable, whether
before or after stockholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written consent at
any time prior to the Effective Time;
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(ii) General Motors may terminate this Agreement by giving written notice
to Mergeco at any time prior to the Effective Time in the event General
Motors' board of directors concludes that termination would be in the best
interests of General Motors and its stockholders;
(iii) General Motors may terminate this Agreement by giving written
notice to Mergeco at any time prior to the Effective Time in the event any
opinion referred to in Section 3(c) is withdrawn;
(iv) General Motors may terminate this Agreement by giving written notice
to Mergeco at any time prior to the Effective Time in the event that
General Motors has been notified by the IRS or otherwise believes that the
Split-Off would not be treated as a tax-free exchange under Section 355 of
the Code; and
(v) General Motors may terminate this Agreement by giving written notice
to Mergeco in the event the Transactions, including the adoption of this
Agreement, fail to receive the Requisite Stockholder Approval.
(b) Effect of Termination. If either Party terminates this Agreement pursuant
to Section 4(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach).
Section 5. Amendment. This Agreement may be amended at any time and from time
to time if set forth in a writing executed by both Parties; provided, however,
that any such amendment made after this Agreement has received Requisite
Stockholder Approval shall not (i) alter or change the amount or kind of
shares, securities, cash, property and/or rights to be received in exchange for
or on conversion of the Class E Common Stock, (ii) alter or change any term of
the Certificate of Incorporation of the Surviving Corporation or (iii) alter or
change any of the terms and conditions of this Agreement if such alteration or
change would adversely affect the holders of any class or series of General
Motors capital stock.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of
the date first above written.
/s/ General Motors Corporation
/s/ GM Mergeco Corporation
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EXHIBIT A TO MERGER AGREEMENT
ARTICLE FOURTH OF GENERAL MOTORS CERTIFICATE OF INCORPORATION, AFTER GIVING
EFFECT TO THE MERGER
The complete text of Article Fourth of the General Motors Certificate of
Incorporation, as proposed to be amended, appears below. Added text is
underlined. Deleted text has been lined through.
ARTICLE FOURTH
The total authorized capital stock of the Corporation is as follows:
3,706,000,000 2,706,000,000 shares, of which 6,000,000 shares shall be
Preferred Stock, without par value ("Preferred Stock"), 100,000,000 shares
shall be Preference Stock, $0.10 par value ("Preference Stock"), and
3,600,000,000 2,600,000,000 shares shall be Common Stock, of which
2,000,000,000 shares shall be Common Stock, $1 2/3 par value ("Common Stock"),
1,000,000,000 shares shall be Class E Common Stock, $0.10 par value ("Class E
Common Stock") and 600,000,000 shares shall be Class H Common Stock, $0.10 par
value ("Class H Common Stock").
DIVISION I:
COMMON STOCK, CLASS E COMMON STOCKAND CLASS H COMMON STOCK.
The Common Stock, the Class E Common Stock and the Class H Common Stock
shall be identical in all respects and shall have equal rights and privileges,
except as otherwise provided in this Article FOURTH. The relative rights,
privileges and restrictions of the shares of each class are as follows:
(a) Dividend Rights.
Subject to the express terms of any outstanding series of Preferred Stock or
Preference Stock, dividends may be paid in cash or otherwise upon the Common
Stock, the Class E Common Stock and the Class H Common Stock out of the assets
of the Corporation in the relationship and upon the terms provided for below
with respect to each such class:
(1) Dividends on Common Stock.
Dividends on Common Stock may be declared and paid only to the extent of the
assets of the Corporation legally available therefor reduced by an amount
equal to the sum of (A) the paid in surplus attributable to the Class E Common
Stock; (B) that portion of the earned surplus of the Corporation attributable
to the Available Separate Consolidated Net Income of EDS (as defined in
subparagraph (a)(5)) earned since the date of the acquisition by the
Corporation of Electronic Data Systems Corporation, its subsidiaries and
successors ("EDS"); (C) the paid in surplus attributable to the Class H Common
Stock; and (D) (B) that portion of the earned surplus of the Corporation
attributable to the Available Separate Consolidated Net Income of GMHE Hughes
(as defined in subparagraph (a)(6) (a)(5)) earned since the date of the
acquisition by the Corporation of GM Hughes Electronics Corporation, its
subsidiaries and successors ("GMHE Hughes"). Dividends declared and paid with
respect to shares of Common Stock and any adjustments to surplus resulting
from either (i) the repurchase or issuance of any shares of Common Stock or
(ii) any other reason deemed appropriate by the Board of Directors shall be
subtracted from or added to the amounts available for the payment of dividends
on Common Stock. Subject to the foregoing, the declaration and payment of
dividends on the Common Stock, and the amount thereof, shall at all times be
solely in the discretion of the Board of Directors of the Corporation.
(2) Dividends on Class E Common Stock.
Dividends on the Class E Common Stock may be declared and paid only to the
extent of the assets of the Corporation legally available therefor reduced by
an amount equal to the sum of (A) the paid in surplus attributable to the
Common Stock; (B) the paid in surplus attributable to the Class H Common
Stock; and (C)
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the earned surplus of the Corporation exclusive of that portion of such earned
surplus attributable to the Available Separate Consolidated Net Income of EDS
earned since the date of the acquisition of EDS by the Corporation. Dividends
declared and paid with respect to shares of Class E Common Stock and any
adjustments to surplus resulting from either (i) the repurchase or issuance of
any shares of Class E Common Stock or (ii) any other reason deemed appropriate
by the Board of Directors shall be subtracted from or added to the amounts
available for the payment of dividends on Class E Common Stock. Subject to the
foregoing, the declaration and payment of dividends on the Class E Common
Stock, and the amount thereof, shall at all times be solely in the discretion
of the Board of Directors of the Corporation.
(3)(2) Dividends on Class H Common Stock
Dividends on the Class H Common Stock may be declared and paid only to the
extent of the assets of the Corporation legally available therefor reduced by
an amount equal to the sum of (A) the paid in surplus attributable to the
Common Stock; and (B) the paid in surplus attributable to the Class E Common
Stock; and (C) the earned surplus of the Corporation exclusive of that portion
of such earned surplus attributable to the Available Separate Consolidated Net
Income of GMHE Hughes earned since the date of the acquisition of GMHE Hughes
by the Corporation. Dividends declared and paid with respect to shares of
Class H Common Stock and any adjustments to surplus resulting from either (i)
the repurchase or issuance of any shares of Class H Common Stock or (ii) any
other reason deemed appropriate by the Board of Directors shall be subtracted
from or added to the amounts available for the payment of dividends on Class H
Common Stock. Subject to the foregoing, the declaration and payment of
dividends on the Class H Common Stock, and the amount thereof, shall be at all
times be solely in the discretion of the Board of Directors of the
Corporation.
(4)(3) Discrimination Among Between Common Stock, Class E Common Stock and
Class H Common Stock
The Board of Directors, subject to the provisions of subparagraphs (a)(1),
and (a)(2) and (a)(3), may, in its sole discretion, declare dividends payable
exclusively to the holders of Common Stock, exclusively to the holders of
Class E Common Stock, exclusively to the holders of Class H Common Stock or to
the holders of any two or more of both such classes in equal or unequal
amounts, notwithstanding the respective amounts of surplus available for
dividends to each class, the respective voting and liquidation rights of each
class, the amount of prior dividends declared on each class or any other
factor.
(5)(4) Available Separate Consolidated Net Income of EDS.
The "Available Separate Consolidated Net Income of EDS" for any period
during which Electronic Data Systems Corporation (together with its
subsidiaries and successors, "EDS") was a direct or indirect wholly-owned
subsidiary of the Corporation shall mean the separate net income of EDS on a
consolidated basis, determined in accordance with generally accepted
accounting principles without giving effect to any adjustment which would
result from accounting for the acquisition of EDS by the Corporation using the
purchase method, calculated for each quarterly accounting period and
multiplied by a fraction, the numerator of which shall be the weighted average
number of shares of Class E Common Stock outstanding during such accounting
period and the denominator of which shall initially be 121,888,889; provided,
that such fraction shall in no event be greater than one. The denominator of
the foregoing fraction shall be adjusted from time to time as deemed
appropriate by the Board of Directors of the Corporation (i) to reflect
subdivisions (by stock split or otherwise) and combinations (by reverse stock
split or otherwise) of the Class E Common Stock and stock dividends payable in
shares of Class E Common Stock to holders of Class E Common Stock, (ii) to
reflect the fair market value of contributions of cash or property by the
Corporation to EDS or of cash or property of the Corporation to, or for the
benefit of, employees of EDS in connection with employee benefit plans or
arrangements of the Corporation or any of its subsidiaries, (iii) to reflect
the number of shares of capital stock of the Corporation contributed to, or
for the benefit of, employees of EDS in connection with benefit plans or
arrangements of the Corporation or any of its subsidiaries, (iv) to reflect
payments by EDS to the Corporation of amounts applied to the repurchase by the
Corporation of shares of Class E Common Stock, and (v) to reflect the number
of shares of Class E Common Stock repurchased by EDS and no longer
outstanding; provided, that in the case of adjustments
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pursuant to clause (iv) or clause (v) above, adjustments shall be made only to
the extent that the Board of Directors of the Corporation, in its sole
discretion, shall have approved such repurchase of shares by the Corporation
or EDS and, in the case of clause (iv) above, shall declare such payments by
EDS to be applied to such repurchase. Any changes in the numerator or
denominator of the foregoing fraction occurring after the end of a quarterly
accounting period shall not result in an adjustment to the Available Separate
Consolidated Net Income of EDS for such quarterly accounting period or any
prior period. For all purposes, determination of the Available Separate
Consolidated Net Income of EDS shall be in the sole discretion of the Board of
Directors of the Corporation and shall be final and binding on all
stockholders of the Corporation.
(6)(5) Available Separate Consolidated Net Income of GMHE Hughes.
The "Available Separate Consolidated Net Income of GMHE Hughes" shall mean
the separate net income of GMHE Hughes on a consolidated basis, determined in
accordance with generally accepted accounting principles without giving effect
to any adjustment which would result from accounting for the acquisition of
GMHE Hughes by the Corporation using the purchase method, calculated for each
quarterly accounting period and multiplied by a fraction, the numerator of
which shall be the weighted average number of shares of Class H Common Stock
outstanding during such accounting period and the denominator of which shall
initially be 200,000,000; provided, that such fraction shall in no event be
greater than one. The denominator of the foregoing fraction shall be adjusted
from time to time as deemed appropriate by the Board of Directors of the
Corporation (i) to reflect subdivisions (by stock split or otherwise) and
combinations (by reverse stock split or otherwise) of the Class H Common Stock
and stock dividends payable in shares of Class H Common Stock to holders of
Class H Common Stock, (ii) to reflect the fair market value of contributions
of cash or property by the Corporation to GMHE Hughes or of cash or property
of the Corporation to, or for the benefit of, employees of GMHE Hughes in
connection with employee benefit plans or arrangements of the Corporation or
any of its subsidiaries, (iii) to reflect the number of shares of capital
stock of the Corporation contributed to, or for the benefit of, employees of
GMHE Hughes in connection with benefit plans or arrangements of the
Corporation or any of its subsidiaries, (iv) to reflect payments by GMHE
Hughes to the Corporation of amounts applied to the repurchase by the
Corporation of shares of Class H Common Stock, and (v) to reflect the number
of shares of Class H Common Stock repurchased by GMHE Hughes and no longer
outstanding; provided, that in the case of adjustments pursuant to clause (iv)
or clause (v) above, adjustments shall be made only to the extent that the
Board of Directors of the Corporation, in its sole discretion, shall have
approved such repurchase of shares by the Corporation or GMHE Hughes and, in
the case of clause (iv) above, shall declare such payments by GMHE Hughes to
be applied to such repurchase. Any changes in the numerator or denominator of
the foregoing fraction occurring after the end of a quarterly accounting
period shall not result in an adjustment to the Available Separate
Consolidated Net Income of GMHE Hughes for such quarterly accounting period or
any prior period. For all purposes, determination of the Available Separate
Consolidated Net Income of GMHE Hughes shall be in the sole discretion of the
Board of Directors of the Corporation and shall be final and binding on all
stockholders of the Corporation.
(b) Voting Rights.
The holders of Common Stock, Class E Common Stock and Class H Common Stock
shall vote together as a single class on all matters; provided, however, that
(i) the holders of Common Stock voting separately as a class shall be entitled
to approve by the vote of a majority of the shares of Common Stock then
outstanding any amendment, alteration or repeal of any of the provisions of
this Certificate of Incorporation which adversely affects the rights, powers
or privileges of the Common Stock; (ii) the holders of Class E Common Stock
voting separately as a class shall be entitled to approve by the vote of a
majority of the shares of Class E Common Stock then outstanding any amendment,
alteration or repeal of any of the provisions of this Certificate of
Incorporation which adversely affects the rights, powers or privileges of the
Class E Common Stock; (iii) the holders of Class H Common Stock voting
separately as a class shall be entitled to approve by the vote of a majority
of the shares of Class H Common Stock then outstanding any amendment,
alteration or repeal of any of the provisions of this Certificate of
Incorporation which adversely affects the rights, powers or privileges of the
Class H Common Stock; (iv) any increase in the number of authorized shares of
Class E Common Stock shall be subject to approval by both (A) the holders of a
majority of the shares of Common Stock, Class E Common
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Stock and Class H Common Stock then outstanding, voting together as a single
class based upon their respective voting rights, and (B) the holders of a
majority of the shares of Class E Common Stock then outstanding, voting
separately as a class; and (v)(iii) any increase in the number of authorized
shares of Class H Common Stock shall be subject to approval by both (A) the
holders of a majority of the shares of Common Stock, Class E Common Stock and
Class H Common Stock then outstanding, voting together as a single class based
upon their respective voting rights, and (B) the holders of a majority of the
shares of Class H Common Stock then outstanding, voting separately as a class.
Subject to adjustment pursuant to paragraph (e) hereof, each holder of Common
Stock shall be entitled to one vote, in person or by proxy, for each share of
Common Stock standing in his name on the stock transfer books of the
Corporation; each holder of Class E Common Stock shall be entitled to one-
quarter (0.25) of a vote, in person or by proxy, for each share of Class E
Common Stock standing in his name on the stock transfer books of the
Corporation, and each holder of Class H Common Stock shall be entitled to one-
half (0.5) of a vote, in person or by proxy, for each share of Class H Common
Stock standing in his name on the stock transfer books of the Corporation.
(c) Exchangeability.
(1) After December 31, 1994, the Board of Directors of the Corporation, in
its sole discretion and by a majority vote of the directors then in office,
may at any time effect a recapitalization of the Corporation by declaring that
all of the outstanding shares of Class E Common Stock shall be exchanged for
fully paid and nonassessable shares of Common Stock in accordance with the
applicable Exchange Rate (as defined in subparagraph (c)(7)); provided, that
the Board of Directors may effect such recapitalization only if, during each
of the five full fiscal years preceding such recapitalization, the Board of
Directors has declared and paid cash dividends on the Class E Common Stock
equal to or greater than the Class E Payout Ratio for such year (as defined in
subparagraph (c)(3)) multiplied by the Available Separate Consolidated Net
Income of EDS for the prior fiscal year.
(2) After December 31, 1995, the Board of Directors of the Corporation, in
its sole discretion and by a majority vote of the directors then in office,
may at any time effect a recapitalization of the Corporation by declaring that
all of the outstanding shares of Class H Common Stock shall be exchanged for
fully paid and nonassessable shares of Common Stock in accordance with the
applicable Exchange Rate (as defined in subparagraph (c)(7)(c)(4)); provided,
that the Board of Directors may effect such recapitalization only if, during
each of the five full fiscal years preceding such recapitalization, the Board
of Directors has declared and paid cash dividends on the Class H Common Stock
equal to or greater than the Class H Payout Ratio for such year (as defined in
subparagraph (c)(4)(c)(2)) multiplied by the Available Separate Consolidated
Net Income of GMHE Hughes for the prior fiscal year.
(3) For purposes of this paragraph (c) of Division I of this Article FOURTH,
the term "Class E Payout Ratio" shall mean, for any fiscal year, the lesser of
(A) 0.25 or (B) the quotient of (x) the total cash dividends paid on the
Common Stock in respect of such fiscal year, divided by (y) (i) the
consolidated net income of the Corporation and its subsidiaries for such
fiscal year minus (ii) the Available Separate Consolidated Net Income of EDS
for such fiscal year minus (iii) the Available Separate Consolidated Net
Income of GMHE for such fiscal year; provided, that nothing in this paragraph
(c) shall be deemed to limit or restrict the authority of the Board of
Directors of the Corporation to declare and pay dividends on Class E Common
Stock and Common Stock at such times and in such amounts as the Board of
Directors in its sole discretion (subject to paragraph (a)) may determine.
(4)(2) For purposes of this paragraph (c) of Division I of this Article
FOURTH, the term "Class H Payout Ratio" shall mean, for any fiscal year, the
lesser of (A) 0.25 or (B) the quotient of (x) the total cash dividends paid on
the Common Stock in respect of such fiscal year, divided by (y) (i) the
consolidated net income of the Corporation and its subsidiaries for such
fiscal year minus (ii) the Available Separate Consolidated Net Income of EDS
for any portion of such fiscal year during which EDS was a direct or indirect
wholly owned subsidiary of the Corporation, minus (iii) the Available Separate
Consolidated Net Income of GMHE Hughes for such fiscal year; provided, that
nothing in this paragraph (c) shall be deemed to limit or restrict the
authority of the Board of
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Directors of the Corporation to declare and pay dividends on Class H Common
Stock and Common Stock at such times and in such amounts as the Board of
Directors in its sole discretion (subject to paragraph (a)) may determine.
(5) In the event of the sale, transfer, assignment or other disposition by
the Corporation of the business of EDS substantially as an entirety to a
person, entity or group of which the Corporation is not a majority owner
(whether by merger, consolidation, sale of assets or stock, liquidation,
dissolution, winding up or otherwise), effective upon the consummation of such
sale, transfer, assignment or other disposition and automatically without any
action on the part of the Corporation or its Board of Directors or on the part
of the holders of shares of Class E Common Stock, the Corporation shall be
recapitalized and all outstanding shares of Class E Common Stock shall be
exchanged for fully paid and nonassessable shares of Common Stock at the
applicable Exchange Rate (as defined in subparagraph (c)(7)).
(6)(3) In the event of the sale, transfer, assignment or other disposition
by the Corporation of substantially all of the business of Hughes Aircraft
Company, its subsidiaries and successors or of substantially all of the other
business of GMHE Hughes to a person, entity or group of which the Corporation
is not a majority owner (whether by merger, consolidation, sale of assets or
stock, liquidation, dissolution, winding up or otherwise), effective upon the
consummation of such sale, transfer, assignment or other disposition and
automatically without any action on the part of the Corporation or its Board
of Directors or on the part of the holders of shares of Class H Common Stock,
the Corporation shall be recapitalized and all outstanding shares of Class H
Common Stock shall be exchanged for fully paid and nonassessable shares of
Common Stock at the applicable Exchange Rate (as defined in subparagraph
(c)(7)(c)(4)).
(7)(4) For purposes of this paragraph (c) of Division I of this Article
FOURTH, the term "Exchange Rate" applicable to the Class E Common Stock and to
the Class H Common Stock shall mean the number of shares of Common Stock for
which each share of Class E Common Stock and Class H Common Stock,
respectively, shall be exchangeable pursuant to subparagraphs (c)(1) and
(c)(5) or (c)(2) and (c)(6)(c)(3), as the case may be, of this paragraph (c)
determined as follows: Each share of Class E Common Stock or Class H Common
Stock, as the case may be, shall be exchangeable for such number of shares of
Common Stock (calculated to the nearest five decimal places) as is determined
by dividing (A) the product resulting from multiplying (i) the Average Market
Price Per Share (as defined in subparagraph (c)(8) or (c)(9), as the case may
be), of such Class E Common Stock or (c)(5)) of such Class H Common Stock by
(ii) 1.2, by (B) the Average Market Price Per Share of Common Stock.
(8) For purposes of computing the Exchange Rate applicable to the Class E
Common Stock pursuant to this paragraph (c) of Division I of this Article
FOURTH, the Average Market Price Per Share of Common Stock or Class E Common
Stock, as the case may be, shall mean the average of the daily closing prices
per share for such Common Stock or Class E Common Stock for the fifteen (15)
consecutive trading days ending one (1) trading day prior to either (A) in the
case of an exchange pursuant to subparagraph (c)(1), the date the Exchange
Notice (as defined in subparagraph (c)(12)) is mailed or (B) in the case of an
exchange pursuant to subparagraph (c)(5), the date of the public announcement
by the Corporation or one of its subsidiaries of the first to occur of the
following: that the Corporation or one of its subsidiaries (1) has entered
into an agreement in principle with respect to such transaction or (2) has
entered into a definitive agreement with respect thereto. The closing price
for each day shall be the closing sales price as reported in The Wall Street
Journal or, if not reported therein, as reported in another newspaper of
national circulation chosen by the Board of Directors of the Corporation or,
in case no such sale takes place on such day, the average of the closing bid
and asked prices regular way on the New York Stock Exchange, or if the Common
Stock or Class E Common Stock is not then listed or admitted to trading on the
New York Stock Exchange, on the largest principal national securities exchange
on which such stock is then listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, then the last
reported sale prices for such shares in the over-the-counter market, as
reported on the National Association of Securities Dealers Automatic Quotation
System, or, if such sale prices shall not be reported thereon, the average of
the closing bid and asked prices so reported, or, if such bid and asked prices
shall not be reported thereon, as the same shall be reported by the National
Quotation Bureau Incorporated, or,
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in all other cases, an appraised market value furnished by any New York Stock
Exchange member firm selected from time to time by the Board of Directors or
the Finance Committee or Executive Committee of the Corporation for that
purpose.
(9)(5) For purposes of computing the Exchange Rate applicable to the Class H
Common Stock pursuant to this paragraph (c) of Division I of this Article
FOURTH, the Average Market Price Per Share of Common Stock or Class H Common
Stock, as the case may be, shall mean the average of the daily closing prices
per share for such Common Stock or Class H Common Stock for the fifteen (15)
consecutive trading days ending one (1) trading day prior to either (A) in the
case of an exchange pursuant to subparagraph (c)(2)(c)(1), the date the
Exchange Notice (as defined in subparagraph (c)(12))(c)(8)) is mailed or (B)
in the case of an exchange pursuant to subparagraph (c)(6)(c)(3), the date of
the public announcement by the Corporation or one of its subsidiaries of the
first to occur of the following: that the Corporation or one of its
subsidiaries (1) has entered into an agreement in principle with respect to
such transaction or (2) has entered into a definitive agreement with respect
thereto. The closing price for each day shall be the closing sales price as
reported in The Wall Street Journal or, if not reported therein, as reported
in another newspaper of national circulation chosen by the Board of Directors
of the Corporation or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way on the New York Stock
Exchange, or if the Common Stock or Class H Common Stock is not then listed or
admitted to trading on the New York Stock Exchange, on the largest principal
national securities exchange on which such stock is then listed or admitted to
trading, or if not listed or admitted to trading on any national securities
exchange, then the last reported sale prices for such shares in the over-the-
counter market, as reported on the National Association of Securities Dealers
Automated Quotation System, or, if such sale prices shall not be reported
thereon, the average of the closing bid and asked prices so reported, or, if
such bid and asked prices shall not be reported thereon, as the same shall be
reported by the National Quotation Bureau Incorporated, or, in all other
cases, an appraised market value furnished by any New York Stock Exchange
member firm selected from time to time by the Board of Directors or the
Finance Committee or Executive Committee of the Corporation for that purpose.
(10)(6) No fraction of a share of Common Stock shall be issued in connection
with the exchange of shares of Class E Common Stock or Class H Common Stock
into Common Stock, but in lieu thereof, each holder of Class E Common Stock or
Class H Common Stock, as the case may be, who would otherwise be entitled to a
fractional interest of a share of Common Stock shall, upon surrender of such
holder's certificate or certificates representing shares of Class E Common
Stock or Class H Common Stock, receive a cash payment (without interest) (the
"Fractional Payment") equal to the product resulting from multiplying (A) the
fraction of a share of Common Stock to which such holder would otherwise have
been entitled by (B) the Average Market Price Per Share of the Common Stock on
the Exchange Date (as defined in subparagraph (c)(12))(c)(8)).
(11)(7) No adjustments in respect of dividends shall be made upon the
exchange of any shares of Class E Common Stock or Class H Common Stock;
provided, however, that if the Exchange Date with respect to Class E Common
Stock or Class H Common Stock shall be subsequent to the record date for the
payment of a dividend or other distribution thereon or with respect thereto
but prior to the payment or distribution thereof, the registered holders of
such shares at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on such shares on the date
set for payment of such dividend or other distribution notwithstanding the
exchange of such shares or the Corporation's default in payment of the
dividend or distribution due on such date.
(12)(8) At such time or times as the Corporation exercises it right to cause
all of the shares of Class E Common Stock or Class H Common Stock to be
exchanged for Common Stock in accordance with subparagraph (c)(1) or (c)(2) of
this paragraph (c) of Division I of this Article FOURTH and at such time as
the Corporation causes the exchange of such Class E Common Stock or Class H
Common Stock for Common Stock as a result of a sale, transfer, assignment or
other disposition of the type referred to in subparagraph (c)(5) or
(c)(6)(c)(3) of this paragraph (c), the Corporation shall give notice of such
exchange to the holders of Class E Common Stock or Class H Common Stock, as
the case may be, whose shares are to be exchanged, by mailing by first-class
mail a notice of such exchange (the "Exchange Notice"), in the case of an
exchange in accordance with subparagraph
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(c)(1) or (c)(2) not less than thirty (30) nor more than sixty (60) days prior
to the date fixed for such exchange (the "Exchange Date"), and in the case of
an exchange in accordance with subparagraph (c)(5) or (c)(6)(c)(3) as soon as
practicable before or after the Exchange Date, in either case to their last
addresses as they shall appear upon the Corporation's books. Each such
Exchange Notice shall specify the Exchange Date and the Exchange Rate
applicable to such exchange, and shall state that issuance of certificates
representing Common Stock to be received upon exchange of shares of Class E
Common Stock or Class H Common Stock, as the case may be, shall be upon
surrender of certificates representing such shares of Class E Common Stock or
Class H Common Stock.
(13)(9) Before any holder of shares of Class E Common Stock or Class H
Common Stock shall be entitled to receive certificates representing such
shares of Common Stock, he shall surrender at such office as the Corporation
shall specify certificates for such shares of Class E Common Stock or Class H
Common Stock, as the case may be, duly endorsed to the Corporation or in blank
or accompanied by proper instruments of transfer to the Corporation or in
blank, unless the Corporation shall waive such requirement. The Corporation
will, as soon as practicable after such surrender of certificates representing
such shares of Class E Common Stock or Class H Common Stock, issue and deliver
at the office of the transfer agent representing the Common Stock to the
person for whose account such shares of Class E Common Stock or Class H Common
Stock were so surrendered, or to his nominee or nominees, certificates
representing the number of whole shares of Common Stock to which he shall be
entitled as aforesaid, together with the Fractional Payment, if any.
(14)(10) From and after any applicable the Exchange Date, all rights of a
holder of shares of Class E Common Stock or Class H Common Stock which were
exchanged for shares of Common Stock shall cease except for the right, upon
surrender of the certificates representing such shares of Class E Common Stock
or Class H Common Stock, as the case may be, to receive certificates
representing shares of Common Stock together with a Fractional Payment, if
any, as contemplated by subparagraphs (c)(10)(c)(6) and (c)(13)(c)(9) of this
paragraph (c) and rights to dividends as provided in subparagraph
(c)(11)(c)(7). No holder of a certificate which immediately prior to the
applicable Exchange Date represented shares of Class E Common Stock or Class H
Common Stock, as the case may be, shall be entitled to receive any dividend or
other distribution with respect to shares of Common Stock until surrender of
such holder's certificate for a certificate or certificates representing
shares of Common Stock. Upon such surrender, there shall be paid to the holder
the amount of any dividends or other distributions (without interest) which
theretofore became payable with respect to a record date after the Exchange
Date, but which were not paid by reason of the foregoing, with respect to the
number of whole shares of Common Stock represented by the certificate or
certificates issued upon such surrender. From and after an the Exchange Date
applicable to the Class E Common Stock or the Class H Common Stock, the
Corporation shall, however, be entitled to treat the certificates for Class E
Common Stock or Class H Common Stock, as the case may be, which have not yet
been surrendered for exchange as evidencing the ownership of the number of
whole shares of Common Stock for which the shares of Class E Common Stock or
Class H Common Stock represented by such certificates shall have been
exchanged, notwithstanding the failure to surrender such certificates.
(15)(11) If any certificate for shares of Common Stock is to be issued in a
name other than that in which the certificate representing shares of Class E
Common Stock or Class H Common Stock surrendered in exchange therefor is
registered, it shall be a condition of such issuance that the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of certificates for such shares of Common Stock in a
name other than that of the record holder of the certificate surrendered, or
shall establish to the satisfaction of the Corporation or its agent that such
tax has been paid or is not applicable. Notwithstanding anything to the
contrary in this paragraph (c), the Corporation shall not be liable to a
holder of shares of Class E Common Stock or Class H Common Stock for any
shares of Common Stock or dividends or distributions thereon delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(16)(12) At such time as any Exchange Notice is delivered with respect to
any shares of Class E Common Stock or Class H Common Stock, or at the time of
the Exchange Date, if earlier, the Corporation shall have reserved and kept
available, solely for the purpose of issuance upon exchange of the outstanding
shares of Class E Common Stock or Class H Common Stock, as the case may be,
such number of shares of Common Stock as
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shall be issuable upon the exchange of the number of shares of Class E Common
Stock or Class H Common Stock specified or to be specified in the applicable
Exchange Notice, provided, that nothing contained herein shall be construed to
preclude the Corporation from satisfying its obligations in respect of the
exchange of the outstanding shares of Class E Common Stock or Class H Common
Stock, as the case may be, by delivery of purchased shares of Common Stock
which are held in the treasury of the Corporation.
(d) Liquidation Rights.
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after there shall have been
paid or set apart for the holders of Preferred Stock and Preference Stock the
full preferential amounts to which they are entitled, the holders of Common
Stock, Class E Common Stock and Class H Common Stock shall be entitled to
receive the assets of the Corporation remaining for distribution to its
stockholders, on a per share basis in proportion to the respective per share
liquidation units of such classes. Subject to adjustment pursuant to paragraph
(e) hereof, each share of Common Stock, Class E Common Stock and Class H
Common Stock shall initially be entitled to liquidation units of one (1.0),
one-quarter (0.25), and one-half (0.5), respectively.
(e) Subdivision or Combination.
(1) If after December 20, 1985, the Corporation shall in any manner
subdivide (by stock split or otherwise) or combine (by reverse stock split or
otherwise) the outstanding shares of the Common Stock, Class E Common Stock or
Class H Common Stock, or pay a stock dividend in shares of any class to
holders of that class, the per share voting rights specified in paragraph (b)
and the per share liquidation units specified in paragraph (d) of Class E
Common Stock and Class H Common Stock relative to Common Stock shall be
appropriately adjusted so as to avoid any dilution in the aggregate voting or
liquidation rights of any class. Distribution by the Corporation of shares of
any class of its common stock as a dividend on any other class of its common
stock shall not require an adjustment pursuant to this paragraph (e)(1).
(2) If after December 20, 1985, the Corporation shall distribute shares of
Class E Common Stock or Class H Common Stock (such class being hereinafter
referred to as the "Distributed Class") as a dividend (the "Dividend") on
Common Stock (such class being hereinafter referred to as the "Recipient
Class"), then the per share liquidation rights of the classes of common stock
set forth in paragraph (d) above, as they may have been previously adjusted,
shall be adjusted so that:
(A) each holder of shares of any class other than the Recipient Class
shall be entitled to, with respect to such holder's interest in each such
class, the same percentage of the aggregate liquidation units of all shares
of the Corporation's common stock immediately after the Dividend as such
holder was entitled to, with respect to such holder's interest in such
class immediately prior to the Dividend; and
(B) each holder of shares of the Recipient Class shall be entitled to,
with respect to such holder's interest in the Recipient Class and all
shares of the Distributed Class issued with respect to such holder's shares
of the Recipient Class, the same percentage of the aggregate liquidation
units of all shares of the Corporation's common stock immediately after the
Dividend as such holder was entitled to with respect to such holder's
interest in the Recipient Class immediately prior to the Dividend;
provided, that any adjustment pursuant to this subparagraph (e)(2)(B) shall
be made to the liquidation units of the Recipient Class.
Notwithstanding the foregoing provisions of this subparagraph (e)(2) or any
other provision of this Article FOURTH, in the event of the payment of the
first Dividend of Class H Common Stock on the Common Stock prior to September
16, 1986, no adjustment pursuant to this subparagraph (e)(2) shall be made to
the liquidation rights of the Class H Common Stock, except to the extent that
such Dividend shall exceed 20,000,000 shares of Class H Common Stock, but an
adjustment shall be made to the liquidation rights of the Common Stock and the
Class E Common Stock so that; (i) the ratio of the aggregate liquidation units
of the Common Stock to the aggregate liquidation units of the Class E Common
Stock, determined immediately prior to the Dividend, is the same as the ratio
of the aggregate liquidation units of the Common Stock plus the Class H Common
Stock
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distributed pursuant to the Dividend to the aggregate liquidation units of the
Class E Common Stock, determined immediately after the Dividend; and (ii) the
sum of the aggregate liquidation units of the Common Stock plus the Class E
Common Stock, computed immediately prior to the Dividend, equals the sum of
the aggregate liquidation units of the Common Stock plus the Class E Common
Stock, computed immediately after the Dividend.
In no event will any adjustments be made pursuant to this subparagraph
(e)(2) if the adjustment called for herein would reduce the liquidation units
of any class of common stock to less than zero.
(3) The determination of any adjustment required under this paragraph (e)
shall be made by the Corporation's Board of Directors; any such determination
shall be binding and conclusive upon all holders of shares of all classes of
the Corporation's common stock. Following any such determination, the
Secretary of the Corporation shall maintain a record of any such adjustment.
DIVISION II:
PREFERRED STOCK.
A statement of the relative rights of the holders of Preferred Stock and a
statement of the limits of variation between each series of Preferred Stock as
to rate of dividends and price of redemption, a statement of the provisions in
these respects of the Preferred Stock-$5 Series and the Preferred Stock-$3.75
Series, and a statement of the voting powers and the designations, powers,
privileges and rights, and the qualifications, limits or restrictions thereof
of the various series thereof, except so far as the Board of Directors is
expressly authorized to fix the same by resolution or resolutions for the
various series of the Preferred Stock, are as follows:
Preferred Stock of the Corporation may be issued in various series as may be
determined from time to time by the Board of Directors, each such series to be
distinctly designated, provided, however, that of the Preferred Stock
authorized or to be authorized, 1,875,366 shares shall be designated as
Preferred Stock-$5 Series and 1,000,000 shares shall be designated as
Preferred Stock-$3.75 Series. The Board of Directors may from time to time
authorize the issuance of Preferred Stock-$5 Series additional to the said
1,875,366 shares. All shares of any one series of Preferred Stock shall be
alike in every particular, and all series shall rank equally and be identical
in all respects except as to the dividend rate and the amount payable upon the
exercise of the right to redeem.
The dividend rate on the Preferred Stock-$5 Series shall be $5.00 per annum
and no more, the dividend rate on the Preferred Stock-$3.75 Series shall be
$3.75 per annum and no more, and the dividend on the Preferred Stock of each
series additional to the $5 Series and the $3.75 Series shall be such rate as
may be fixed by the Board of Directors in the resolution or resolutions
providing for the issuance of the Preferred Stock of such series, and as shall
be stated on the face or back of the certificates of stock therefor.
The amount payable upon the exercise of the right to redeem the Preferred
Stock-$5 Series shall be $120.00 a share and accrued dividends, the amount
payable upon the exercise of the right to redeem the Preferred Stock-$3.75
Series shall be $100.00 a share and accrued dividends, and the amount payable
on the exercise of the right to redeem Preferred Stock of each series
additional to the $5 Series and the $3.75 Series shall be an amount as may be
fixed by the Board of Directors in the resolution or resolutions providing for
the issuance of the Preferred Stock of such series, and as shall be stated on
the face or back of the certificates of stock therefor.
All other provisions herein set forth in respect of the Preferred Stock of
the Corporation shall apply to all the Preferred Stock of the Corporation,
irrespective of any variations between the Preferred Stock of the different
series.
The holders of the Preferred Stock shall be entitled to receive cumulative
dividends, when and as declared by the Board of Directors, at the rates fixed
for the respective series in the Certificate of Incorporation or in the
resolution or resolutions of the Board of Directors providing for the issuance
of the respective series, and no more, payable quarterly on the dates to be
fixed by the By-Laws. The periods between such dates commencing
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on such dates are herein designated as "dividend periods." Dividends on all
shares of any one series shall commence to accrue and be cumulative from the
first day of the current dividend period within which shares of such series
are first issued, but in the event of the issue of additional shares of such
series subsequent to the date of the first issue of said shares of such
series, all dividends paid on the shares of such series prior to the issue of
such additional shares and all dividends declared payable to holders of record
of shares of such series of a date prior to such issue shall be deemed to have
been paid in respect of the additional shares so issued. Such dividends on the
Preferred Stock shall be in preference and priority to any payment on any
other class of stock of the Corporation.
The dividends on the Preferred Stock shall be cumulative and shall be
payable before any dividend on the Common Stock, Class E Common Stock or Class
H Common Stock or any series of the Preference Stock shall be paid or set
apart so that if in any year dividends a the rates determined for the
respective series of the Preferred Stock shall not be paid thereon, the
deficiency shall be payable before any dividend shall be paid upon or set
apart for the Common Stock, Class E Common Stock or Class H Common Stock or
any series of the Preference Stock. Dividends shall not be declared and paid
on the shares of Preferred Stock of any one series for any dividend period
unless dividends have been or are contemporaneously paid or declared and set
apart for payment thereof on the shares of Preferred Stock of all series, for
all the dividend periods terminating on the same or an earlier date.
Whenever all cumulative dividends on the Preferred Stock outstanding shall
have been paid and a sum sufficient for the payment of the next ensuing
quarterly dividend on the Preferred Stock outstanding shall have been set
aside from the surplus or net profits, the Board of Directors may declare
dividends on the Common Stock, Class E Common Stock or Class H Common Stock or
any series of the Preference Stock, payable then or thereafter, out of any
remaining surplus or net profits, and no holders of any shares of any series
of Preferred Stock, as such, shall be entitled to share therein; provided,
however, that subsequent to the issue of any Preferred Stock herein provided
to be issued, additional to 1,875,366 of Preferred Stock-$5 Series, no
dividends other than dividends payable in Common Stock, Class E Common Stock
or Class H Common Stock shall be paid on the Common Stock, Class E Common
Stock or Class H Common Stock or any series of the Preference Stock unless the
aggregate of the Common Stock, Class E Common Stock and Class H Common Stock
capital and surplus shall exceed $335,700,600 by an amount not less than
$100.00 in respect of each such additional share of Preferred Stock issued and
outstanding; and provided further, that no cash dividends shall be paid on the
Common Stock, Class E Common Stock or Class H Common Stock or any series of
the Preference Stock after the issue of Preferred Stock so long as the net
quick assets in excess of current liabilities of the Corporation are less than
$75.00 in respect of each share of outstanding Preferred Stock. Net quick
assets referred to above shall be made up of cash, drafts, notes and accounts
receivable, inventories, and marketable securities, and the aforesaid current
liabilities shall consist of obligations maturing within one year, as set
forth in the books of the Corporation.
At the option of the Board of Directors, the Preferred Stock shall be
subject to redemption at the amounts fixed for the respective series in the
Certificate of Incorporation or in the resolution or resolutions of the Board
of Directors providing for the issuance of the respective series, together, in
the case of each class or series, with accrued dividends on the shares to be
redeemed, on any dividend paying date in such manner as the Board of Directors
may determine.
The holders of the Preferred Stock shall not have any voting power
whatsoever, except upon the question of selling, conveying, transferring or
otherwise disposing of the property and assets of the Corporation as an
entirety and except as otherwise required by law; provided, however:.
In the event that the Corporation shall fail to pay any dividend on the
shares of any series of the Preferred Stock when it regularly becomes due, and
failure to make such payment shall continue for a period of six months, the
holders of the shares of Preferred Stock as a class, during the continuance of
such non-payment and until the Corporation shall have paid all accrued
dividends on the shares of all series of Preferred Stock, shall have the
exclusive right to elect one quarter of the total number of directors of the
Corporation.
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Unless the holders of at least three-fourths of the shares of Preferred
Stock, as a class, then outstanding shall consent thereto either in writing or
at a special meeting, the Corporation shall not mortgage or pledge or place
any specific lien upon the whole or any part of the property of the
Corporation, but this prohibition shall not be construed to apply to the
execution of any purchase money mortgage or any other purchase money lien, nor
to the assumption of any mortgage or other lien upon property purchased, nor
to the renewal or renewals thereof or to substitutions therefor, in whole or
in part, nor shall it prevent the Corporation at any time from pledging
securities belonging to it for the purpose of securing cash to be used in the
ordinary course of its business, provided such cash advances are procured upon
its obligations which shall mature not more than three years from the date
thereof; nor shall any amendment to any provision contained in this
Certificate of Incorporation in reference to the rights and security of the
holders of the Preferred Stock be authorized, unless such amendment is
consented to by the holders of three-fourths of the shares of Preferred Stock
then issued and outstanding.
DIVISION III:
PREFERENCE STOCK
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article FOURTH, to provide for the issuance of
Preference Stock from time to time in one or more series of any number of
shares, with a distinctive serial designation for each series, provided that
the aggregate number of shares issued and not cancelled of any and all such
series shall not exceed the total number of shares of Preference Stock
authorized by this Article FOURTH, all as shall hereafter be stated and
expressed in the resolution or resolutions providing for the issue of such
Preference Stock from time to time adopted by the Board of Directors. Subject
to said limitations, and provided that each series of Preference Stock shall
rank junior to the Preferred Stock with respect to the payment of dividends
and distributions in liquidation, each series of Preference Stock (a) may have
such voting powers, full or limited, or may be without voting powers; (b) may
be subject to redemption at such time or times and at such prices; (c) may be
entitled to receive dividends (which may be cumulative or noncumulative) at
such rate or rates, on such conditions, and at such times, and payable in
preference to, or in such relation to, the dividends payable on any other
class or classes or series of stock; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the Corporation;
(e) may be made convertible into, or exchangeable for, shares of any other
class or classes of or any other series of the same or any other class or
classes of stock of the Corporation or any other issuer, at such price or
prices or at such rates of exchange, and with such adjustments; (f) may be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional stock (including additional shares of such series or of any other
series) and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the Corporation or
any subsidiary of any outstanding stock of the Corporation; and (h) may have
such other relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof; all as shall be stated in
said resolution or resolutions providing for the issue of such series of
Preference Stock.
Shares of any series of Preference Stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of Preference Stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of Preference Stock to be created by
resolution or resolutions of the Board of Directors or as part of any other
series of Preference Stock, all subject to the conditions or restrictions on
issuance set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of Preference Stock.
DIVISION IV:
MISCELLANEOUS.
From time to time, the Preferred Stock, the Preference Stock, the Common
Stock, the Class E Common Stock and the Class H Common Stock may be increased
or decreased according to law, and may be issued in
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such amounts and proportions as shall be determined by the Board of Directors,
and as may be permitted by law, except that no shares of Preferred Stock in
addition to 1,875,366 shares of the Preferred Stock-$5 Series shall be issued
unless the sum total of the Common Stock, Class E Common Stock and Class H
Common Stock capital and surplus shall exceed $335,700,600 by an amount at
least equal to $100.00 in respect of each additional share of the Preferred
Stock to be issued.
In the event of any liquidation or dissolution or winding up, whether
voluntary or otherwise, of the Corporation, the holders of the Preferred Stock
shall be entitled to be paid the redemption price of each series in full, as
aforesaid, out of the assets whether capital or surplus, $100.00 a share, and,
in every case, the unpaid dividends accrued on such shares, whether or not
earned or declared, before any distribution of the assets to be distributed
shall be made to the holders of Common Stock, Class E Common Stock or Class H
Common Stock or any series of the Preference Stock; but the holders of such
shares shall be entitled to no further participation in such distribution. If
the assets distributable on such liquidation, dissolution or winding up shall
be insufficient to permit the payment to the holders of the Preferred Stock of
the full amount of $100.00 a share the redemption price of each series in full
as aforesaid and accrued dividends as aforesaid, the said assets shall be
distributed pro rata among the holders of the respective series of the
Preferred Stock. After all payments are made as aforesaid, any required
payments shall be made with respect to the Preference Stock, if any,
outstanding, and the remaining assets and funds shall be divided among and
paid to the holders of Common Stock, Class E Common Stock and Class H Common
Stock pro rata in proportion to the respective per share liquidation units of
such classes. The merger or consolidation of the Corporation into or with any
other corporation shall not be or be deemed to be a distribution of assets or
a dissolution, liquidation or winding up for the purposes of this paragraph.
Any Preferred Stock, Preference Stock, Common Stock, Class E Common Stock or
Class H Common Stock, authorized hereunder or under any amendment hereof, in
the discretion of the Board of Directors, may be issued, except as herein
otherwise provided, in payment for property or services, or as bonuses to
employes of the Corporation or employes of subsidiary companies, or for other
assets or securities including cash, necessary or desirable, in the judgment
of the Board of Directors, to be purchased or acquired from time to time for
the Corporation, or for any other lawful purpose of the Corporation.
If it seems desirable so to do, the Board of Directors may from time to time
issue scrip for fractional shares of stock. Such scrip shall not confer upon
the holder any right to dividends or any voting or other rights of a
stockholder of the Corporation, but the Corporation shall from time to time,
within such time as the Board of Directors may determine or without limit of
time if the Board of Directors so determines, issue one or more whole shares
of stock upon the surrender of scrip for fractional shares aggregating the
number of whole shares issuable in respect of the scrip so surrendered,
provided that the scrip so surrendered shall be properly endorsed for transfer
if in registered form.
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APPENDIX B
FAIRNESS OPINIONS
<PAGE>
APPENDIX B-1
MERRILL LYNCH FAIRNESS OPINION
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
March 31, 1996
Board of Directors
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202-3091
Ladies and Gentlemen:
General Motors Corporation ("GM") proposes to split off from GM (the "Split-
Off") its wholly owned subsidiary Electronic Data Systems Holding Corporation
(together with its subsidiaries, unless the context requires otherwise, "EDS")
in accordance with the terms of a proposed merger agreement (the "Merger
Agreement") to be entered into between GM and GM Mergeco Corporation, a wholly
owned subsidiary of EDS ("Mergeco"), pursuant to which Mergeco will be merged
with and into GM (the "Merger"). As a condition to the consummation of the
Merger, EDS will contribute to the capital of Mergeco $500 million in cash
(the "Special Inter-Company Payment"). As a result of the Merger, (i) each
outstanding share of GM's Class E Common Stock, par value $0.10 per share (the
"Class E Common Stock"), will be converted into one share of common stock, par
value $0.01 per share, of EDS ("EDS Common Stock") and, upon such conversion,
all such shares of Class E Common Stock will be cancelled and will cease to
exist (the "Class E Common Stock Conversion"), (ii) GM's $1 2/3 Par Value
Common Stock, par value $1 2/3 per share (the "$1 2/3 Common Stock"), and GM's
Class H Common Stock, par value $0.10 per share (the "Class H Common Stock"),
will remain outstanding and (iii) the Special Inter-Company Payment will
become an asset of GM. You have advised us that GM has received a private
letter ruling (the "Private Letter Ruling") from the Internal Revenue Service
to the effect that the Split-Off will be treated as a tax-free exchange under
Section 355 of the Internal Revenue Code of 1986, as amended.
In connection with the Split-Off, GM and EDS also propose to enter into a
long-term master services agreement and certain related agreements
(collectively, the "New MSA") governing certain of the terms on which EDS will
provide information technology and other services to GM and its affiliates
after the Split-Off. The New MSA modifies certain of the terms on which such
services are provided under the Master Agreement effective as of September 1,
1985 between GM and EDS, as amended by the Addendum dated May 29, 1987, and
certain related agreements (collectively, the "Current MSA"), including, among
other things, (1) by giving GM and its affiliates the option, with respect to
purchases of information technology services covered under the New MSA, to
subject a portion of such purchases to competitive bidding and to source such
purchases with bidders other than EDS, (2) by providing certain goals for EDS
to meet in reducing the cost to GM and its affiliates of the services to be
provided by EDS, (3) by lengthening, commencing in 1997, the time available to
GM and its affiliates to make payments for services and (4) by providing for
an initial term of 10 years following the consummation of the Split-Off,
subject to renewal (such modifications being collectively referred to as the
"MSA Modifications").
GM and EDS also propose to enter into a separation agreement (the
"Separation Agreement") and a tax allocation agreement (the "Tax Allocation
Agreement"), which will establish certain transitional and other arrangements
in connection with the Split-Off. Pursuant to the Separation Agreement, GM
would provide EDS a $50 million allowance relating to the resolution of
various uncertain, contingent or other matters arising directly or indirectly
out of the separation of GM and EDS (the "Separation Allowance").
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You have advised us that, as of December 31, 1995, defined benefit pension
plans covered by Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), sponsored by GM and certain of its subsidiaries
(the "GM Pension Plans") were underfunded, on an SFAS No. 87 basis, and the
projected benefit obligations exceeded plan assets by approximately $3 billion
in the aggregate. You have also advised us that you expect that the Pension
Benefit Guaranty Corporation (the "PBGC") will, in accordance with an
agreement dated March 3, 1995 between GM and the PBGC, as amended on March 5,
1996 (the "GM-PBGC Agreement"), release EDS and its subsidiaries, upon
consummation of the Merger, from all fixed or contingent liabilities under
Title IV of ERISA with respect to the GM Pension Plans. In addition, you have
advised us that, as of the date hereof, approximately 31% of the currently
outstanding Class E Common Stock is held by the GM Special Hourly Employees
Pension Trust (the "Hourly Plan Special Trust") and approximately 1% of such
stock is held by the GM Salaried Employees Pension Trust (such holdings are
collectively referred to as the "Plan Holdings").
Under the Registration Rights Agreement (as defined below), the Hourly Plan
Special Trust has certain registration rights with respect to the Class E
Common Stock that it holds and will have the same rights with respect to the
EDS Common Stock into which such stock will be converted in the Merger. The
Registration Rights Agreement also contains certain restrictions on transfer
of the shares of Class E Common Stock held by the Hourly Plan Special Trust
(and the EDS Common Stock into which such Class E Common Stock will be
converted in the Merger). The Hourly Plan Special Trust has agreed with GM,
pursuant to a Transfer Agreement dated as of March 12, 1995 (the "Transfer
Agreement"), to certain additional transfer restrictions intended to preserve
the tax-free status of the Split-Off.
The Merger and related transactions, including the making of the Special
Inter-Company Payment and the execution and delivery of the New MSA, are
collectively referred to herein as the "Transactions". The Special Inter-
Company Payment, the Separation Allowance, the expenses of implementing the
Transactions to be borne by GM and the financial effects on GM (excluding EDS)
of (i) the MSA Modifications, (ii) the removal of certain potential conflicts
between the business of EDS and certain other businesses of GM and its
subsidiaries, (iii) any change in the market price of the Plan Holdings as a
result of the Transactions and (iv) the Class E Common Stock Conversion are
collectively referred to herein as the "Financial Effects of the
Transactions".
You have asked us to advise you with respect to the fairness, from a
financial point of view, to GM and, accordingly, to GM's common stockholders
after consummation of the Merger, namely the holders of the $1 2/3 Common
Stock and the Class H Common Stock, of the Financial Effects of the
Transactions.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed GM's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1994, GM's audited
financial statements for the year ended December 31, 1995, drafts of GM's
Annual Report and Form 10-K for that year and GM's Forms 10-Q for the
quarterly periods ending March 31, 1995, June 30, 1995 and September 30,
1995;
(2) Reviewed EDS's Annual Reports and related financial information for
the five fiscal years ended December 31, 1994 and EDS's audited financial
statements for the year ended December 31, 1995;
(3) Conducted discussions with members of senior management of GM
concerning their views regarding (a) the use of information technology
services by GM in the future and (b) the strategic rationale for, and the
financial effects on GM (excluding EDS) of, the Split-Off, including the
financial benefits to GM of the removal of certain potential conflicts
between the business of EDS and certain other businesses of GM and its
subsidiaries;
(4) Reviewed certain forecasts furnished to us by GM management of GM's
future expenditures for information technology services;
(5) Reviewed certain estimates furnished to us by GM management of the
expenses of implementing the Transactions to borne by GM;
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(6) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of EDS,
furnished to us by EDS;
(7) Reviewed published reports of equity analysts regarding their
expectations with respect to the future earnings of EDS and the impact of
the Split-Off on such earnings;
(8) Conducted discussions with members of senior management of EDS
concerning their views regarding the strategic rationale for, and the
financial effects on EDS of, the Split-Off and various strategic
alternatives available to EDS, both as a wholly owned subsidiary of GM and
as an independent, publicly traded company;
(9) Compared certain financial ratios of EDS, on a pro forma basis giving
effect to the Split-Off, to the financial ratios of certain companies that
we deemed to be reasonably similar to EDS;
(10) Reviewed the historical market prices for the Class E Common Stock
to be converted into EDS Common Stock in the Split-Off and considered the
potential impact of the Split-Off on the market price thereof;
(11) Considered the financial benefits to GM of its rights of ownership
and control of EDS (taking into account the terms of the Class E Common
Stock and the GM Board's policies with respect to the exercise of such
rights), all of which would terminate as a result of the Class E Common
Stock Conversion;
(12) Compared the financial terms of the Split-Off with the financial
terms of certain transactions that we deemed to be relevant;
(13) Considered the alternatives available to EDS and GM in developing
and implementing strategic alliances and other strategic alternatives for
EDS, as a wholly owned subsidiary of GM, with third parties;
(14) Reviewed a draft dated March 27, 1996 of the Merger Agreement;
(15) Reviewed a draft dated March 26, 1996 of the Separation Agreement
and a draft dated March 28, 1996 of the Tax Allocation Agreement;
(16) Reviewed the Current MSA and a draft dated March 22, 1996 of the New
MSA;
(17) Reviewed GM's Restated Certificate of Incorporation and By-laws;
(18) Reviewed (a) the GM-PBGC Agreement, (b) the Escrow Agreement (the
"Escrow Agreement") made as of March 5, 1996 by and among Bankers Trust
Company (the "Escrow Agent"), the PBGC and GM and (c) forms of Releases and
Covenants Not to Sue (the "PBGC Releases") to be provided pursuant to the
GM-PBGC Agreement and held by the Escrow Agent in escrow pursuant to the
Escrow Agreement;
(19) Reviewed the Registration Rights Agreement (the "Registration Rights
Agreement") dated March 12, 1995 between GM and United States Trust Company
of New York and its affiliate, U.S. Trust Company of California, N.A., as
trustees of the Hourly Plan Special Trust, and the Transfer Agreement;
(20) Reviewed the Final Exemption published by the Department of Labor in
the Federal Register dated March 15, 1995;
(21) Reviewed the Private Letter Ruling and the request to the Internal
Revenue Service for such ruling;
(22) Reviewed a draft dated March 28, 1996 of the Solicitation
Statement/Prospectus to be furnished to the holders of the $1 2/3 Common
Stock, the Class H Common Stock and the Class E Common Stock; and
(23) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
GM and EDS, and we have not independently verified such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of GM or
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EDS or been furnished with any such evaluation or appraisal. With respect to
the forecasts furnished by GM management of GM's future expenditures for
information technology services, we have assumed that they are reasonably
based and reflect the best currently available estimates and judgments of such
management as to such expected expenditures. We have assumed that the executed
PBGC Releases will be released from escrow in accordance with the terms of the
Escrow Agreement. In addition, we have assumed that any appreciation in the
market price of the Plan Holdings as a result of the Transactions will
directly reduce GM's pension expense and unfunded pension liability. You have
advised us that the consummation of the Transactions will not result in any
default or similar event under any loan agreement, instrument of indebtedness
or other contract of GM or EDS that will not be waived.
Our opinion does not in any manner address the fairness of the Transactions
to EDS or to the holders of Class E Common Stock, matters as to which our
opinion has not been requested. Furthermore, we express no opinion as to the
prices at which EDS Common Stock will trade subsequent to the Split-Off. Our
opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof. In
connection with the preparation of this opinion, we have not been authorized
by GM or the GM Board of Directors to solicit, nor have we solicited, third-
party indications of interest with respect to a business combination or other
extraordinary transaction involving EDS or any of its assets. We wish to
advise you that certain elements of the Transactions are not susceptible to
precise quantification and that, in connection with the preparation of this
opinion, we have made judgments and estimates that we consider reasonable and
appropriate under the circumstances.
We have acted as financial advisor to GM, its Board of Directors and the
negotiating team designated by GM's Board of Directors to develop the terms of
the Transactions from the perspective of the holders of the $1 2/3 Common
Stock and the Class H Common Stock and will receive a fee for our services
that is contingent upon the consummation of the Split-Off. We have also, in
the past, provided financial advisory and financing services to GM (including
financial advisory services in connection with GM's contribution of Class E
Common Stock to the Hourly Plan Special Trust) and have received fees for the
rendering of such services. In addition, in the ordinary course of our
business, we may actively trade shares of the $1 2/3 Common Stock, the Class H
Common Stock, the Class E Common Stock and other securities of GM for our own
account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that
the Financial Effects of the Transactions are fair, from a financial point of
view, to GM and, accordingly, to GM's common stockholders after consummation
of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H
Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH
INCORPORATED
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APPENDIX B-2
LEHMAN BROTHERS FAIRNESS OPINION
[Lehman Brothers Inc. Letterhead]
March 31, 1996
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202
Attention: Board of Directors
Members of the Board:
We understand that the Board of Directors (the "General Motors Board") of
General Motors Corporation ("General Motors") is considering a tax-free split-
off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic
Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split-
Off will be accomplished through a merger (the "Merger") of GM Mergeco
Corporation ("Mergeco") with and into General Motors pursuant to the proposed
Agreement and Plan of Merger to be entered into between General Motors and
Mergeco (the "Merger Agreement"), with General Motors as the surviving
corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of
EDS organized for the purpose of effecting the Split-Off. In the Merger, each
outstanding share of Class E Common Stock, $.10 par value per share, of
General Motors ("Class E Common Stock") will be converted into one share of
EDS common stock, $0.01 par value per share (the "EDS Common Stock"). There
will be attached to each share of EDS Common Stock a purchase right for EDS
Series A Junior Participating Preferred Stock. As a result of the Split-Off,
EDS will become an independent, publicly held company, holders of the Class E
Common Stock will become stockholders of EDS rather than of General Motors,
and the Class E Common Stock will cease to exist. The terms and conditions of
the proposed Split-Off are set forth in more detail in the draft, dated March
27, 1996, of the joint Solicitation Statement/Prospectus of General Motors and
EDS (the "Statement").
Immediately prior to and as a condition of the consummation of the Merger,
EDS will contribute to Mergeco $500 million in cash (the "Special Inter-
Company Payment"). As a result of the Merger, all of the assets of Mergeco,
which will consist entirely of the cash contributed by EDS, will become assets
of General Motors. Immediately before the Merger, General Motors and EDS will
enter into a new master service agreement (the "Master Services Agreement")
pursuant to which EDS will continue to serve as General Motors' principal
supplier of information technology services for an initial term of ten years
following the Split-Off, which may be extended by agreement of the parties.
The information technology and other services to be provided by EDS under the
Master Services Agreement will generally be similar to those provided to
General Motors under an existing master agreement between General Motors and
EDS (the "Existing Master Services Agreement"). However, the Master Services
Agreement will reflect certain significant changes to the pricing and terms
under which such services are to be provided by EDS. Additionally, General
Motors and EDS will enter into a Separation Agreement and certain related
agreements, including a Tax Allocation Agreement (collectively, the
"Separation Agreement"), establishing certain arrangements between General
Motors and EDS deemed necessary by General Motors and EDS in order to address
various business, legal and regulatory issues resulting from the Split-Off.
The Merger and the related transactions, including the Special Inter-Company
Payment, the Split-Off Changes (as defined below) effected pursuant to the
execution and delivery of the Master Services Agreement and the execution and
delivery of the Separation Agreement are collectively referred to as the
"Split-Off Transactions".
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We have been engaged by General Motors to act as financial advisor to a team
appointed by the General Motors Board (the "E Team") which has been charged
with negotiating the terms and conditions of the proposed Split-Off from the
perspective of the holders of the Class E Common Stock. We have been requested
to render to the General Motors Board our opinion with respect to the
fairness, from a financial point of view, to the holders of Class E Common
Stock, of the financial effect of the Split-Off Transactions taken as a whole
and in connection with such opinion to provide our financial advice to General
Motors and its Board of Directors. We have not been requested to opine as to,
and our opinion does not in any manner address, General Motors' or EDS'
underlying business decision to proceed with or effect the proposed Split-Off
Transactions.
In arriving at our opinion, we reviewed, among other things, (1) historical
financial statements of EDS and certain other historical financial and
operating data of EDS, (2) historical financial statements of General Motors,
(3) certain publicly available information with respect to EDS and General
Motors, (4) certain projected financial data with respect to EDS, both with
and without giving effect to the Split-Off, prepared by EDS management, (5)
reported prices and trading activity for the Class E Common Stock, (6) drafts
of the Statement, (7) the terms of the Class E Common Stock as set forth in
General Motors' certificate of incorporation as currently in effect, (8) the
terms of the EDS Common Stock as set forth in EDS' certificate of
incorporation as currently in effect, (9) the private letter ruling received
by General Motors from the IRS with respect to the tax-free nature of the
Split-Off, (10) a summary of terms for the Master Services Agreement provided
to the General Motors Board in connection with its March 31, 1996 meeting,
(11) the Registration Rights Agreement, dated March 12, 1995 between General
Motors and the Trustees of the General Motors Hourly Plan Pension Trust and
(12) the Shareholder Rights Agreement between EDS and Bank of New York dated
as of March 12, 1996. In addition, we have held discussions with management of
EDS, and in certain cases management of General Motors, with respect to, among
other things, (1) the operations and financial condition of EDS and the plans
of EDS management with respect to the business and affairs of EDS both prior
to and after the Split-Off, (2) the projected financial data for EDS prepared
by EDS management, (3) the benefits and detriments to EDS of ownership by
General Motors, (4) the expected impact of the Split-Off Transactions on EDS'
operations and the financial and strategic flexibility of EDS, and the new
business opportunities available to EDS, after the Split-Off, (5) certain
terms of (A) the Agreement, dated March 3, 1995, between General Motors and
the Pension Benefit Guaranty Corporation (the "GM-PBGC Agreement"), (B) the
Existing Master Services Agreement and the proposed Master Services Agreement,
and certain other information technology services agreements to be entered
into in connection with the Master Services Agreement, and (C) the proposed
Separation Agreement, and (6) the effect of the Master Services Agreement
(including the related changes to the terms of the underlying services
agreements, and certain other information technology services agreements to be
entered into in connection with the Master Services Agreement, to the extent
that they relate to the financial effect of the Master Services Agreement as
projected by EDS management) and the Separation Agreement on the business,
results of operations and financial condition of EDS and on the business
relationship between General Motors and EDS (including, but not limited to,
their relationship as customer and vendor, respectively). In addition, we
undertook such other studies, analyses and investigations as we deemed
appropriate for purposes of rendering our opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information used by us without
assuming any responsibility for independent verification of such information
and have further relied upon the assurances of management of EDS and General
Motors that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the projected financial data of EDS
prepared by EDS management (which reflect, among other things, with respect to
periods following the Split-Off, estimates of the expected value of certain
benefits to be derived by EDS from the Split-Off), upon the advice of EDS
management and with your consent we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of EDS management as to the expected future prospects
and financial performance of EDS, and we have relied on such projections in
rendering our opinion. With respect to the estimates prepared by EDS
management of the value of certain benefits and detriments of the Split-Off to
EDS, with your consent, we have relied on such estimates and assumed that they
were reasonably prepared and reflected the best currently available judgments
of EDS management as to such benefits and detriments. We also took into
account and
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considered your determination, as described in the Statement, that a split-off
of EDS would be proposed only in a transaction that would not result in the
recapitalization of shares of Class E Common Stock into Common Stock, $1 2/3
par value, of General Motors at a 120% exchange ratio as provided for under
certain circumstances under the terms of General Motors' certificate of
incorporation. Furthermore, we believe that following the Split-Off, the EDS
Common Stock would very likely be included in the Standard and Poor's 500
Index, and we have rendered our opinion on that basis. In arriving at our
opinion, we have not conducted a physical inspection of the properties and
facilities of EDS and have not made or obtained any evaluations or appraisals
of the assets or liabilities of EDS. You have not authorized us to solicit,
and we have not solicited, any indications of interest from any third party
with respect to the purchase of all or a part of EDS, its business or the
Class E Common Stock. We have not been asked to, and we do not, express an
opinion as to the prices at which EDS Common Stock will actually trade
following the Merger and we can provide no assurance that the trading price of
a share of EDS Common Stock following the Split-Off will be equal to or in
excess of the trading price of a share of Class E Common Stock prior to the
Split-Off. Our opinion necessarily is based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter.
In connection with the review of the financial effect on EDS of the Master
Services Agreement, both EDS management and General Motors management advised
us that certain changes would have been made to the Existing Master Services
Agreement commencing in 1996 even in the absence of the Split-Off. EDS
management identified to us those changes that EDS management believed would
have been made to the Existing Master Services Agreement commencing in 1996
even in the absence of the Split-Off, the financial effect of which, as
projected by EDS management, would begin to impact EDS in 1996 and continue
over time. The changes to the Existing Master Services Agreement which would
have been made in the absence of the Split-Off are referred to herein as the
"Base Changes." Under different base cases identified by EDS management, the
Base Changes assumed to occur vary to the extent they reflect different
assumptions regarding certain rate reductions and changes in payment terms.
General Motors management advised us that General Motors management believed
that changes that differ from or are in addition to the Base Changes
identified by EDS management, which changes, taken as a whole, would have been
more favorable to General Motors and less favorable to EDS than the Base
Changes identified by EDS management, would have been made to the Existing
Master Services Agreement even in the absence of the Split-Off. No assurances
can be given as to exactly which changes to the Existing Master Service
Agreement would have been implemented absent the Split-Off or which changes
might be implemented in the future if the Split-Off is not consummated.
In considering the fairness, from a financial point of view, to holders of
Class E Common Stock of the financial effect of the Split-Off Transactions
taken as a whole, we have considered, among other things, (1) the $500 million
Special Inter-Company Payment which was recommended to the General Motors
Board by the Capital Stock Committee on March 22, 1996 and is proposed to be
approved as of the date hereof in connection with the Split-Off Transactions,
(2) the allowance of $50 million provided to EDS under the Separation
Agreement (and in rendering our opinion, with your consent, we assumed that a
substantial amount of such allowance will be used for the benefit of EDS under
the Separation Agreement), (3) that EDS management has estimated that, as a
result of the allowance identified in the immediately preceding clause, there
will be no net payments made by EDS to General Motors under the terms of the
Separation Agreement (other than payments, if any, to be made under the
provisions thereof with respect to indemnification obligations or the
allocation of contingent liabilities, to which we gave no effect in rendering
this opinion), (4) the financial effect on EDS, as projected by EDS
management, of the changes other than the Base Changes (such changes being
referred to herein as the "Split-Off Changes") effected pursuant to the Master
Services Agreement, (5) the financial effect, as projected by EDS management,
of projected declines following the Split-Off in sales of certain goods and
services provided by EDS to General Motors and its affiliates other than under
the Existing Master Services Agreement or the Master Services Agreement, as
the case may be, (6) transaction costs, estimated by EDS management and (7)
certain estimated benefits of the Split-Off to EDS or holders of Class E
Common Stock, including (A) the Derivative Stock Differential (as defined in
the Statement), (B) the value of the inclusion of the EDS Common Stock in the
Standard & Poor's 500 Index, (C) the value to EDS of the removal of certain
limitations on EDS' ability to participate in major strategic alliances
(including among others, mergers and
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acquisitions which can be effected using EDS Common Stock), which was
estimated by EDS management to be at least $500 million and (D) the present
value to EDS of projected new business growth and customer relationships,
which was estimated by EDS management. Accordingly, to the extent described
herein, we took into account and considered certain benefits as estimated by
EDS management that may be realized by EDS as a result of the opportunity to
pursue the business purposes of the Split-Off.
At the request of the E Team, and with your consent, we have assumed that
the Base Changes would have been made to the Existing Master Services
Agreement in 1996 even in the absence of the Split-Off (or any other change in
the nature of General Motors' ownership of EDS), and that the financial effect
thereof would begin in 1996 and continue over time as reflected in the
projections prepared by EDS management and therefore, in performing our
analyses in connection with rendering this opinion, at the request of the E
Team and with your consent, we did not address, and gave no effect to, the
financial effect on EDS or holders of Class E Common Stock of the Base Changes
effected pursuant to the Master Services Agreement. Based on information
regarding the historical financial and operating results of EDS and
discussions with EDS management, if neither the Base Changes nor any other
significant modifications to the terms of the Existing Master Services
Agreement would have been made in the absence of a Split-Off, then the
decrement in the present value of cash flows attributable to goods and
services projected by EDS management to be provided to General Motors and its
affiliates in accordance with the terms of the Existing Master Services
Agreement (both under analyses performed on a consolidated company basis for
EDS (including goods and services provided to General Motors and its
affiliates and to all other customers) and under analyses performed on a basis
reflecting only goods and services provided to General Motors and affiliates
under the terms of the Existing Master Services Agreement) resulting from
changes to the Existing Master Services Agreement arising as a result of the
Split-Off would have been significantly larger than under the analyses we have
conducted. At the request of the E Team and with your consent, we did not
consider, and gave no effect to, contingent liabilities or indemnification
obligations of EDS arising under the Separation Agreement or otherwise in
connection with the Split-Off. At the request of the E Team, upon the advice
of General Motors management and its legal and accounting advisors, and with
your consent, we also assumed that the proposed Merger would be tax free to
the holders of Class E Common Stock receiving EDS Common Stock in the Merger
and that the Unconditional Releases under the GM-PBGC Agreement would become
effective as of the effectiveness of the Merger.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the financial effect of the Split-Off Transactions taken as a
whole is fair, from a financial point of view, to the holders of Class E
Common Stock.
We have been engaged by General Motors to act as financial advisor to the E
Team in connection with the Split-Off. We have been advised by you that it is
intended that our fee will be paid by EDS. A significant portion of our fee is
contingent on consummation of the Split-Off. In addition, General Motors has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for each of General Motors and EDS in the past (including
representation of General Motors and EDS in connection with the 1995
contribution by General Motors of approximately 173 million shares of Class E
Common Stock to the General Motors Hourly Plan Special Trust) and have
received customary fees for such services. In March 1996, two of the senior
investment bankers actively involved in the transaction for Lehman Brothers in
its capacity as financial advisor to the E Team joined Morgan Stanley, at
which time Morgan Stanley also began advising the E Team. Since such time,
Morgan Stanley and Lehman Brothers have performed their services in
cooperation, both relying to a significant degree on the due diligence of
those two individuals. However, Lehman Brothers has performed its own
independent internal review and analysis in arriving at this opinion.
In the ordinary course of our business, we actively trade in the debt and
equity securities of General Motors, including the Class E Common Stock, for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
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This opinion is for the use and benefit of the Board of Directors of General
Motors, the Capital Stock Committee of the Board of Directors of General
Motors, the E Team and the Board of Directors of EDS and is rendered to the
General Motors Board in connection with its consideration of the Split-Off
Transactions. This opinion is not intended to be and does not constitute a
recommendation to any holder of Class E Common Stock, or any other class of
capital stock of General Motors, as to whether such stockholder should consent
to the Transactions (as defined in the Statement).
Very truly yours,
[Lehman Brothers Inc.]
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APPENDIX B-3
MORGAN STANLEY FAIRNESS OPINION
[MORGAN STANLEY & CO. INCORPORATED LETTERHEAD]
March 31, 1996
General Motors Corporation
General Motors Building
3044 West Grand Boulevard
Detroit, Michigan 48202
Attention: Board of Directors
Members of the Board:
We understand that the Board of Directors (the "General Motors Board") of
General Motors Corporation ("General Motors") is considering a tax-free split-
off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic
Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split-
Off will be accomplished through a merger (the "Merger") of GM Mergeco
Corporation ("Mergeco") with and into General Motors pursuant to the proposed
Agreement and Plan of Merger to be entered into between General Motors and
Mergeco (the "Merger Agreement"), with General Motors as the surviving
corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of
EDS organized for the purpose of effecting the Split-Off. In the Merger, each
outstanding share of Class E Common Stock, $.10 par value per share, of
General Motors ("Class E Common Stock") will be converted into one share of
EDS common stock, $0.01 par value per share (the "EDS Common Stock"). There
will be attached to each share of EDS Common Stock a purchase right for EDS
Series A Junior Participating Preferred Stock. As a result of the Split-Off,
EDS will become an independent, publicly held company, holders of the Class E
Common Stock will become stockholders of EDS rather than of General Motors,
and the Class E Common Stock will cease to exist. The terms and conditions of
the proposed Split-Off are set forth in more detail in the draft, dated March
27, 1996, of the joint Solicitation Statement/Prospectus of General Motors and
EDS (the "Statement").
Immediately prior to and as a condition of the consummation of the Merger,
EDS will contribute to Mergeco $500 million in cash (the "Special Inter-
Company Payment"). As a result of the Merger, all of the assets of Mergeco,
which will consist entirely of the cash contributed by EDS, will become assets
of General Motors. Immediately before the Merger, General Motors and EDS will
enter into a new master service agreement (the "Master Services Agreement")
pursuant to which EDS will continue to serve as General Motors' principal
supplier of information technology services for an initial term of ten years
following the Split-Off which may be extended by agreement of the parties. The
information technology and other services to be provided by EDS under the
Master Services Agreement will generally be similar to those provided to
General Motors under an existing master agreement between General Motors and
EDS (the "Existing Master Services Agreement"). However, the Master Services
Agreement will reflect certain significant changes to the pricing and terms
under which such services are to be provided by EDS. Additionally, General
Motors and EDS will enter into a Separation Agreement and certain related
agreements, including a Tax Allocation Agreement (collectively, the
"Separation Agreement"), establishing certain arrangements between General
Motors and EDS deemed necessary by General Motors and EDS in order to address
various business, legal and regulatory issues resulting from the Split-Off.
The Merger and the related transactions, including the Special Inter-Company
Payment, the
B-10
<PAGE>
Split-Off Changes (as defined below) effected pursuant to the execution and
delivery of the Master Services Agreement and the execution and delivery of
the Separation Agreement are collectively referred to as the "Split-Off
Transactions".
We have been engaged by General Motors to act as financial advisor to a team
appointed by the General Motors Board (the "E Team") which has been charged
with negotiating the terms and conditions of the proposed Split-Off from the
perspective of the holders of the Class E Common Stock. We have been requested
to render to the General Motors Board our opinion with respect to the
fairness, from a financial point of view, to the holders of Class E Common
Stock, of the financial effect of the Split-Off Transactions taken as a whole
and in connection with such opinion to provide our financial advice to General
Motors and its Board of Directors. We have not been requested to opine as to,
and our opinion does not in any manner address, General Motors' or EDS'
underlying business decision to proceed with or effect the proposed Split-Off
Transactions.
In arriving at our opinion, we reviewed, among other things, (1) historical
financial statements of EDS and certain other historical financial and
operating data of EDS, (2) historical financial statements of General Motors,
(3) certain publicly available information with respect to EDS and General
Motors, (4) certain projected financial data with respect to EDS, both with
and without giving effect to the Split-Off, prepared by EDS management, (5)
reported prices and trading activity for the Class E Common Stock, (6) drafts
of the Statement, (7) the terms of the Class E Common Stock as set forth in
General Motors' certificate of incorporation as currently in effect, (8) the
terms of the EDS Common Stock as set forth in EDS' certificate of
incorporation as currently in effect, (9) the private letter ruling received
by General Motors from the IRS with respect to the tax-free nature of the
Split-Off, (10) a summary of terms for the Master Services Agreement provided
to the General Motors Board in connection with its March 31, 1996 meeting,
(11) the Registration Rights Agreement, dated March 12, 1995 between General
Motors and the Trustees of the General Motors Hourly Plan Pension Trust and
(12) the Shareholder Rights Agreement between EDS and Bank of New York dated
as of March 12, 1996. In addition, we have held discussions with management of
EDS, and in certain cases management of General Motors, with respect to, among
other things, (1) the operations and financial condition of EDS and the plans
of EDS management with respect to the business and affairs of EDS both prior
to and after the Split-Off, (2) the projected financial data for EDS prepared
by EDS management, (3) the benefits and detriments to EDS of ownership by
General Motors, (4) the expected impact of the Split-Off Transactions on EDS'
operations and the financial and strategic flexibility of EDS, and the new
business opportunities available to EDS, after the Split-Off, (5) certain
terms of (A) the Agreement, dated March 3, 1995, between General Motors and
the Pension Benefit Guaranty Corporation (the "GM-PBGC Agreement"), (B) the
Existing Master Services Agreement and the proposed Master Services Agreement,
and certain other information technology services agreements to be entered
into in connection with the Master Services Agreement, and (C) the proposed
Separation Agreement, and (6) the effect of the Master Services Agreement
(including the related changes to the terms of the underlying services
agreements, and certain other information technology services agreements to be
entered into in connection with the Master Services Agreement, to the extent
that they relate to the financial effect of the Master Services Agreement as
projected by EDS management) and the Separation Agreement on the business,
results of operations and financial condition of EDS and on the business
relationship between General Motors and EDS (including, but not limited to,
their relationship as customer and vendor, respectively). In addition, we
undertook such other studies, analyses and investigations as we deemed
appropriate for purposes of rendering our opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information used by us without
assuming any responsibility for independent verification of such information
and have further relied upon the assurances of management of EDS and General
Motors that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the projected financial data of EDS
prepared by EDS management (which reflect, among other things, with respect to
periods following the Split-Off, estimates of the expected value of certain
benefits to be derived by EDS from the Split-Off), upon the advice of EDS
management and with your consent we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of EDS management as to the expected future prospects
and financial performance of EDS, and we
B-11
<PAGE>
have relied on such projections in rendering our opinion. With respect to the
estimates prepared by EDS management of the value of certain benefits and
detriments of the Split-Off to EDS, with your consent, we have relied on such
estimates and assumed that they were reasonably prepared and reflected the
best currently available judgments of EDS management as to such benefits and
detriments. We also took into account and considered your determination, as
described in the Statement, that a split-off of EDS would be proposed only in
a transaction that would not result in the recapitalization of shares of Class
E Common Stock into Common Stock, $1 2/3 par value, of General Motors at a
120% exchange ratio as provided for under certain circumstances under the
terms of General Motors' certificate of incorporation. Furthermore, we believe
that following the Split-Off, the EDS Common Stock would very likely be
included in the Standard and Poor's 500 Index, and we have rendered our
opinion on that basis. In arriving at our opinion, we have not conducted a
physical inspection of the properties and facilities of EDS and have not made
or obtained any evaluations or appraisals of the assets or liabilities of EDS.
You have not authorized us to solicit, and we have not solicited, any
indications of interest from any third party with respect to the purchase of
all or a part of EDS, its business or the Class E Common Stock. We have not
been asked to, and we do not, express an opinion as to the prices at which EDS
Common Stock will actually trade following the Merger and we can provide no
assurance that the trading price of a share of EDS Common Stock following the
Split-Off will be equal to or in excess of the trading price of a share of
Class E Common Stock prior to the Split-Off. Our opinion necessarily is based
upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
In connection with the review of the financial effect on EDS of the Master
Services Agreement, both EDS management and General Motors management advised
us that certain changes would have been made to the Existing Master Services
Agreement commencing in 1996 even in the absence of the Split-Off. EDS
management identified to us those changes that EDS management believed would
have been made to the Existing Master Services Agreement commencing in 1996
even in the absence of the Split-Off, the financial effect of which, as
projected by EDS management, would begin to impact EDS in 1996 and continue
over time. The changes to the Existing Master Services Agreement which would
have been made in the absence of the Split-Off are referred to herein as the
"Base Changes." Under different base cases identified by EDS management, the
Base Changes assumed to occur vary to the extent they reflect different
assumptions regarding certain rate reductions and changes in payment terms.
General Motors management advised us that General Motors management believed
that changes that differ from or are in addition to the Base Changes
identified by EDS management, which changes, taken as a whole, would have been
more favorable to General Motors and less favorable to EDS than the Base
Changes identified by EDS management, would have been made to the Existing
Master Services Agreement even in the absence of the Split-Off. No assurances
can be given as to exactly which changes to the Existing Master Service
Agreement would have been implemented absent the Split-Off or which changes
might be implemented in the future if the Split-Off is not consummated.
In considering the fairness, from a financial point of view, to holders of
Class E Common Stock of the financial effect of the Split-Off Transactions
taken as a whole, we have considered, among other things, (1) the $500 million
Special Inter-Company Payment which was recommended to the General Motors
Board by the Capital Stock Committee on March 22, 1996 and is proposed to be
approved as of the date hereof in connection with the Split-Off Transactions,
(2) the allowance of $50 million provided to EDS under the Separation
Agreement (and in rendering our opinion, with your consent, we assumed that a
substantial amount of such allowance will be used for the benefit of EDS under
the Separation Agreement), (3) that EDS management has estimated that, as a
result of the allowance identified in the immediately preceding clause, there
will be no net payments made by EDS to General Motors under the terms of the
Separation Agreement (other than payments, if any, to be made under the
provisions thereof with respect to indemnification obligations or the
allocation of contingent liabilities, to which we gave no effect in rendering
this opinion), (4) the financial effect on EDS, as projected by EDS
management, of the changes other than the Base Changes (such changes being
referred to herein as the "Split-Off Changes") effected pursuant to the Master
Services Agreement, (5) the financial effect, as projected by EDS management,
of projected declines following the Split-Off in sales of certain goods and
services provided by EDS to General Motors and its affiliates other than under
the Existing Master Services Agreement or the Master Services Agreement, as
the case may be, (6) transaction costs, estimated by EDS
B-12
<PAGE>
management and (7) certain estimated benefits of the Split-Off to EDS or
holders of Class E Common Stock, including (A) the Derivative Stock
Differential (as defined in the Statement), (B) the value of the inclusion of
the EDS Common Stock in the Standard & Poor's 500 Index, (C) the value to EDS
of the removal of certain limitations on EDS' ability to participate in major
strategic alliances (including among others, mergers and acquisitions which
can be effected using EDS Common Stock), which was estimated by EDS management
to be at least $500 million and (D) the present value to EDS of projected new
business growth and customer relationships, which was estimated by EDS
management. Accordingly, to the extent described herein, we took into account
and considered certain benefits as estimated by EDS management that may be
realized by EDS as a result of the opportunity to pursue the business purposes
of the Split-Off.
At the request of the E Team, and with your consent, we have assumed that
the Base Changes would have been made to the Existing Master Services
Agreement in 1996 even in the absence of the Split-Off (or any other change in
the nature of General Motors' ownership of EDS), and that the financial effect
thereof would begin in 1996 and continue over time as reflected in the
projections prepared by EDS management and therefore, in performing our
analyses in connection with rendering this opinion, at the request of the E
Team and with your consent, we did not address, and gave no effect to, the
financial effect on EDS or holders of Class E Common Stock of the Base Changes
effected pursuant to the Master Services Agreement. Based on information
regarding the historical financial and operating results of EDS and
discussions with EDS management, if neither the Base Changes nor any other
significant modifications to the terms of the Existing Master Services
Agreement would have been made in the absence of a Split-Off, then the
decrement in the present value of cash flows attributable to goods and
services projected by EDS management to be provided to General Motors and its
affiliates in accordance with the terms of the Existing Master Services
Agreement (both under analyses performed on a consolidated company basis for
EDS (including goods and services provided to General Motors and its
affiliates and to all other customers) and under analyses performed on a basis
reflecting only goods and services provided to General Motors and affiliates
under the terms of the Existing Master Services Agreement) resulting from
changes to the Existing Master Services Agreement arising as a result of the
Split-Off would have been significantly larger than under the analyses we have
conducted. At the request of the E Team and with your consent, we did not
consider, and gave no effect to, contingent liabilities or indemnification
obligations of EDS arising under the Separation Agreement or otherwise in
connection with the Split-Off. At the request of the E Team, upon the advice
of General Motors management and its legal and accounting advisors, and with
your consent, we also assumed that the proposed Merger would be tax free to
the holders of Class E Common Stock receiving EDS Common Stock in the Merger
and that the Unconditional Releases under the GM-PBGC Agreement would become
effective as of the effectiveness of the Merger.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, the financial effect of the Split-Off Transactions taken as
a whole is fair, from a financial point of view, to the holders of Class E
Common Stock.
We have been engaged by General Motors to act as financial advisor to the E
Team in connection with the Split-Off. We have been advised by you that it is
intended that our fee will be paid by EDS. A significant portion of our fee is
contingent on consummation of the Split-Off. In addition, General Motors has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. In addition, certain senior personnel providing
financial advice to the E Team and involved in rendering this opinion
represented General Motors in connection with its acquisition of EDS and the
related creation and issuance of the Class E Common Stock. In March 1996, two
of the senior investment bankers actively involved in the transaction for
Lehman Brothers in its capacity as financial advisor to the E Team joined
Morgan Stanley, at which time Morgan Stanley also began advising the E Team.
Since such time as Morgan Stanley also began acting in this capacity, it and
Lehman Brothers have performed their services in cooperation, both relying to
a significant degree on the work performed by the same individuals. However,
we have performed our own independent internal review and analysis in arriving
at this opinion.
In the ordinary course of our business, we actively trade in the debt and
equity securities of General Motors, including the Class E Common Stock, for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
B-13
<PAGE>
This opinion is for the use and benefit of the Board of Directors of General
Motors, the Capital Stock Committee of the Board of Directors of General
Motors, the E Team and the Board of Directors of EDS and is rendered to the
General Motors Board in connection with its consideration of the Split-Off
Transactions. This opinion is not intended to be and does not constitute a
recommendation to any holder of Class E Common Stock, or any other class of
capital stock of General Motors, as to whether such stockholder should consent
to the Transactions (as defined in the Statement).
Very truly yours,
[Morgan Stanley & Co.
Incorporated]
B-14
<PAGE>
APPENDIX C
EDS CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE
----- ----
<S> <C>
Independent Auditors' Report.............................................. C-1
Consolidated Statements of Income......................................... C-2
Consolidated Balance Sheets............................................... C-3
Consolidated Statements of Cash Flows..................................... C-4
Notes to Consolidated Financial Statements................................ C-5
</TABLE>
<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
C-1
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
--------- -------- --------
(IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Systems and other contracts revenues.............. $12,422.1 $9,960.1 $8,507.3
--------- -------- --------
Costs and expenses
Cost of revenues................................ 9,601.6 7,529.4 6,390.6
Selling, general, and administrative............ 1,291.5 1,187.1 1,005.4
--------- -------- --------
Total costs and expenses...................... 10,893.1 8,716.5 7,396.0
--------- -------- --------
Operating income.................................. 1,529.0 1,243.6 1,111.3
Interest and other income, net (Note 20).......... (62.0) 40.6 20.0
--------- -------- --------
Income before income taxes........................ 1,467.0 1,284.2 1,131.3
Provision for income taxes (Note 11).............. 528.1 462.3 407.3
--------- -------- --------
Separate Consolidated Net Income.................. $ 938.9 $ 821.9 $ 724.0
========= ======== ========
Earnings Per Share Attributable to GM Class E
Common Stock..................................... $ 1.96 $ 1.71 $ 1.51
========= ======== ========
</TABLE>
Revenues related to GM and affiliates amounted to $3,891.1 million, $3,547.2
million, and $3,323.7 million for 1995, 1994, and 1993, respectively.
See accompanying notes to consolidated financial statements.
C-2
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
--------- --------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 548.9 $ 608.2
Marketable securities (Note 3)............................ 89.7 149.6
Accounts receivable, net.................................. 2,872.0 2,082.1
Accounts receivable from GM and affiliates................ 297.0 65.4
Inventories............................................... 181.2 137.8
Prepaids and other........................................ 392.7 311.0
--------- --------
Total current assets.................................... 4,381.5 3,354.1
--------- --------
Property and equipment, at cost less accumulated
depreciation (Note 4)...................................... 3,242.4 2,756.6
--------- --------
Operating and other assets
Land held for development, at cost (Note 5)............... 105.1 97.4
Investment in leases and other (Note 6)................... 1,573.5 1,308.8
Software, goodwill, and other intangibles, net (Notes 7
and 19).................................................. 1,529.9 1,269.6
--------- --------
Total operating and other assets........................ 3,208.5 2,675.8
--------- --------
Total Assets............................................ $10,832.4 $8,786.5
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable.......................................... $ 603.9 $ 571.1
Accrued liabilities (Note 8).............................. 1,704.5 1,451.0
Deferred revenue.......................................... 629.3 536.7
Income taxes (Note 11).................................... 75.9 111.0
Notes payable (Note 9).................................... 247.8 203.4
--------- --------
Total current liabilities............................... 3,261.4 2,873.2
--------- --------
Deferred income taxes (Note 11)............................. 739.7 659.8
--------- --------
Notes payable (Note 9)...................................... 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 483.7 and 481.7 shares at
December 31, 1995 and 1994, respectively................. 517.7 455.1
Retained earnings......................................... 4,460.8 3,777.4
--------- --------
Total stockholder's equity.............................. 4,978.5 4,232.5
--------- --------
Total Liabilities and Stockholder's Equity.............. $10,832.4 $8,786.5
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
C-3
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................. $ 938.9 $ 821.9 $ 724.0
--------- ---------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 1,107.8 771.1 626.8
Deferred compensation.................... 58.8 62.0 33.8
Other.................................... 33.0 30.9 (17.7)
Changes in assets and liabilities, net of
effects of acquired companies:
(Increase) in accounts receivable...... (611.5) (605.4) (200.8)
(Increase) decrease in accounts
receivable from GM and affiliates..... (227.8) 51.1 (56.0)
(Increase) in inventories.............. (41.9) (1.9) (15.5)
(Increase) in prepaids and other....... (59.7) (57.0) (26.8)
Increase (decrease) in accounts payable
and accrued liabilities............... (76.0) 453.2 27.4
Increase in deferred revenue........... 81.0 79.1 137.1
Increase (decrease) in taxes payable... 56.4 (72.5) 188.7
--------- ---------- ---------
Total adjustments.................... 320.1 710.6 697.0
--------- ---------- ---------
Net cash provided by operating activities.. 1,259.0 1,532.5 1,421.0
--------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of marketable
securities................................ 163.6 370.0 234.2
Proceeds from investments in leases and
other assets.............................. 87.8 134.6 217.3
Payments for purchases of property and
equipment................................. (1,261.5) (1,186.0) (816.4)
Payments for investments in leases and
other assets.............................. (356.3) (395.7) (170.6)
Payments related to acquisitions, net of
cash acquired............................. (234.9) (186.6) (122.1)
Payments for purchases of software and
other intangibles......................... (92.0) (77.0) (119.0)
Payments for purchases of marketable
securities................................ (100.9) (248.9) (292.5)
Other...................................... 12.7 49.9 1.4
--------- ---------- ---------
Net cash used in investing activities...... (1,781.5) (1,539.7) (1,067.7)
--------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable................ 7,466.7 10,821.0 2,527.7
Payments on notes payable.................. (6,776.3) (10,300.7) (2,648.7)
Net decrease in current notes payable with
maturities less than
90 days................................... -- (102.9) (99.0)
Employee stock transactions and related tax
benefit................................... 26.0 20.2 33.9
Dividends paid to GM....................... (251.3) (231.1) (192.1)
--------- ---------- ---------
Net cash provided by (used in) financing
activities................................ 465.1 206.5 (378.2)
--------- ---------- ---------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents............................ (1.9) 25.5 (13.6)
--------- ---------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents................................. (59.3) 224.8 (38.5)
Cash and Cash Equivalents at Beginning of
Year........................................ 608.2 383.4 421.9
--------- ---------- ---------
Cash and Cash Equivalents at End of Year..... $ 548.9 $ 608.2 $ 383.4
========= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
C-4
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
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. Accordingly, EDS is an indirect wholly
owned subsidiary of GM.
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).
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 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.
C-5
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
The current GM Board policy is that the cash dividends on the GM Class E
Common Stock, when, as, and if declared by the GM Board in its sole
discretion, will 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>
YEARS ENDED DECEMBER
31,
--------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Separate Consolidated Net Income.................... $938.9 $821.9 $724.0
Available Separate Consolidated Net Income.......... $795.5 $444.4 $367.2
Average Number of Shares of GM Class E Common Stock
Outstanding (Numerator)............................ 404.6 260.3 243.0
Class E Dividend Base (Denominator)................. 483.7 481.7 480.6
Earnings Attributable to GM Class E Common Stock on
a Per Share Basis.................................. $1.96 $1.71 $1.51
Cash Dividends Per Share of GM Class E Common Stock. $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 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.
C-6
<PAGE>
APPENDIX D
AMENDED EDS INCENTIVE PLAN
<PAGE>
1996 INCENTIVE PLAN
OF
ELECTRONIC DATA SYSTEMS CORPORATION
1. Plan. This 1996 Incentive Plan of Electronic Data Systems Corporation
(the "Plan") is a continuation of the 1984 Electronic Data Systems Corporation
Stock Incentive Plan (the "Existing Plan"), which was adopted by General
Motors Corporation, a Delaware corporation ("General Motors"), to reward
certain corporate officers and key employees of the predecessor of Electronic
Data Systems Holding Corporation (to be renamed "Electronic Data Systems
Corporation" upon the consummation of the Reincorporation (as hereinafter
defined)), a Delaware corporation (the "Company"), and its subsidiaries by
enabling them to acquire shares of Class E Common Stock, par value $.10 per
share ("GM Class E Common Stock"), of General Motors. Upon the Amendment
Effective Date (as hereinafter defined), the Existing Plan shall be amended
and restated in its entirety as set forth herein and shall be assumed by the
Company and neither General Motors nor the committee appointed by General
Motors to administer the Existing Plan (the "Predecessor Committee") shall
have any further rights or responsibilities hereunder.
2. Objectives. This Plan is designed to attract and retain key employees of
the Company and its Subsidiaries (as hereinafter defined), to attract and
retain qualified directors of the Company, to encourage the sense of
proprietorship of such employees and Directors, and to stimulate the active
interest of such persons in the development and financial success of the
Company and its Subsidiaries. These objectives are to be accomplished by
making Awards (as hereinafter defined) under this Plan and thereby providing
Participants (as hereinafter defined) with a proprietary interest in the
growth and performance of the Company and its Subsidiaries.
3. Definitions. As used herein, the terms set forth below shall have the
following respective meanings:
"Amendment Effective Date" has the meaning set forth in paragraph 19 hereof.
"Annual Director Award Date" means, for each year beginning on or after the
Amendment Effective Date, the first business day of the month next succeeding
the date upon which the annual meeting of stockholders of the Company is held
in such year.
"Authorized Officer" means the Chairman of the Board or the Chief Executive
Officer of the Company (or any other senior officer of the Company to whom
either of them shall delegate the authority to execute any Award Agreement).
"Award" means an Employee Award or a Director Award.
"Award Agreement" means any Employee Award Agreement or Director Award
Agreement.
"Board" means the Board of Directors of the Company.
"Cash Award" means an award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Compensation and Benefits Committee of the Board or
such other committee of the Board as is designated by the Board to administer
the Plan.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Director" means an individual serving as a member of the Board.
"Director Award" means the grant of a Director Option or Director Restricted
Stock.
D-1
<PAGE>
"Director Award Agreement" means a written agreement between the Company and
a Participant who is a Nonemployee Director setting forth the terms, conditions
and limitations applicable to a Director Award.
"Director Options" means Nonqualified Options granted to Nonemployee
Directors pursuant to the applicable terms, conditions and limitations
specified in paragraph 9(a) hereof.
"Director Restricted Stock" means Common Stock granted to Nonemployee
Directors pursuant to the applicable terms, conditions and limitations
specified in paragraph 9(b) hereof.
"Disability" means, with respect to a Nonemployee Director, the inability to
perform the duties of a Director for a continuous period of more than three
months by reason of any medically determinable physical or mental impairment.
"Dividend Equivalents" means, with respect to shares of Restricted Stock that
are to be issued at the end of the Restriction Period, an amount equal to all
dividends and other distributions (or the economic equivalent thereof) which
are payable to stockholders of record during the Restriction Period on a like
number of shares of Common Stock.
"Employee" means an employee of the Company or any of its Subsidiaries.
"Employee Award" means the grant of any Option, SAR, Stock Award, Cash Award
or Performance Award, whether granted singly, in combination or in tandem, to a
Participant who is an Employee pursuant to such applicable terms, conditions
and limitations as the Committee may establish in order to fulfill the
objectives of the Plan.
"Employee Award Agreement" means a written agreement between the Company and
a Participant who is an Employee setting forth the terms, conditions and
limitations applicable to an Employee Award.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" of a share of Common Stock means, as of a particular
date, (i) if shares of Common Stock are listed on a national securities
exchange, the mean between the highest and lowest sales price per share of
Common Stock on the consolidated transaction reporting system for the principal
national securities exchange on which shares of Common Stock are listed on that
date, or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported, (ii) if shares of
Common Stock are not so listed but are quoted on the Nasdaq National Market,
the mean between the highest and lowest sales price per share of Common Stock
reported by the Nasdaq National Market on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on which
such a sale was so reported or (iii) if the Common Stock is not so listed or
quoted, the mean between the closing bid and asked price on that date, or, if
there are no quotations available for such date, on the last preceding date on
which such quotations shall be available, as reported by the Nasdaq Stock
Market, or, if not reported by the Nasdaq Stock Market, by the National
Quotation Bureau Incorporated.
"Incentive Option" means an Option that is intended to comply with the
requirements set forth in Section 422 of the Code.
"Noncompetition Provisions" has the meaning set forth in paragraph 8(c)
hereof.
"Nonemployee Director" has the meaning set forth in paragraph 4(b) hereof.
"Nonqualified Stock Option" means an Option that is not an Incentive Option.
"Option" means a right to purchase a specified number of shares of Common
Stock at a specified price.
"Participant" means an Employee or Director to whom an Award has been made
under this Plan.
D-2
<PAGE>
"Performance Award" means an award made pursuant to this Plan to a
Participant who is an Employee that is subject to the attainment of one or more
Performance Goals.
"Performance Goal" means a standard established by the Committee, to
determine in whole or in part whether a Performance Award shall be earned.
"Reincorporation" means (i) the merger of Electronic Data Systems
Intermediate Corporation, a Delaware corporation and direct wholly owned
subsidiary of the Company, with and into the Company and (ii) the merger of
Electronic Data Systems Corporation, a Texas corporation and indirect wholly
owned subsidiary of the Company, with and into the Company.
"Restricted Stock" means any Common Stock that is restricted or subject to
forfeiture provisions.
"Restriction Period" means a period of time beginning as of the date upon
which an Award of Restricted Stock is made pursuant to this Plan and ending as
of the date upon which the Common Stock subject to such Award is no longer
restricted or subject to forfeiture provisions.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any
successor rule.
"SAR" means a right to receive a payment, in cash or Common Stock, equal to
the excess of the Fair Market Value or other specified valuation of a specified
number of shares of Common Stock on the date the right is exercised over a
specified strike price (in each case, as determined by the Committee).
"Split-Off" means the issuance or delivery of shares of Common Stock upon
conversion of all of the outstanding shares of GM Class E Common Stock as a
result of the merger of GM Mergeco Corporation, a Delaware corporation and
indirect wholly owned subsidiary of the Company, with and into General Motors
in accordance with the terms of the Merger Agreement to be entered into between
General Motors and GM Mergeco Corporation.
"Stock Award" means an award in the form of shares of Common Stock or units
denominated in shares of Common Stock.
"Subsidiary" means (i) in the case of a corporation, any corporation of which
the Company directly or indirectly owns shares representing more than 50% of
the combined voting power of the shares of all classes or series of capital
stock of such corporation which have the right to vote generally on matters
submitted to a vote of the stockholders of such corporation and (ii) in the
case of a partnership or other business entity not organized as a corporation,
any such business entity of which the Company directly or indirectly owns more
than 50% of the voting, capital or profits interests (whether in the form of
partnership interests, membership interests or otherwise).
"Transactions" has the meaning set forth in paragraph 19 hereof.
4. Eligibility.
(a) Employees. Key Employees eligible for Employee Awards under this Plan
are those who hold positions of responsibility and whose performance, in
the judgment of the Committee, can have a significant effect on the success
of the Company and its Subsidiaries.
(b) Directors. Directors eligible for Director Awards under this Plan are
those who are not employees of the Company or any of its Subsidiaries
("Nonemployee Directors").
5. Common Stock Available for Awards. Subject to the provisions of paragraph
15 hereof, there shall be available for Awards under this Plan granted wholly
or partly in Common Stock (including rights or options which may be exercised
for or settled in Common Stock) an aggregate of 60,000,000 shares of Common
Stock (in addition to any shares that are the subject of Awards outstanding as
of the Amendment Effective Date), of
D-3
<PAGE>
which an aggregate of not more than 400,000 shares shall be available for
Director Awards and the remainder shall be available for Employee Awards. The
number of shares of Common Stock that are the subject of Awards under this
Plan, that are forfeited or terminated, expire unexercised, are settled in cash
in lieu of Common Stock or in a manner such that all or some of the shares
covered by an Award are not issued to a Participant or are exchanged for Awards
that do not involve Common Stock, shall again immediately become available for
Awards hereunder. The Committee may from time to time adopt and observe such
procedures concerning the counting of shares against the Plan maximum as it may
deem appropriate. The Board and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that shares of Common Stock are available for
issuance pursuant to Awards.
6. Administration.
(a) This Plan, as it applies to Participants who are Employees but not
with respect to Participants who are Nonemployee Directors, shall be
administered by the Committee. To the extent required in order for Employee
Awards to be exempt from Section 16 of the Exchange Act by virtue of the
provisions of Rule 16b-3, the Committee shall consist of at least two
members of the Board who meet the requirements of the definition of
"disinterested person" set forth in Rule 16b-3(c)(2)(i) promulgated under
the Exchange Act.
(b) Subject to the provisions hereof, insofar as this Plan relates to the
Employee Awards, the Committee shall have full and exclusive power and
authority to administer this Plan and to take all actions which are
specifically contemplated hereby or are necessary or appropriate in
connection with the administration hereof. Insofar as this Plan relates to
Employee Awards, the Committee shall also have full and exclusive power to
interpret this Plan and to adopt such rules, regulations and guidelines for
carrying out this Plan as it may deem necessary or proper, all of which
powers shall be exercised in the best interests of the Company and in
keeping with the objectives of this Plan. The Committee may, in its
discretion, provide for the extension of the exercisability of an Employee
Award, accelerate the vesting or exercisability of an Employee Award,
eliminate or make less restrictive any restrictions contained in an
Employee Award, waive any restriction or other provision of this Plan or an
Employee Award or otherwise amend or modify an Employee Award in any manner
that is either (i) not adverse to the Participant to whom such Employee
Award was granted or (ii) consented to by such Participant. The Committee
may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Employee Award in the manner and to
the extent the Committee deems necessary or desirable to carry it into
effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute
discretion and shall be final, conclusive and binding on all parties
concerned.
(c) No member of the Committee or officer of the Company to whom the
Committee has delegated authority in accordance with the provisions of
paragraph 7 of this Plan shall be liable for anything done or omitted to be
done by him or her, by any member of the Committee or by any officer of the
Company in connection with the performance of any duties under this Plan,
except for his or her own willful misconduct or as expressly provided by
statute.
7. Delegation of Authority. The Committee may delegate to the Chief Executive
Officer and to other senior officers of the Company its duties under this Plan
pursuant to such conditions or limitations as the Committee may establish,
except that the Committee may not delegate to any person the authority to grant
Awards to, or take other action with respect to, Participants who are subject
to Section 16 of the Exchange Act.
8. Employee Awards.
(a) The Committee shall determine the type or types of Employee Awards to
be made under this Plan and shall designate from time to time the Employees
who are to be the recipients of such Awards. Each Employee Award may be
embodied in an Employee Award Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its
sole discretion and shall be signed by the Participant to whom the Employee
Award is made and by an Authorized Officer for and on behalf of the
Company. Employee Awards may consist of those listed in this paragraph 8(a)
hereof and may be
D-4
<PAGE>
granted singly, in combination or in tandem. Employee Awards may also be
made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under this Plan or any other employee
plan of the Company or any of its Subsidiaries, including the plan of any
acquired entity; provided that no Option may be issued in exchange for the
cancellation of an Option with a lower exercise price. An Employee Award
may provide for the grant or issuance of additional, replacement or
alternative Employee Awards upon the occurrence of specified events,
including the exercise of the original Employee Award granted to a
Participant. All or part of an Employee Award may be subject to conditions
established by the Committee, which may include, but are not limited to,
continuous service with the Company and its Subsidiaries, achievement of
specific business objectives, increases in specified indices, attainment of
specified growth rates and other comparable measurements of performance.
Upon the termination of employment by a Participant who is an Employee, any
unexercised, deferred, unvested or unpaid Employee Awards shall be treated
as set forth in the applicable Employee Award Agreement.
(i) Stock Option. An Employee Award may be in the form of an Option.
An Option awarded pursuant to this Plan may consist of an Incentive
Option or a Nonqualified Option. The price at which shares of Common
Stock may be purchased upon the exercise of an Incentive Option shall
be not less than the Fair Market Value of the Common Stock on the date
of grant. The price at which shares of Common Stock may be purchased
upon the exercise of a Nonqualified Option shall be not less than, but
may exceed, the Fair Market Value of the Common Stock on the date of
grant. Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Options awarded pursuant to this Plan,
including the term of any Options and the date or dates upon which they
become exercisable, shall be determined by the Committee.
(ii) Stock Appreciation Right. An Employee Award may be in the form
of an SAR. The terms, conditions and limitations applicable to any SARs
awarded pursuant to this Plan, including the term of any SARs and the
date or dates upon which they becomes exercisable, shall be determined
by the Committee.
(iii) Stock Award. An Employee Award may be in the form of a Stock
Award. The terms, conditions and limitations applicable to any Stock
Awards granted pursuant to this Plan shall be determined by the
Committee.
(iv) Cash Award. An Employee Award may be in the form of a Cash
Award. The terms, conditions and limitations applicable to any Cash
Awards granted pursuant to this Plan shall be determined by the
Committee.
(v) Performance Award. Without limiting the type or number of
Employee Awards that may be made under the other provisions of this
Plan, an Employee Award may be in the form of a Performance Award. A
Performance Award shall be paid, vested or otherwise deliverable solely
on account of the attainment of one or more pre-established, objective
Performance Goals established by the Committee prior to the earlier to
occur of (x) 90 days after the commencement of the period of service to
which the Performance Goal relates and (y) the elapse of 25% of the
period of service (as scheduled in good faith at the time the goal is
established), and in any event while the outcome is substantially
uncertain. A Performance Goal is objective if a third party having
knowledge of the relevant facts could determine whether the goal is
met. Such a Performance Goal may be based on one or more of business
criteria that apply to the individual, one or more business units of
the Company, or the Company as a whole, and may include one or more of
the following: increased revenue, net income, stock price, market
share, earnings per share, return on equity, return on assets or
decrease in costs. Unless otherwise stated, such a Performance Goal
need not be based upon an increase or positive result under a
particular business criterion and could include, for example,
maintaining the status quo or limiting economic losses (measured, in
each case, by reference to specific business criteria). In interpreting
Plan provisions applicable to Performance Goals and Performance Awards,
it is the intent of the Plan to conform with the standards of Section
162(m) of the Code and Treasury Regulations (S) 1.162-27(e)(2)(i), and
the Committee in establishing such goals and interpreting the Plan
shall be guided by such provisions. Prior to the payment of any
compensation based on the achievement of
D-5
<PAGE>
Performance Goals, the Committee must certify in writing that
applicable Performance Goals and any of the material terms thereof
were, in fact, satisfied. Subject to the foregoing provisions, the
terms, conditions and limitations applicable to any Performance Awards
made pursuant to this Plan shall be determined by the Committee.
(b) Notwithstanding anything to the contrary contained in this Plan, the
following limitations shall apply to any Employee Awards made hereunder:
(i) no Participant may be granted, during any one-year period,
Employee Awards consisting of Options or SARs that are exercisable for
more than 1,500,000 shares of Common Stock;
(ii) no Participant may be granted, during any one-year period,
Employee Awards consisting of shares of Common Stock or units
denominated in such shares (other than any Employee Awards consisting
of Options or SARs) covering or relating to more than 300,000 shares of
Common Stock (the limitation set forth in this clause (ii), together
with the limitation set forth in clause (i) above, being hereinafter
collectively referred to as the "Stock Based Awards Limitations"); and
(iii) no Participant may be granted Employee Awards consisting of
cash or in any other form permitted under this Plan (other than
Employee Awards consisting of Options or SARs or otherwise consisting
of shares of Common Stock or units denominated in such shares) in
respect of any one-year period having a value determined on the date of
grant in excess of $5,000,000.
(c) Prior to the Amendment Effective Date, certain awards consisting of
shares of GM Class E Common Stock or units denominated in such shares (the
"Existing Stock Awards") have been made to Employees under the Existing
Plan as in effect from time to time. As of the Amendment Effective Date,
each Existing Stock Award shall be adjusted so that such award shall
consist of or relate to a number of shares of Common Stock equal to the
number of shares of GM Class E Common Stock that are the subject of such
Existing Stock Award immediately prior to such date, without any alteration
or enlargement of the rights of the holders thereof. Notwithstanding
anything to the contrary contained in this Plan, all Existing Stock Awards
that are subject to the restrictions and other provisions relating to
competition by participants and related matters that are set forth in
Section 10 of the Existing Plan (the "Noncompetition Provisions") shall
continue to be subject to the Noncompetition Provisions after the Amendment
Effective Date, as fully and to the same extent as if Section 10 of the
Existing Plan were set forth herein in its entirety. The Noncompetition
Provisions shall apply to all Existing Awards, but shall not apply to any
Awards made after the Amendment Effective Date unless otherwise determined
by the Committee.
9. Director Awards. Each Nonemployee Director of the Company shall be granted
Director Awards in accordance with this paragraph 9 and subject to the
applicable terms, conditions and limitations set forth in this Plan and the
applicable Director Award Agreement. Notwithstanding anything to the contrary
contained herein, Director Awards shall not be made in any year in which a
sufficient number of shares of Common Stock are not available to make such
Awards under this Plan.
(a) Director Options. On the Amendment Effective Date, each Nonemployee
Director shall be automatically awarded a Director Option that provides for
the purchase of 1,500 shares of Common Stock. In addition, on each Annual
Director Award Date, each Nonemployee Director shall automatically be
granted a Director Option that provides for the purchase of 1,500 shares of
Common Stock. In the event that a Nonemployee Director is elected after the
Amendment Effective Date otherwise than by election at an annual meeting of
stockholders of the Company, on the date of his or her election, such
Nonemployee Director shall automatically be granted a Director Option that
provides for the purchase of a number of shares of Common Stock (rounded up
to the nearest whole number) equal to the product of (i) 1,500 and (ii) a
fraction the numerator of which is the number of days between the election
of such Nonemployee Director and the next scheduled Annual Director Award
Date (or, if no such date has been scheduled, the first anniversary of the
immediately preceding Annual Director Award Date) and the denominator of
which is 365. Each Director Option shall have a term of ten years from the
date of grant, notwithstanding any earlier termination of the status of the
holder as a Nonemployee Director. The purchase price of each share
D-6
<PAGE>
of Common Stock subject to a Director Option shall be equal to the Fair
Market Value of the Common Stock on the date of grant. All Director Options
shall vest and become exercisable in increments of one-third of the total
number of shares of Common Stock that are subject thereto (rounded up to
the nearest whole number) on the first and second anniversaries of the date
of grant and of all remaining shares of Common Stock that are subject
thereto on the third anniversary of the date of grant. All unvested
Director Options shall be forfeited if the Nonemployee Director resigns as
a Director without the consent of a majority of the other Directors.
In addition to the Director Options automatically awarded pursuant to the
immediately preceding paragraph, a Nonemployee Director may make an annual
election to receive, in lieu of all or any portion of the Director's fees
he would otherwise be entitled to receive in cash during the next year
(including both annual retainer and meeting fees), Director Options that
provide for the purchase of a number of shares of Common Stock (rounded up
to the nearest whole number) equal to the product of (x) three times (y) a
fraction the numerator of which is equal to the dollar amount of fees the
Nonemployee Director elects to forego in the next year in exchange for
Director Options and the denominator of which is equal to the Fair Market
Value of the Common Stock on the date of the election. Each annual election
made by a Nonemployee Director pursuant to this paragraph 9(a)(i) shall
take the form of a written document signed by such Nonemployee Director and
filed with the Secretary of the Company, (ii) shall designate the dollar
amount of the fees the Nonemployee Director elects to forego in the next
year in exchange for Director Options and (iii) to extent provided by the
Committee in order to ensure that the Award of the Director Options is
exempt from Section 16 by virtue of Rule 16b-3, shall be irrevocable and
shall be made at least six months prior to the date as of which such Award
of Director Options is to be effective. An Award of Director Options at the
election of a Nonemployee Director shall be effective on the next Annual
Director Award Date.
Any Award of Director Options shall be embodied in a Director Award
Agreement, which shall contain the terms, conditions and limitations set
forth above and shall be signed by the Participant to whom the Director
Options are granted and by an Authorized Officer for and on behalf of the
Company.
(b) Director Restricted Stock. On the Amendment Effective Date, each
Nonemployee Director shall automatically be awarded 500 shares of Director
Restricted Stock. In addition, on each Annual Director Award Date, each
Nonemployee Director shall automatically be granted 500 shares of Director
Restricted Stock. In the event that a Nonemployee Director is elected after
the Amendment Effective Date otherwise than by election at an annual
meeting of stockholders of the Company, on the date of his or her election,
such Nonemployee Director shall automatically be granted a number of shares
of Director Restricted Stock (rounded up to the nearest whole number) equal
to the product of (i) 500 and (ii) a fraction the numerator of which is the
number of days between the election of such Nonemployee Director and the
next scheduled Annual Director Award Date (or, if no such date has been
scheduled, the first anniversary of the immediately preceding Annual
Director Award Date) and the denominator of which is 365. Shares of
Director Restricted Stock awarded to a Nonemployee Director (i) shall vest
in increments of one-third of the total number of shares of Director
Restricted Stock (rounded up to the nearest whole number) that are the
subject of such Award on the first and second anniversaries of the date of
grant and all remaining shares of Director Restricted Stock that are the
subject of such Award on the third anniversary of the date of grant and
(ii) shall fully vest (to the extent not previously vested pursuant to
clause (i) above) upon a failure to reelect the Nonemployee Director as
Director, the death of the Director or the resignation of the Director by
reason of Disability or at the request of a majority of the other
Directors. All unvested shares of Director Restricted Stock granted to a
Nonemployee Director shall be forfeited if the Nonemployee Director resigns
as a Director without the consent of a majority of the other Directors.
In addition to the Director Restricted Stock automatically awarded
pursuant to the immediately preceding paragraph, a Nonemployee Director may
make an annual election to receive, in lieu of all or any portion of the
Director's fees he would otherwise be entitled to receive in cash during
the next year (including both annual retainer and meeting fees), a number
of shares of Director Restricted Stock (rounded up to the nearest whole
number) having a Fair Market Value equal to 110% of a fraction the
numerator of
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<PAGE>
which is equal to the dollar amount of fees the Nonemployee Director elects
to forego in the next year in exchange for Director Restricted Stock and
the denominator of which is equal to the Fair Market Value of the Common
Stock on the date of the election. Each annual election made by a
Nonemployee Director pursuant to this paragraph 9(b)(i) shall take the form
of a written document signed by such Nonemployee Director and filed with
the Secretary of the Company, (ii) shall designate the dollar amount of the
fees the Nonemployee Director elects to forego in the next year in exchange
for Director Restricted Stock and (iii) to the extent provided by the
Committee in order to ensure that the Award of the Director Restricted
Stock is exempt from Section 16 by virtue of Rule 16b-3, shall be
irrevocable and shall be made at least six months prior to the date as of
which such Award of Director Restricted Stock is to be effective. An Award
of Director Restricted Stock at the election of a Nonemployee Director
shall be effective on the next Annual Director Award Date.
Any Award of Director Restricted Stock shall be embodied in a Director
Award Agreement, which shall contain the terms, conditions and limitations
set forth above and shall be signed by the Participant to whom the Director
Restricted Stock is granted and by an Authorized Officer for and on behalf
of the Company.
10. Payment of Awards.
(a) General. Payment of Employee Awards may be made in the form of cash
or Common Stock, or a combination thereof, and may include such
restrictions as the Committee shall determine, including, in the case of
Common Stock, restrictions on transfer and forfeiture provisions. If
payment of an Employee Award is made in the form of Restricted Stock, the
Employee Award Agreement relating to such shares shall specify whether they
are to be issued at the beginning or end of the Restriction Period. In the
event that shares of Restricted Stock are to be issued at the beginning of
the Restriction Period, the certificates evidencing such shares (to the
extent that such shares are so evidenced) shall contain appropriate legends
and restrictions that describe the terms and conditions of the restrictions
applicable thereto. In the event that shares of Restricted Stock are to be
issued at the end of the Restricted Period, the right to receive such
shares shall be evidenced by book entry registration or in such other
manner as the Committee may determine.
(b) Deferral. With the approval of the Committee, payments in respect of
Employee Awards may be deferred, either in the form of installments or a
future lump sum payment. The Committee may permit selected Participants to
elect to defer payments of some or all types of Employee Awards in
accordance with procedures established by the Committee. Any deferred
payment of an Employee Award, whether elected by the Participant or
specified by the Employee Award Agreement or by the Committee, may be
forfeited if and to the extent that the Employee Award Agreement so
provides.
(c) Dividends and Interest. Rights to dividends or Dividend Equivalents
may be extended to and made part of any Employee Award consisting of shares
of Common Stock or units denominated in shares of Common Stock, subject to
such terms, conditions and restrictions as the Committee may establish. The
Committee may also establish rules and procedures for the crediting of
interest on deferred cash payments and Dividend Equivalents for Employee
Awards consisting of shares of Common Stock or units denominated in shares
of Common Stock.
(d) Substitution of Awards. At the discretion of the Committee, a
Participant who is an Employee may be offered an election to substitute an
Employee Award for another Employee Award or Employee Awards of the same or
different type.
11. Stock Option Exercise. The price at which shares of Common Stock may be
purchased under an Option shall be paid in full at the time of exercise in cash
or, if elected by the optionee, the optionee may purchase such shares by means
of tendering Common Stock or surrendering another Award, including Restricted
Stock or Director Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine acceptable
methods for Participants who are Employees to tender Common Stock or other
Employee Awards; provided that any Common Stock that is or was the subject of
an
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Employee Award may be so tendered only if it has been held by the Participant
for six months. The Committee may provide for procedures to permit the exercise
or purchase of such Awards by use of the proceeds to be received from the sale
of Common Stock issuable pursuant to an Employee Award. Unless otherwise
provided in the applicable Award Agreement, in the event shares of Restricted
Stock are tendered as consideration for the exercise of an Option, a number of
the shares issued upon the exercise of the Option, equal to the number of
shares of Restricted Stock or Director Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the Restricted Stock or
Director Restricted Stock so submitted as well as any additional restrictions
that may be imposed by the Committee.
12. Tax Withholding. The Company shall have the right to deduct applicable
taxes from any Employee Award payment and withhold, at the time of delivery or
vesting of cash or shares of Common Stock under this Plan, an appropriate
amount of cash or number of shares of Common Stock or a combination thereof for
payment of taxes required by law or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Employee Award with respect to which withholding is
required. If shares of Common Stock are used to satisfy tax withholding, such
shares shall be valued based on the Fair Market Value when the tax withholding
is required to be made. The Committee may provide for loans, on either a short
term or demand basis, from the Company to a Participant who is an Employee to
permit the payment of taxes required by law.
13. Amendment, Modification, Suspension or Termination. The Board may amend,
modify, suspend or terminate this Plan for the purpose of meeting or addressing
any changes in legal requirements or for any other purpose permitted by law,
except that (i) no amendment or alteration that would adversely affect the
rights of any Participant under any Award previously granted to such
Participant shall be made without the consent of such Participant and (ii) no
amendment or alteration shall be effective prior to approval by the
stockholders of the Company to the extent such approval is then required
pursuant to Rule 16b-3 in order to preserve the applicability of any exemption
provided by such rule to any Award then outstanding (unless the holder of such
Award consents) or to the extent stockholder approval is otherwise required by
applicable legal requirements.
14. Assignability. Unless otherwise determined by the Committee and provided
in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under
the Exchange Act shall be assignable or otherwise transferable except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. The Committee may prescribe and
include in applicable Award Agreements other restrictions on transfer. Any
attempted assignment of an Award or any other benefit under this Plan in
violation of this paragraph 14 shall be null and void.
15. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner
the right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes
in the capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stock (whether or not such issue is prior to, on a
parity with or junior to the Common Stock) or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding of any
kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock, declaration of a dividend payable in shares of
Common Stock or other stock split, then (i) the number of shares of Common
Stock reserved under this Plan, (ii) the number of shares of Common Stock
covered by outstanding Awards in the form of Common Stock or units
denominated in Common Stock, (iii) the exercise or other price in respect
of such Awards, (iv) the appropriate Fair Market Value and other price
determinations for such Awards, (v) the number of shares of Common Stock
covered by Director Options automatically granted pursuant to paragraph
9(a) hereof, (vi) the number of shares of Director Restricted
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Stock automatically granted pursuant to paragraph 9(b) hereof and (vii) the
Stock Based Awards Limitations shall each be proportionately adjusted by
the Board to reflect such transaction. In the event of any other
recapitalization or capital reorganization of the Company, any
consolidation or merger of the Company with another corporation or entity,
the adoption by the Company of any plan of exchange affecting the Common
Stock or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends or dividends payable in Common
Stock), the Board shall make appropriate adjustments to (i) the number of
shares of Common Stock covered by Awards in the form of Common Stock or
units denominated in Common Stock, (ii) the exercise or other price in
respect of such Awards, (iii) the appropriate Fair Market Value and other
price determinations for such Awards, (iv) the number of shares of Common
Stock covered by Director Options automatically granted pursuant to
paragraph 9(a) hereof, (v) the number of shares of Director Restricted
Stock automatically granted pursuant to paragraph 9(b) hereof and (vi) the
Stock Based Awards Limitations to give effect to such transaction shall
each be proportionately adjusted by the Board to reflect such transaction.;
provided that such adjustments shall only be such as are necessary to
maintain the proportionate interest of the holders of the Awards and
preserve, without exceeding, the value of such Awards. In the event of a
corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Board shall be authorized to
issue or assume Awards by means of substitution of new Awards, as
appropriate, for previously issued Awards or an assumption of previously
issued Awards as part of such adjustment.
16. Restrictions. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. It is the intent of the Company that this
Plan comply with Rule 16b-3 with respect to persons subject to Section 16 of
the Exchange Act unless otherwise provided herein or in an Award Agreement,
that any ambiguities or inconsistencies in the construction of this Plan be
interpreted to give effect to such intention, and that if any provision of this
Plan is found not to be in compliance with Rule 16b-3, such provision shall be
null and void to the extent required to permit this Plan to comply with Rule
16b-3. Certificates evidencing shares of Common Stock certificates delivered
under this Plan (to the extent that such shares are so evidenced) may be
subject to such stop transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any securities exchange or transaction
reporting system upon which the Common Stock is then listed or to which it is
admitted for quotation and any applicable federal or state securities law. The
Committee may cause a legend or legends to be placed upon such certificates (if
any) to make appropriate reference to such restrictions.
17. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock or
rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may
be established with respect to Participants who are entitled to cash, Common
Stock or rights thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate
any assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation,
nor shall the Company, the Board or the Committee be deemed to be a trustee of
any cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to an
Award of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and
any Award Agreement, and no such liability or obligation of the Company shall
be deemed to be secured by any pledge or other encumbrance on any property of
the Company. Neither the Company nor the Board nor the Committee shall be
required to give any security or bond for the performance of any obligation
that may be created by this Plan.
18. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions
of the Code or the securities laws of the United States, shall be governed by
and construed in accordance with the laws of the State of Delaware.
19. Effectiveness. The Existing Plan shall be amended and restated in its
entirety as set forth herein as of the earliest date (the "Amendment Effective
Date") upon which both the Reincorporation and the Split-Off (collectively, the
"Transactions") have been consummated; provided, however, that (i) the
amendment and
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restatement of the Existing Plan and the assumption of the Existing Plan by the
Company as contemplated hereby are expressly conditioned upon the approval of
this Plan by the Board of Directors and the Executive Compensation Committee of
General Motors and the ratification and approval of this Plan by the Board (the
"Corporate Approvals Condition") and (ii) insofar as this Plan relates to
Employees and Employee Awards, the amendment and restatement of the Existing
Plan and the assumption of the Existing Plan by the Company as contemplated
hereby are expressly conditioned upon the ratification and approval of this
Plan by (a) a majority of the voting power of the holders of common stock of
General Motors of all classes, voting together as a single class in accordance
with their respective voting rights and (b) a majority of the holders of Class
E Common Stock, voting together as a separate class (the "Stockholder Approval
Condition"). If the Transactions are not consummated prior to December 31, 1996
or if at the date upon which the Transactions are consummated the Corporate
Approvals Condition shall not have been satisfied, the Existing Plan shall not
be amended and restated as set forth herein and the awards granted under the
Existing Plan as then in effect shall not be affected and shall continue in
full force and effect in accordance with the Existing Plan as then in effect
and any award agreements hereunder. If the Transactions are consummated prior
to December 31, 1996 but at the date upon which the Transactions are
consummated the Stockholder Approval Condition shall not have been satisfied,
(a) the Existing Plan shall not be amended and restated as set forth herein and
all awards granted under the Existing Plan as then in effect shall not be
affected and shall continue in full force and effect in accordance with the
Existing Plan as then in effect (or as the same may be amended from time to
time) and any award agreements hereunder and (b) a new plan (the "Separate
Director Stock Incentive Plan") shall be deemed to have been adopted by the
Company and approved by General Motors as the sole stockholder of the Company,
which plan shall be referred to as the "1996 Nonemployee Director Stock
Incentive Plan" and shall include all of the terms and conditions set forth
herein that relate to Directors and Director Awards but not the terms and
conditions that relate to Employees and Employee Awards (it being understood
that the Board shall be authorized to cause the Separate Director Stock
Incentive Plan to be embodied in a separate document by eliminating all
references to Employees and Employee Awards contained herein and making other
appropriate changes to the text hereof, none of which shall result in any
alteration or enlargement of the rights granted to Directors hereunder).
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF EDS.
Delaware General Corporation Law
Section 145(a) 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, 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.
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) 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.
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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 EDS, a copy
of which is filed as Exhibit 3(a) to this Registration Statement, provides
that no director of EDS shall be personally liable to EDS 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 EDS 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 EDS, 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
EDS shall be prospective only, and shall not adversely affect any limitation
on the personal liability of a director of EDS existing at the time of such
repeal or modification.
Bylaws
Article VI of the Amended and Restated Bylaws of EDS, a copy of which is
filed as Exhibit 3(b) to this Registration Statement, provides that each
person who at any time shall serve or shall have served as a director,
officer, employee or agent of EDS, or any person who, while a director,
officer, employee or agent of EDS, is or was serving at the written request of
EDS (in accordance with written procedures adopted from time to time by the
Board of Directors of EDS) as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of 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 EDS 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
EDS has entered into Indemnification Agreements (the "Indemnification
Agreements") with its directors, nominees for director and certain of its
officers (the "Indemnitees"), a form of which is attached as Exhibit 10(f) to
this Registration Statement. Under the terms of the Indemnification
Agreements, EDS 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 EDS 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 EDS 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 EDS (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
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<PAGE>
action, suit, arbitration, alternative dispute resolution mechanism,
investigation or other proceeding (each, a "Proceeding"), other than a
Proceeding by or in the right of EDS, (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 EDS 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 EDS 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, EDS 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 EDS or otherwise, in advance of any determination with respect to
entitlement to indemnification and within 15 days after the receipt by EDS 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 EDS 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 EDS 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 EDS.
Separation Agreement
In the Separation Agreement, GM has agreed to indemnify the members of the
EDS Team, the officers and employees of EDS providing assistance to the EDS
Team, and the directors of EDS who granted any approval or authorization for
EDS in connection with the Split-Off, in each case, in their capacity as such,
against losses arising from the Split-Off in accordance with the GM Bylaws, to
the same extent as if such person were a director or officer of GM; provided
that such indemnification does not apply to losses relating to (i) the EDS
Certificate of Incorporation, the EDS Bylaws or the EDS Rights Agreement, (ii)
EDS employee and director compensation and indemnification arrangements or
(iii) EDS plans, proposals, intentions or policies applicable after the
Effective Time, including EDS' dividend policy. In addition, the Separation
Agreement requires GM to indemnify, in accordance with the GM Bylaws, to the
same extent as if such person were a director or officer of GM, each EDS non-
employee board nominee against losses arising from the expression of any views
prior to the Effective Time at the request of GM or the GM Board with respect
to EDS' proposed charter, bylaws, stockholders rights plan or employee benefit
plans. EDS will reimburse GM for all amounts paid to or on behalf of such
persons pursuant to such indemnification.
Insurance
EDS 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 EDS.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
The following documents are exhibits to the Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<C> <S> <C>
2(a) Merger Agreement dated as of April , 1996 between Gen-
eral Motors and Mergeco (included as Appendix A).
2(b) Form of Separation Agreement between General Motors and
EDS.
2(c) Amended and Restated Agreement for the Allocation of
United States Federal, State and Local Income Taxes dated
as of April 2, 1996 between General Motors and EDS.
3(a) Restated Certificate of Incorporation of EDS.
3(b) Amended and Restated Bylaws of EDS.
4(a) Restated Certificate of Incorporation of EDS (filed as Ex-
hibit 3(a) above).
4(b) Amended and Restated Bylaws of EDS (filed as Exhibit 3(b)
above).
4(c) Rights Agreement, dated as of March 12, 1996, by and be-
tween EDS and The Bank of New York, as Rights Agent.
5 Opinion of Baker & Botts, L.L.P.
8 Opinion of Kirkland & Ellis.
10(a) Form of Master Services Agreement between General Motors
and EDS (portions of which are subject to a request for
confidential treatment filed with the Commission).
<CAPTION>
<C> <S> <C>
10(b) 1996 Incentive Plan of EDS (included as Appendix D).
10(c) 1996 Electronic Data Systems Corporation Stock Purchase
Plan.
10(d) EDS Supplemental Executive Retirement Plan.
10(e) Electronic Data Systems Corporation Deferred Compensation
Plan for Non-Employee Directors
10(f) Form of Indemnification Agreement entered into by EDS and
each of its executive officers and director nominees.
10(g) Indenture dated as of May 15, 1995 between EDS, a Texas
corporation, and Texas Commerce Bank National Association,
as trustee.
10(h) Revolving Credit and Term Loan Agreement dated as of Octo-
ber 4, 1995 among EDS, Citibank, N.A., as Administrative
Agent, and the other financial institutions identified
therein as Arrangers, Managers and Lenders.
10(i) Multi-Currency Revolving Credit Agreement dated as of Oc-
tober 4, 1995 among EDS, Citibank, N.A., as Administrative
Agent, and the other financial institutions identified
therein as Arrangers, Managers and Lenders.
10(j) Registration Rights Agreement dated March 12, 1995 between
General Motors and United States Trust Company of New
York, as trustee of the General Motors Hourly-Rate Pension
Plan.
10(k) Form of Succession Agreement among General Motors, United
States Trust Company of New York and EDS.
10(l) 1984 EDS Stock Incentive Plan.
11 Statement of Computation of Earnings Per General Motors
Class E Common Share.
21 Subsidiaries of EDS.
23(a) Consent of Deloitte & Touche LLP, independent auditors.
23(b) Consent of KPMG Peat Marwick LLP, independent auditors.
23(c) Consent of Baker & Botts, L.L.P. (included in Exhibit 5
above).
23(d) Consent of Kirkland & Ellis (included in Exhibit 8 above).
23(e) Consent of Merrill Lynch.
23(f) Consent of Lehman Brothers.
23(g) Consent of Morgan Stanley.
99 Consents of Persons About to Become Directors.
</TABLE>
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FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report; Schedule II--Allowances
FAIRNESS OPINIONS
Incorporated as Appendix B to the Solicitation Statement/Prospectus which
forms a part of this Registration Statement.
ITEM 22. 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 herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
2. That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
3. That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
4. 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 assessed 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.
5. To respond to requests for information that is incorporated by
reference into this Solicitation Statement/Prospectus pursuant to Items 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of this Registration
Statement through the date of responding to the request.
6. To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement
when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
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 APRIL 15, 1996.
Electronic Data Systems Holding
Corporation
/s/ Lester M. Alberthal, Jr.
By: _________________________________
Lester M. Alberthal, Jr.
Chairman of the Board, President
andChief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON APRIL 15, 1996 IN THE
CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ Lester M. Alberthal, Jr. Chairman of the Board,
____________________________________ President, Chief Executive
Lester M. Alberthal, Jr. Officer
and Director (Principal
Executive Officer)
/s/ John R. Castle, Jr. Senior Vice President and
____________________________________ Director
John R. Castle, Jr.
/s/ Paul J. Chiapparone Senior Vice President and
____________________________________ Director
Paul J. Chiapparone
/s/ Gary J. Fernandes Senior Vice President and
____________________________________ Director
Gary J. Fernandes
/s/ Joseph M. Grant Senior Vice President, Chief
____________________________________ Financial Officer and
Joseph M. Grant Director (Principal
Financial Officer)
/s/ H. Paulett Eberhart Vice President and
____________________________________ Controller (Principal
H. Paulett Eberhart Accounting Officer)
</TABLE>
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 and incorporated by reference 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>
Detach Consent Card Here
- -------------------------------------------------------------------------------
C O N S E N T
CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING
REVOCABLE CONSENT SOLICITED ON BEHALF OF
GENERAL MOTORS CORPORATION
The undersigned, a common stockholder of General Motors Corporation
("General Motors"), acting with respect to all of the shares of Common Stock,
par value $1 2/3 per share ("$1 2/3 Common Stock"), Class H Common Stock, par
value $.10 per share ("Class H Common Stock"), and/or Class E Common Stock,
par value $.10 per share ("Class E Common Stock" and, together with the Class
H Common Stock and $1 2/3 Common Stock, the "Common Stock"), as applicable,
held by the undersigned on April 10, 1996 (the "Record Date"), hereby
consents, withholds consent or abstains as specified on the reverse side with
respect to the taking of corporate actions without a meeting pursuant to
Section 228 of the Delaware General Corporation Law. All capitalized terms
used but not defined herein shall have the meanings ascribed to such terms in
the Solicitation Statement/Prospectus furnished herewith to all stockholders
of General Motors who hold shares of Common Stock.
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
Stockholders wishing to approve any or all of the actions set forth herein
should mark the appropriate "Consent" box on the reverse side of this consent
card. Those opposing any such action should register their position by marking
the appropriate "Withhold Consent" or "Abstain" box on the reverse side of
this consent card or by not returning this consent card. Unless you otherwise
indicate on this consent card, this consent card will be voted as set forth on
the reverse side with respect to all shares of all classes of Common Stock
held by the undersigned on the Record Date, and if no choice is indicated but
this consent card is otherwise completed, you will be deemed to have consented
to each of the actions set forth on the reverse side of this consent card. By
executing this card the undersigned hereby revokes any and all prior consents
and hereby affirms that, as of the Record Date, the undersigned had the power
to deliver a consent for the number of shares represented by this consent.
SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE
ACTIONS SET FORTH ON THE REVERSE SIDE OF THIS CARD.
Consummation of the Transactions is conditioned upon receiving the consent
of the holders of (i) a majority of the voting power of all outstanding shares
of all three classes of General Motors Common Stock, voting together as a
single class based on their respective voting rights, (ii) a majority of the
outstanding shares of $1 2/3 Common Stock, voting as a separate class, and
(iii) a majority of the outstanding shares of Class E Common Stock, voting as
a separate class. Approval of the Amended EDS Incentive Plan will require the
consent of the holders of (i) a majority of the voting power of all
outstanding shares of all three classes of General Motors Common Stock, voting
together as a single class based on their respective voting rights, and (ii) a
majority of the outstanding shares of Class E Common Stock, voting as a
separate class. Unless previously revoked, this consent will be effective when
and if delivered along with consents representing the percentages of shares
indicated in the two immediately preceding sentences to General Motors.
PLEASE SIGN AND DATE ON REVERSE SIDE
<PAGE>
Detach Consent Card Here
- -------------------------------------------------------------------------------
[x] PLEASE MARK VOTES AS IN THIS EXAMPLE.
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED BELOW.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS
CONSENT TO PROPOSALS 1 AND 2 BELOW.
- -------------------------------------------------------------------------------
Abstain
1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF
THE MERGER AGREEMENT
The approval of the Split-Off and related transactions, including the
consummation of the Merger, the making of the Special Inter-Company Payment,
the execution and delivery of the Master Services Agreement (and certain
related agreements) and the Separation Agreement and the consummation of the
other transactions and events contemplated by the Merger Agreement, including
the adoption of the Merger Agreement.
[_] Consent [_]Withhold Consent [_] Abstain
2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN
The approval of the 1996 Incentive Plan of EDS, which amends and restates the
existing 1984 EDS Stock Incentive Plan.
[_] Consent [_]Withhold Consent [_] Abstain
When shares are held by joint tenants, both
must sign. When signing as attorney-in-fact,
executor, administrator, trustee, guardian,
corporate officer or partner, please give full
title as such. If a corporation, please sign in
corporate name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
Signature ____________________ Signature, if held jointly _____________________
Title ________________________ Dated: __________
IN ORDER FOR THIS CONSENT CARD TO BE VALID, IT MUST BE DATED. PLEASE DATE AND
SIGN THIS CARD EXACTLY AS YOUR NAME APPEARS HEREON, AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE.
<PAGE>
CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING
REVOCABLE CONSENT SOLICITED ON BEHALF OF
GENERAL MOTORS CORPORATION COMMON
The undersigned, a common stockholder of General Motors Corporation ("General
Motors"), acting with respect to all of the shares of Common Stock, par value
$1 2/3 per share ("$1 2/3 Common Stock") held by the undersigned on April 10,
1996 (the "Record Date"), hereby consents, withholds consent or abstains as
specified on the reverse side with respect to the taking of corporate actions
without a meeting pursuant to Section 228 of the Delaware General Corporation
Law. All capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Solicitation Statement/Prospectus furnished
herewith to all stockholders of General Motors who hold shares of General
Motors common stock.
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
Stockholders wishing to approve any or all of the actions set forth herein
should mark the appropriate "Consent" box on the reverse side of this consent
card. Those opposing any such action should register their position by marking
the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this
consent card or by not returning this consent card. Unless you otherwise
indicate on this consent card, this consent card will be voted as set forth on
the reverse side with respect to all shares of $1 2/3 Common Stock held by the
undersigned on the Record Date, and if no choice is indicated but this consent
card is otherwise completed, you will be deemed to have consented to each of
the actions set forth on the reverse side of this consent card. By executing
this card the undersigned hereby revokes any and all prior consents and hereby
affirms that, as of the Record Date, the undersigned had the power to deliver a
consent for the number of shares represented by this consent.
SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS
SET FORTH ON THE REVERSE SIDE OF THIS CARD.
Consummation of the Transactions is conditioned upon receiving the consent of
the holders of (i) a majority of the voting power of all outstanding shares of
all three classes of General Motors common stock, voting together as a single
class based on their respective voting rights, (ii) a majority of the
outstanding shares of $1 2/3 Common Stock, voting as a separate class, and
(iii) a majority of the outstanding shares of General Motors Class E Common
Stock, voting as a separate class. Approval of the Amended EDS Incentive Plan
will require the consent of the holders of (i) a majority of the voting power
of all outstanding shares of all three classes of General Motors common stock,
voting together as a single class based on their respective voting rights, and
(ii) a majority of the outstanding shares of General Motors Class E Common
Stock, voting as a separate class. Unless previously revoked, this consent will
be effective when and if delivered along with consents representing the
percentages of shares indicated in the two immediately preceding sentences to
General Motors.
PLEASE SIGN AND DATE ON REVERSE SIDE
- --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE. COMMON
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED BELOW.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS
CONSENT TO PROPOSALS 1 AND 2 BELOW.
- --------------------------------------------------------------------------------
1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF
THE MERGER AGREEMENT
The approval of the Split-Off and related transactions, including the
consummation of the Merger, the making of the Special Inter-Company Payment,
the execution and delivery of the Master Services Agreement (and certain
related agreements) and the Separation Agreement and the consummation of the
other transactions and events contemplated by the Merger Agreement, including
the adoption of the Merger Agreement.
[_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN
2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN
The approval of the 1996 Incentive Plan of EDS, which amends and restates the
existing 1984 EDS Stock Incentive Plan.
[_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN
When shares are held by joint tenants, both
must sign. When signing as attorney-in-fact,
executor, administrator, trustee, guardian,
corporate officer or partner, please give
full title as such. If a corporation, please
sign in corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
Signature __________________ Dated: __________________________
Signature __________________ Dated: __________________________
<PAGE>
CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING
REVOCABLE CONSENT SOLICITED ON BEHALF OF
GENERAL MOTORS CORPORATION CLASS E
The undersigned, a common stockholder of General Motors Corporation ("General
Motors"), acting with respect to all of the shares of Class E Common Stock, par
value $.10 per share ("Class E Common Stock") held by the undersigned on April
10, 1996 (the "Record Date"), hereby consents, withholds consent or abstains as
specified on the reverse side with respect to the taking of corporate actions
without a meeting pursuant to Section 228 of the Delaware General Corporation
Law. All capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Solicitation Statement/Prospectus furnished
herewith to all stockholders of General Motors who hold shares of General
Motors common stock.
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
Stockholders wishing to approve any or all of the actions set forth herein
should mark the appropriate "Consent" box on the reverse side of this consent
card. Those opposing any such action should register their position by marking
the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this
consent card or by not returning this consent card. Unless you otherwise
indicate on this consent card, this consent card will be voted as set forth on
the reverse side with respect to all shares of Class E Common Stock held by the
undersigned on the Record Date, and if no choice is indicated but this consent
card is otherwise completed, you will be deemed to have consented to each of
the actions set forth on the reverse side of this consent card. By executing
this card the undersigned hereby revokes any and all prior consents and hereby
affirms that, as of the Record Date, the undersigned had the power to deliver a
consent for the number of shares represented by this consent.
SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS
SET FORTH ON THE REVERSE SIDE OF THIS CARD.
Consummation of the Transactions is conditioned upon receiving the consent of
the holders of (i) a majority of the voting power of all outstanding shares of
all three classes of General Motors common stock, voting together as a single
class based on their respective voting rights, (ii) a majority of the
outstanding shares of General Motors $1 2/3 Common Stock, voting as a separate
class, and (iii) a majority of the outstanding shares of Class E Common Stock,
voting as a separate class. Approval of the Amended EDS Incentive Plan will
require the consent of the holders of (i) a majority of the voting power of all
outstanding shares of all three classes of General Motors common stock, voting
together as a single class based on their respective voting rights, and (ii) a
majority of the outstanding shares of Class E Common Stock, voting as a
separate class. Unless previously revoked, this consent will be effective when
and if delivered along with consents representing the percentages of shares
indicated in the two immediately preceding sentences to General Motors.
PLEASE SIGN AND DATE ON REVERSE SIDE
- --------------------------------------------------------------------------------
[x] PLEASE MARK VOTES AS IN THIS EXAMPLE. CLASS E
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED BELOW.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS
CONSENT TO PROPOSALS 1 AND 2 BELOW.
- --------------------------------------------------------------------------------
1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF
THE MERGER AGREEMENT
The approval of the Split-Off and related transactions, including the
consummation of the Merger, the making of the Special Inter-Company Payment,
the execution and delivery of the Master Services Agreement (and certain
related agreements) and the Separation Agreement and the consummation of the
other transactions and events contemplated by the Merger Agreement, including
the adoption of the Merger Agreement.
[_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN
2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN
The approval of the 1996 Incentive Plan of EDS, which amends and restates the
existing 1984 EDS Stock Incentive Plan.
[_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN
When shares are held by joint tenants, both
must sign. When signing as attorney-in-fact,
executor, administrator, trustee, guardian,
corporate officer or partner, please give
full title as such. If a corporation, please
sign in corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
Signature __________________ Dated: ________________________
Signature __________________ Dated: ________________________
<PAGE>
CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING
REVOCABLE CONSENT SOLICITED ON BEHALF OF
GENERAL MOTORS CORPORATION CLASS H
The undersigned, a common stockholder of General Motors Corporation ("General
Motors"), acting with respect to all of the shares of Class H Common Stock, par
value $.10 per share ("Class H Common Stock") held by the undersigned on April
10, 1996 (the "Record Date"), hereby consents, withholds consent or abstains as
specified on the reverse side with respect to the taking of corporate actions
without a meeting pursuant to Section 228 of the Delaware General Corporation
Law. All capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Solicitation Statement/Prospectus furnished
herewith to all stockholders of General Motors who hold shares of General
Motors common stock.
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
Stockholders wishing to approve any or all of the actions set forth herein
should mark the appropriate "Consent" box on the reverse side of this consent
card. Those opposing any such action should register their position by marking
the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this
consent card or by not returning this consent card. Unless you otherwise
indicate on this consent card, this consent card will be voted as set forth on
the reverse side with respect to all shares of Class H Common Stock held by the
undersigned on the Record Date, and if no choice is indicated but this consent
card is otherwise completed, you will be deemed to have consented to each of
the actions set forth on the reverse side of this consent card. By executing
this card the undersigned hereby revokes any and all prior consents and hereby
affirms that, as of the Record Date, the undersigned had the power to deliver a
consent for the number of shares represented by this consent.
SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS
SET FORTH ON THE REVERSE SIDE OF THIS CARD.
Consummation of the Transactions is conditioned upon receiving the consent of
the holders of (i) a majority of the voting power of all outstanding shares of
all three classes of General Motors common stock, voting together as a single
class based on their respective voting rights, (ii) a majority of the
outstanding shares of General Motors $1 2/3 Common Stock, voting as a separate
class, and (iii) a majority of the outstanding shares of General Motors Class E
Common Stock, voting as a separate class. Approval of the Amended EDS Incentive
Plan will require the consent of the holders of (i) a majority of the voting
power of all outstanding shares of all three classes of General Motors common
stock, voting together as a single class based on their respective voting
rights, and (ii) a majority of the outstanding shares of General Motors Class E
Common Stock, voting as a separate class. Unless previously revoked, this
consent will be effective when and if delivered along with consents
representing the percentages of shares indicated in the two immediately
preceding sentences to General Motors.
PLEASE SIGN AND DATE ON REVERSE SIDE
- --------------------------------------------------------------------------------
[x] PLEASE MARK VOTES AS IN THIS EXAMPLE. CLASS H
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTIONS DESCRIBED BELOW.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS
CONSENT TO PROPOSALS 1 AND 2 BELOW.
- --------------------------------------------------------------------------------
1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF
THE MERGER AGREEMENT
The approval of the Split-Off and related transactions, including the
consummation of the Merger, the making of the Special Inter-Company Payment,
the execution and delivery of the Master Services Agreement (and certain
related agreements) and the Separation Agreement and the consummation of the
other transactions and events contemplated by the Merger Agreement, including
the adoption of the Merger Agreement.
[_] CONSENT [_] WITHHOLD CONSENT [_] ABSTAIN
2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN
The approval of the 1996 Incentive Plan of EDS, which amends and restates the
existing 1984 EDS Stock Incentive Plan.
[_] CONSENT [_] WITHHOLD CONSENT [_] ABSTAIN
When shares are held by joint tenants, both
must sign. When signing as attorney-in-fact,
executor, administrator, trustee, guardian,
corporate officer or partner, please give
full title as such. If a corporation, please
sign in corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
Signature __________________ Dated: ___________________
Signature __________________ Dated: ___________________
<PAGE>
EXHIBIT 2(B)
DRAFT OF APRIL 11, 1996
SEPARATION AGREEMENT,
DATED AS OF ___________ ____, 1996,
BETWEEN
ELECTRONIC DATA SYSTEMS CORPORATION
AND
GENERAL MOTORS CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Definitions........................................................................ 1
-----------
2. Certain Intercompany Matters....................................................... 11
----------------------------
2.1 Capital Stock Matters........................................................ 11
2.2 Insurance Matters............................................................ 12
2.3 Indemnification of EDS Indemnified Parties................................... 17
2.4 Leases of Real Property...................................................... 19
2.5 Employee Benefit Matters..................................................... 19
2.6 Registration Rights Agreement................................................ 22
2.7 Transfer Agreement........................................................... 23
2.8 Publicity.................................................................... 23
2.9 Further Assurances........................................................... 23
3. GM-PBGC Agreement Matters.......................................................... 23
-------------------------
3.1 GM Representations and Warranties............................................ 23
3.2 GM Covenants................................................................. 24
4. Confidentiality.................................................................... 26
---------------
4.1 Treatment of Confidential Information........................................ 26
4.2 Legally Required Disclosure of Confidential Information...................... 27
5. Continuing Information Support..................................................... 28
------------------------------
5.1 Access to Information........................................................ 28
5.2 Production of Witnesses...................................................... 28
5.3 Reimbursement................................................................ 28
5.4 Retention of Records......................................................... 29
6. Expenses........................................................................... 29
--------
6.1 General...................................................................... 29
6.2 Fees of Professional Advisors................................................ 29
6.3 Costs of Preparation and Distribution of Consent Solicitation and Form S-4... 29
6.4 Certain Costs Relating to EDS Common Stock................................... 30
6.5 Annual Fee for Listing of Stock.............................................. 30
6.6 Allowance.................................................................... 30
7. Covenant To Preserve Tax-Free Status Of Split-Off.................................. 30
-------------------------------------------------
7.1 Representations and Warranties............................................... 30
7.2 Restrictions on EDS.......................................................... 31
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
7.3 Cooperation and Other Covenants.............................................. 34
7.4 Indemnification for Tax Liabilities.......................................... 35
7.5 Procedure for Indemnification for Tax Liabilities............................ 35
7.6 Arbitration.................................................................. 36
7.7 Exclusive Remedies........................................................... 37
8. Indemnification.................................................................... 37
---------------
8.1 Indemnification by EDS....................................................... 37
8.2 Indemnification by GM........................................................ 39
8.3 Other Liabilities............................................................ 40
8.4 Tax Effects of Indemnification............................................... 41
8.5 Effect of Insurance Upon Indemnification..................................... 41
8.6 Procedure for Indemnification Involving Third-Party Claims................... 42
8.7 Procedure for Indemnification Not Involving Third-Party Claims............... 43
8.8 Exclusive Remedies........................................................... 43
9. Miscellaneous...................................................................... 44
-------------
9.1 Dispute Resolution........................................................... 44
9.2 Survival..................................................................... 44
9.3 Complete Agreement........................................................... 44
9.4 Authority.................................................................... 44
9.5 Governing Law................................................................ 44
9.6 Consent to Jurisdiction...................................................... 44
9.7 Notices...................................................................... 45
9.8 Amendment and Modification................................................... 46
9.9 Binding Effect; Assignment................................................... 46
9.10 Third Party Beneficiaries.................................................... 46
9.11 Counterparts................................................................. 46
9.12 Waiver....................................................................... 46
9.13 Severability................................................................. 47
9.14 Remedies..................................................................... 47
9.15 Performance.................................................................. 47
9.16 References; Construction..................................................... 47
</TABLE>
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Exhibits
- --------
Exhibit A Form of Canadian Transfer Agreement
Exhibit B CPR Rules
Exhibit C GM Indemnification Bylaw
Exhibit D Form of Release and Covenant Not to Sue (R2)
Exhibit E Form of Release and Covenant Not to Sue (R3)
Exhibit F Professional Advisor Fees to be Paid by EDS
Exhibit G Professional Advisor Fees to be Paid by GM
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SEPARATION AGREEMENT
--------------------
THIS SEPARATION AGREEMENT, dated as of ___________ ____, 1996, is between
Electronic Data Systems Corporation, a Delaware corporation, and General Motors
Corporation, a Delaware corporation. Capitalized terms used and not otherwise
defined herein are defined in Section 1 below.
RECITALS
--------
WHEREAS, as part of the Split-Off of EDS from GM, each outstanding share
of Class E Stock will be converted into one share of EDS Common Stock;
WHEREAS, the conversion of all outstanding shares of Class E Stock into
EDS Common Stock on a one-for-one basis will be accomplished through a merger of
GM with its indirect wholly owned subsidiary, GM Mergeco Corporation, and it is
expected that such merger will be consummated immediately after the execution
and delivery of this Separation Agreement;
WHEREAS, immediately prior to the execution and delivery of this
Separation Agreement, (i) Electronic Data Systems Intermediate Corporation, a
Delaware corporation, was merged with and into Electronic Data Systems Holding
Corporation, (ii) Electronic Data Systems Corporation, a Texas corporation, was
merged with and into Electronic Data Systems Holding Corporation, and (iii)
Electronic Data Systems Holding Corporation was renamed "Electronic Data Systems
Corporation";
WHEREAS, GM has received from the IRS a ruling, dated December 27, 1995,
to the effect that the Split-Off would be tax-free to GM and its stockholders
for United States federal income tax purposes and the parties hereto wish to
preserve the tax-free status of the Split-Off; and
WHEREAS, the parties hereto have determined that in order to accomplish
the objectives of the Split-Off and to facilitate the consummation thereof, it
is necessary and desirable to restructure certain intercompany relationships,
allocate certain liabilities and provide mutual indemnification, all as set
forth herein;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions, hereinafter set forth, the parties do hereby agree as follows:
1. DEFINITIONS.
-----------
ADR: Center for Public Resources, Alternative Dispute Resolution
section.
AFFILIATE: an EDS Affiliate or a GM Affiliate, as the case may be.
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BUSINESS: the EDS Business or the GM Business, as the case may be.
BUSINESS DAY: any day other than a Saturday, a Sunday, or a day on which
banking institutions located in the State of New York are authorized or
obligated by law or executive order to close.
CANADIAN TRANSFER AGREEMENT: the Transfer Agreement, dated as of the
date hereof, by and between GM-Canada and EDS-Canada.
CLASS E STOCK: the Class E Common Stock, par value $0.10 per share, of
GM.
CODE: the Internal Revenue Code of 1986, as amended.
CONFIDENTIAL INFORMATION: as to EDS, (a) any information concerning GM,
the GM Business or any GM Affiliate that was obtained by EDS or an EDS Affiliate
prior to the Effective Time, (b) any information concerning GM, the GM Business
or any GM Affiliate that is obtained by EDS under Section 5.1, or (c) any other
information obtained by, or furnished to, EDS or any EDS Affiliate that (i) is
marked "Confidential" or "Secret" by GM or any GM Affiliate or (ii) GM or any GM
Affiliate has notified EDS or any EDS Affiliate in writing is confidential or
secret; provided, however, that "Confidential Information" as to EDS shall not
include any information furnished to EDS or any EDS Affiliate by GM or any GM
Affiliate, pursuant to or in connection with any Service Agreement; as to GM,
(a) any information concerning EDS, the EDS Business or any EDS Affiliate that
was obtained by GM or a GM Affiliate prior to the Effective Time, (b) any
information concerning EDS, the EDS Business or any EDS Affiliate that is
obtained by GM under Section 5.1, or (c) any other information obtained by, or
furnished to, GM or any GM Affiliate that (i) is marked "Confidential" or
"Secret" by EDS or any EDS Affiliate or (ii) EDS or any EDS Affiliate has
notified GM or any GM Affiliate in writing is confidential or secret; provided,
however, that "Confidential Information" as to GM shall not include any
information furnished to GM or any GM Affiliate by EDS or any EDS Affiliate,
pursuant to or in connection with any Service Agreement.
CONTROL: the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise.
COOPERATION AGREEMENT: that certain Agreement made March 12, 1995 by and
among United States Trust Company of New York, as trustee and investment manager
of a trust established under the GM Hourly Pension Plan, Bankers Trust Company,
as trustee and investment manager of a trust established under the General
Motors Retirement Program for Salaried Employees, and GM.
CPR RULES: the Rules for Non-Administered Arbitration of Business
Disputes promulgated by the Center for Public Resources attached hereto as
Exhibit B.
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D & O INSURANCE: directors' and officers' liability insurance.
DGCL: the General Corporation Law of the State of Delaware, as in effect
on the date hereof and as the same may hereafter be amended from time to time.
DELAWARE SUPERIOR COURT: the Superior Court of the State of Delaware.
DISPUTE NOTICE: written notice of any dispute between GM and EDS arising
out of or relating to this Separation Agreement, which shall set forth, in
reasonable detail, the nature of the dispute.
E TEAM: the team consisting of three officers of EDS (i.e., Lester M.
Alberthal, Jr., Gary J. Fernandes and Joseph M. Grant) that was appointed by the
Board of Directors of GM for the purpose of negotiating the terms of the Split-
Off from the perspective of the holders of Class E Common Stock pursuant to the
Negotiation Process.
E TEAM PARTY: the members of the E Team and all officers and employees
of EDS or any EDS Affiliate who provided substantial assistance to the E Team in
discharging its responsibilities in connection with the Negotiation Process.
EDS: Electronic Data Systems Corporation, a Delaware corporation.
EDS AFFILIATE: a Person that, after giving effect to the Split-Off,
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with EDS; provided, however, that for
purposes of this Separation Agreement none of the GM Hourly Pension Plan, any
trust thereunder, or any trustee or other fiduciary thereof shall be deemed an
EDS Affiliate.
EDS BOARD NOMINEE: the individuals who are not employees of EDS and who
have been elected as directors of EDS, effective as of immediately following the
Effective Time, as identified in the Form S-4.
EDS BUSINESS: any business or operations of EDS or any EDS Affiliate.
EDS-CANADA: E.D.S. of Canada, Ltd., an Ontario corporation and a wholly
owned subsidiary of EDS.
EDS CAPITAL STOCK: all classes or series of capital stock of EDS.
EDS COMMON STOCK: the Common Stock, par value $0.01 per share, of EDS.
EDS CONTROLLED GROUP: a group of corporations or other entities including
EDS treated as if they were a single employer pursuant to section 414(b) or (c)
of the Code.
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EDS COVERED PERSON: EDS, any EDS Affiliate, any corporation to which EDS
is a successor and each individual who served at any time within the six-year
period prior to the Effective Time as a director, director nominee, officer or
other covered employee of EDS, any EDS Affiliate or any corporation to which EDS
is a successor, in each case to the extent covered by a particular Insurance
Policy.
EDS DIRECTOR: all directors of EDS from and after the reconstitution of
the EDS board of directors on March 11, 1996 and through the Effective Time.
EDS DISCLOSURE PORTIONS: the material set forth in the Form S-4 under
the following captions: "Risk Factors Regarding EDS after the Split-Off,"
"Special Factors -- Background of the Split-Off" (only with respect to
discussion of actions taken by the E Team, the management of EDS or EDS),
"Special Factors -- Fairness Opinions" (only with respect to discussion of
actions taken, consent to actions taken, and information provided to the
financial advisors, by the E Team, the management of EDS or EDS), "The Split-Off
- -- Stock Exchange Listings for EDS Common Stock," "Plans and Proposals of EDS,"
"EDS Unaudited Pro Forma Consolidated Capitalization," "EDS Unaudited Pro Forma
Condensed Consolidated Financial Statements," "EDS Selected Consolidated
Financial Information," "EDS Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business of EDS," "EDS Management and
Executive Compensation," "EDS Capital Stock," any summaries in the Form S-4 of
the information set forth in such sections, and Part II - Information Not
Required in Prospectus (provided, that with respect to Item 21, "EDS Disclosure
Portions" includes the list of exhibits and financial statement schedules
contained in the Form S-4, but not the exhibits, financial statement schedules
or appendices furnished to the SEC pursuant to Item 21).
EDS INDEMNIFIED PARTIES: the following persons, to the extent that they
took, or omitted to take, any action in the respective capacities indicated
herein: (i) an E Team Party, (ii) an EDS Director, or (iii) an EDS Board
Nominee.
EDS QUALIFIED PLAN: the EDS Retirement Plan.
EDS RELEASEE: as defined in the GM-PBGC Agreement.
EDS TRANSFER AGENT: The Bank of New York, as the transfer agent for the
EDS Common Stock.
EDS TRANSFEREE: as defined in the GM-PBGC Agreement.
EFFECTIVE TIME: the date and time at which the Split-Off becomes
effective.
ENVIRONMENTAL LAWS: all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health, safety or the
environment, including, without limitation, laws and regulations relating to
emissions, discharges, releases, or threatened releases of Materials
4
<PAGE>
of Environmental Concern, or otherwise to the generation, storage, disposal,
transport, or handling of Materials of Environmental Concern.
ERISA: the Employee Retirement Income Security Act of 1974, as amended,
29 U.S.C. (S) 1001, et seq., and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time to
time.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder.
EXCHANGE AGENT: The Bank of New York, as exchange agent for the exchange
of certificates representing shares of EDS Common Stock for certificates
representing shares of Class E Stock following consummation of the Split-Off.
FORM S-4: the Registration Statement on Form S-4 filed with the SEC by
EDS on __________ _____, 1996 (Registration No. 333-___________).
GM: General Motors Corporation, a Delaware corporation.
GM AFFILIATE: a Person that, after giving effect to the Split-Off,
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with GM; provided, however, that for
purposes of this Separation Agreement none of the GM Hourly Pension Plan, any
trust thereunder, or any trustee or other fiduciary thereof shall be deemed a GM
Affiliate.
GMAC MORTGAGE: GMAC Mortgage Corporation, a Michigan corporation.
GMAC MORTGAGE QUALIFIED PLANS: the GMAC Mortgage Corporation Savings
Incentive Plan and the Employees Retirement Plan for GMAC Mortgage Corporation.
GM BUSINESS: any business or operations of GM or any GM Affiliates.
GM-CANADA: General Motors of Canada Limited, a Canada corporation.
GM CONTROLLED GROUP: a group of corporations or other entities including
GM treated as if they were a single employer pursuant to section 414(b) or (c)
of the Code.
GM DISCLOSURE PORTIONS: the material set forth in the Form S-4 under the
following captions: "Incorporation of Certain Documents by Reference," "Risk
Factors Regarding General Motors After the Split-Off," "Risk Factors Regarding
Non-Consummation of the Split-Off," "Special Factors -- Alternatives to the
Split-Off," "Special Factors -- Background of the Split-Off" (except for
discussion of actions taken by the E Team, the Board of Directors of EDS or
EDS), "Special Factors -- Fairness Opinions" (only with respect to discussion of
actions taken, consent to actions taken, or information provided to the
financial advisors, by the GM Team, the Board of Directors
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<PAGE>
of GM (or any committee thereof), the management of GM or GM), "Special Factors
- --Recommendations of the Capital Stock Committee and the GM Board; Fairness of
the Transactions," "Special Factors -- Requisite Vote for the Transactions,"
"Special Factors -- Certain U.S. Federal Income Tax Considerations," "Special
Factors -- GM-PBGC Agreement," "Special Factors -- Certain Litigation," "The
Split-Off -- General," "The Split-Off -- Merger Agreement," "The Split-Off -- No
Appraisal Rights," "The Split-Off -- Certain U.S. Federal Income Tax
Considerations," "General Motors Unaudited Pro Forma Condensed Consolidated
Financial Statements," "Class E Common Stock," "Solicitation of Written Consent
of General Motors Common Stockholders," "Security Ownership of Certain
Beneficial Owners and Management of General Motors and EDS," and any summaries
in the Form S-4 of the information set forth in such sections.
GM-EDS CONTRACT: any written contract, agreement or understanding between
GM or any GM Affiliate and EDS or any EDS Affiliate, including without
limitation the Service Agreements, but excluding this Separation Agreement.
GM HOURLY PENSION PLAN: the General Motors Corporation Hourly-Rate
Employees Pension Plan.
GM INDEMNIFICATION BYLAW: Article V of the By-Laws of GM, as in effect
on the date hereof, a true and correct copy of which is attached hereto as
Exhibit C.
GM-PBGC AGREEMENT: the Agreement made as of March 3, 1995 by and between
GM and the PBGC, as amended by the GM-PBGC Agreement Amendment.
GM-PBGC AGREEMENT AMENDMENT: the First Amendments to Agreement Made as
of March 3, 1995, By and Between General Motors Corporation and the Pension
Benefit Guaranty Corporation.
GM-PBGC ESCROW AGENT: Bankers Trust Company, a New York banking
corporation, as the escrow agent under the GM-PBGC Escrow Agreement, selected by
GM and the PBGC pursuant to section 9(d)(v) of the GM-PBGC Agreement.
GM-PBGC ESCROW AGREEMENT: the Escrow Agreement made as of March 5, 1996
by and among GM, the PBGC and the GM-PBGC Escrow Agent.
GM PENSION LIABILITY: as defined in the GM-PBGC Agreement.
GM PENSION PLANS: as defined in the GM-PBGC Agreement.
GM QUALIFIED PLANS: the GM Retirement Program for Salaried Employees and
the Saturn Personal Choices Retirement Plan.
GM TRANSFER AGENT: Boston EquiServe, L.P., as the transfer agent for the
Class E Stock.
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<PAGE>
HUGHES: Hughes Electronics Corporation, a Delaware corporation.
HOURLY PLAN TRUSTEE: either United States Trust Company of New York or
U.S. Trust Company of California, N.A., in either of their capacities as trustee
of a trust established under the GM Hourly Pension Plan.
HUGHES QUALIFIED PLANS: the Hughes Non-Bargaining Retirement Plan, the
Hughes Subsidiary Retirement Plan, the Hughes Salaried Employees Thrift and
Savings Plan and the Hughes Thrift and Savings Plan.
INDEMNIFYING PARTY: a Person that is obligated to provide
indemnification under this Separation Agreement (other than pursuant to Section
2.3).
INDEMNITEE: a Person that is entitled to seek indemnification under this
Separation Agreement (other than pursuant to Section 2.3).
INDEMNITY PAYMENT: an amount that an Indemnifying Party is required to
pay to an Indemnitee under this Separation Agreement.
INSURANCE POLICIES: collectively, each insurance policy or other form of
insurance coverage maintained or provided by GM or any of its Affiliates for the
benefit of EDS, any corporation to which EDS is a successor, or any of EDS' or
such predecessor corporation's Affiliates, directors, director nominees,
officers or employees prior to or at the Effective Time, together with all
amendments, endorsements and waivers thereto or additional insurance policies or
other forms of insurance required by Section 2.2 to be maintained or provided by
GM.
INSURANCE PROCEEDS: the payment received by an insured from an insurance
carrier or paid by an insurance carrier on behalf of the insured, net of any
applicable premium adjustment and tax effect.
IRS: Internal Revenue Service of the U.S. Department of Treasury or any
successor agency.
JOINT DISCLOSURE PORTION: any material set forth in the Form S-4 that
does not constitute a part of an EDS Disclosure Portion or a GM Disclosure
Portion.
LOSSES: all losses, liabilities, claims, obligations, demands,
judgments, damages, dues, penalties, assessments, fines (civil or criminal),
costs, liens, expenses, forfeitures, settlements, or fees, reasonable
attorneys' fees and court costs, of any nature or kind, and whether or not the
same would properly be reflected on a balance sheet, including, without
limitation, such losses relating to or arising in respect of Materials of
Environmental Concern and violations or purported violations of Environmental
Laws.
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MASTER SERVICE AGREEMENT: the Master Service Agreement dated as of the
date hereof by and between GM and EDS relating to the information technology
services to be provided to GM by EDS after the Effective Time.
MATERIALS OF ENVIRONMENTAL CONCERN: any pollutants, contaminants or
wastes, any toxic or hazardous substances or materials, or any petroleum or
petroleum products.
NEGOTIATION PERIOD: the period of 20 Business Days following the initial
meeting of the representatives of GM and EDS following the receipt of a Dispute
Notice.
NEGOTIATION PROCESS: the process by which the financial and other
essential terms of the Split-Off were negotiated, as approved by the Board of
Directors of GM on August 7, 1995.
NOTICE: any notice, request, claim, demand, or other communication under
this Separation Agreement.
PBGC: Pension Benefit Guaranty Corporation, a U.S. government
corporation established under section 4002 of ERISA.
PERSON: an individual, partnership, joint venture, corporation, trust,
unincorporated association, any other entity, or a government or any department
or agency or other unit thereof.
PROCEEDING: any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, in which
an EDS Indemnified Party was or is made or is threatened to be made a party or
is otherwise involved.
PROPOSED ACQUISITION TRANSACTION: a transaction or series of
transactions after the Effective Time as a result of which any Person or any
group of related Persons would acquire, or have the right to acquire, from one
or more holders of outstanding shares of EDS Capital Stock a number of shares of
EDS Capital Stock that would comprise more than 15% of (i) the value of all
outstanding shares of EDS Capital Stock as of the date of such transaction, or
in the case of a series of transactions, the date of the last transaction of
such series, or (ii) the number of the issued and outstanding shares of EDS
Common Stock as of the date of such transaction, or in the case of a series of
transactions, the date of the last transaction of such series.
REGISTRATION RIGHTS AGREEMENT: the Registration Rights Agreement,
entered into on March 12, 1995, by and between GM and the Hourly Plan Trustee.
RELEASES AND COVENANTS NOT TO SUE: the Releases and Covenants Not to Sue
executed by the PBGC and deposited with the GM-PBGC Escrow Agent pursuant to the
GM-PBGC Agreement and in the forms attached hereto as Exhibits D and E.
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REPRESENTATION DATE: any date on which EDS makes any representation (i)
to the IRS for the purpose of obtaining a Subsequent Split-Off Ruling or to
counsel selected by GM for the purpose of obtaining an opinion of counsel
described in the definition of Subsequent Split-Off Ruling, or (ii) to GM for
the purpose of any determination required to be made by GM pursuant to Section
7.2.
REPRESENTATIVE: with respect to any Person, any of such Person's
directors, officers, employees, agents, consultants, advisors, accountants or
attorneys.
RULING: the ruling dated December 27, 1995, issued by the IRS to GM in
connection with the Split-Off.
RULING REQUEST: the written request (including exhibits) submitted by GM
to the IRS dated August 30, 1995 seeking a ruling that the Split-Off would be
tax-free to GM and its stockholders, and all additional documents subsequently
submitted to the IRS in connection therewith.
SECURITIES ACT: the Securities Act of 1933, as amended, together with
the rules and regulations promulgated thereunder.
SEPARATE COUNSEL: as defined in Section 8.6(b).
SERVICE AGENT: for GM, The Corporation Trust Company, with offices on
the date hereof at 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801; and for EDS, The Prentice-Hall Corporation System, Inc., with
offices on the date hereof at 1013 Centre Road, Wilmington, County of New
Castle, Delaware 19805.
SERVICE AGREEMENTS: the Master Agreement, effective as of September 1,
1985 (the "Master Agreement"), by and between GM and EDS, the Master Service
Agreement, all service agreements and other vendor-customer agreements entered
pursuant to or in connection with either the Master Agreement or the Master
Service Agreement, and all other GM-EDS Contracts pursuant to which EDS has
provided or provides information technology or other services to GM.
SPECIAL INTER-COMPANY PAYMENT: as described in the Form S-4.
SPLIT-OFF: the proposed split-off of EDS from GM described in the Form
S-4.
SPLIT-OFF LOSSES: as defined in Section 2.3(g).
SUBSEQUENT EDS RULING REQUEST: a request by EDS after the Effective Time
for a private letter ruling from the IRS.
SUBSEQUENT SPLIT-OFF RULING: either (i) a ruling from the IRS or (ii) an
opinion of counsel selected by GM in its sole and absolute discretion, in either
case confirming, in form and substance satisfactory to GM, that no income, gain
or loss for United States federal income tax purposes will
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be recognized by GM, the stockholders or former stockholders of GM, or any GM
Affiliate with respect to the Split-Off as a consequence of the consummation of
a subsequent transaction.
SUBSIDIARY: with respect to any specified Person, any corporation or
other legal entity of which such Person or any of its Subsidiaries Controls or
owns, directly or indirectly, more than 50% of the stock or other equity
interest entitled to vote on the election of members to the board of directors
or similar governing body; provided, however, that for the purposes of this
Separation Agreement, neither EDS nor any of the Subsidiaries of EDS shall be
deemed to be Subsidiaries of GM or of any of the Subsidiaries of GM.
SUBTRUST LETTER AGREEMENT: that certain letter agreement, dated June 7,
1995, among the Hourly Plan Trustees and GM.
TAX: (i) any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on, minimum, estimated, or other
tax, assessment, or governmental charge of any kind whatsoever imposed by any
governmental authority, including any interest, penalty, or addition thereto,
whether disputed or not; (ii) liability for the payment of any amounts of the
type described in clause (i) above arising as a result of being (or having been)
a member of any group or being (or having been) included or required to be
included in any Tax Return related thereto; and (iii) liability for the payment
of any amounts of the type described in clause (i) above as a result of any
express or implied obligation to indemnify or otherwise assume or succeed to the
liability of any other Person.
TAX ALLOCATION AGREEMENTS: collectively, the Agreement for the
Allocation of United States Federal Income Taxes entered into effective as of
December 31, 1984, and the Agreement for the Allocation of United States
Federal, State and Local Income Taxes, both as amended and restated in the
Amended and Restated Agreement for the Allocation of United States Federal,
State and Local Income Taxes, dated as of April 2, 1996, by and between GM and
EDS.
TAX-FREE REORGANIZATION: a Proposed Acquisition Transaction that would
constitute a tax-free reorganization under the Code with respect to EDS, its
Subsidiaries and its stockholders, with respect to which at least 50% of the
consideration to be received in exchange for the acquired corporation
constitutes property described in Section 354(a)(1) of the Code.
TAX-FREE STATUS OF THE SPLIT-OFF: the nonrecognition of taxable gain or
loss for United States federal income tax purposes to GM or GM's stockholders,
including holders of Class E Stock, in connection with the Split-Off.
TAX-RELATED LOSSES: (i) all federal, state and local taxes (including
interest and penalties thereon) imposed pursuant to any settlement, final
determination, judgment or otherwise; (ii) all
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accounting, legal and other professional fees, and court costs incurred in
connection with such taxes; and (iii) all costs and expenses that may result
from adverse tax consequences to GM (including all costs, expenses and damages
associated with stockholder litigation or controversies) payable by GM or GM
Affiliates.
THIRD-PARTY CLAIM: any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any arbitration tribunal asserted by a
Person other than GM or any GM Affiliate or EDS or any EDS Affiliate which gives
rise to a right of indemnification hereunder.
TRANSFER AGREEMENT: the Transfer Agreement, dated March 12, 1995, by and
between GM and the Hourly Plan Trustee.
VOTING STOCK: with respect to any Person, all classes and series of the
capital stock of such Person entitled to vote generally in the election of
directors.
2. CERTAIN INTERCOMPANY MATTERS.
----------------------------
2.1 CAPITAL STOCK MATTERS.
(a) Recognition of Stockholders. Immediately after the Effective Time,
EDS shall regard the Persons who were record holders of Class E Stock
immediately prior to the Effective Time as the record holders of EDS Common
Stock without requiring any action on the part of such Persons. EDS agrees
that (i) subject to any transfers of such stock, each such holder shall be
entitled to receive all dividends payable on, and exercise voting rights
and all other rights and privileges with respect to, EDS Common Stock and
(ii) each such holder shall be entitled, upon proper surrender (in
accordance with the requirements of the letter of transmittal and other
instructions provided by the Exchange Agent) of the certificate or
certificates representing the shares of Class E Stock formerly held by it,
to receive one or more certificates representing the shares of EDS Common
Stock then held by it.
(b) GM Representations and Warranties. GM hereby represents and
warrants that, as of immediately prior to the Effective Time (i)
487,555,556 shares of Class E Stock will be issued and outstanding, (ii)
all of such shares will be validly issued, fully paid and nonassessable,
(iii) none of such shares will be subject to any preemptive rights, and
(iv) there will be (x) no outstanding securities of GM or any of its
Subsidiaries convertible into or exchangeable for shares of Class E Stock
and (y) no outstanding subscriptions, options, warrants, rights or other
arrangements or commitments to which GM is a party obligating GM to issue
any shares of Class E Stock.
(c) EDS Representations and Warranties. EDS hereby represents and
warrants that, as of immediately prior to the Effective Time (i)
487,555,556 shares of EDS Common
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Stock will be issued and outstanding, (ii) all of such shares will be
validly issued, fully paid and nonassessable, and (iii) all of such shares
will be held of record by GM.
(d) Cooperation of Transfer Agents; Stockholder Records. GM shall
cause the GM Transfer Agent to cooperate with the EDS Transfer Agent, and
EDS shall cause the EDS Transfer Agent to cooperate with the GM Transfer
Agent, in connection with the Split-Off and all other matters relating to
the exchange of certificates evidencing the conversion of all outstanding
shares of Class E Stock into EDS Common Stock. As soon as practicable after
the Effective Time, GM shall cause the GM Transfer Agent to deliver to the
EDS Transfer Agent the transfer records reflecting the record holders of
Class E Stock as of the Effective Time. As soon as practicable after
receipt by the EDS Transfer Agent of such transfer records, EDS shall cause
the EDS Transfer Agent, in its capacity as the Exchange Agent, to
distribute letters of transmittal, in form reasonably satisfactory to GM,
for such exchange of certificates by such record holders. EDS shall cause
the EDS Transfer Agent to issue the certificates representing the shares of
EDS Common Stock promptly after proper surrender (in accordance with the
requirements of the letter of transmittal and other instructions provided
by the Exchange Agent) of the certificates representing the corresponding
shares of Class E Stock. Upon the reasonable request of EDS from time to
time after the Effective Time, GM shall, or shall cause the GM Transfer
Agent to, cooperate in providing EDS with reasonable access to all
historical share, transfer and dividend payment records with respect to
former holders of Class E Stock.
2.2 INSURANCE MATTERS.
(a) Cooperation in Insurance Matters. GM has historically provided
insurance coverage to EDS and certain EDS Affiliates through various
insurance policies (and other forms of insurance coverage) maintained by GM
for the benefit of itself and its subsidiaries for general liability,
products liability, directors and officers liability, automobile liability
and other types of losses. EDS has made payments to GM to reimburse GM for
its allocable share of certain premiums and costs for the provision of such
insurance. From and after the Effective Time, except as set forth herein,
EDS and the EDS Affiliates shall be responsible for obtaining and
maintaining insurance coverage separately from the GM insurance programs.
Notwithstanding the foregoing, from and after the Effective Time, (i) upon
request by EDS, GM shall use commercially reasonable efforts to assist EDS
in the transition to separate, initial insurance coverage for EDS and the
EDS Affiliates, effective from and after the Effective Time, and shall
provide EDS with information that is reasonably necessary to prevent gaps
in EDS' insurance coverages, (ii) each of GM and EDS shall cooperate with
and use commercially reasonable efforts to assist the other in the
collection of proceeds from insurance claims made under any Insurance
Policy and the EDS Covered Persons shall be entitled to the benefit of any
proceeds from insurance claims made by or for the benefit of any EDS
Covered Person with respect to the Insurance Policies, and (iii) GM shall
not take any action that would jeopardize or otherwise interfere with any
EDS Covered
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Person's ability to collect any proceeds payable by any Person pursuant to
such Insurance Policies.
(b) Claims-Made Coverage. Until the six-year anniversary of the
Effective Time, or until such earlier time as EDS requests, GM shall
provide EDS with general liability and products liability insurance
coverage and D&O Insurance for all applicable incidents, acts or omissions
occurring prior to or at the Effective Time, regardless of when, prior to
the six-year anniversary of the Effective Time (or EDS' earlier termination
of coverage), any claims relating to such incidents, acts or omissions are
presented. GM shall provide such coverage at no cost to EDS. Such insurance
coverage shall be no less favorable to any EDS Covered Person in coverage
or amount than the lesser of (i) the coverage in effect at the Effective
Time or (ii) any applicable insurance coverage in effect for GM at the time
of the claim; provided, however, that if GM determines that (x) the amount
or scope of such coverage will be reduced to a level materially inferior to
the level of coverage in existence immediately prior to the Effective Time
or (y) the retention or deductible levels applicable to such coverage, if
any, will be increased to a level materially greater than the levels in
existence immediately prior to the Effective Time, GM shall give EDS notice
of such determination as promptly as practicable, but in no event less than
30 days prior to the effectiveness of such reduction in coverage or
increase in retention or deductible levels. Upon notice of such
determination, EDS shall be entitled to no less than 90 days to evaluate
its options regarding continuance of coverage hereunder and may cancel all
or any portion of such coverage as of any day within such 90 day period,
regardless of whether such date coincides with any anniversary of the
Effective Time. At any time during the period that GM is obligated to
provide coverage pursuant to this Section 2.2(b), upon at least 30 days
prior written notice, EDS may request GM to cancel all or any portion of
such coverage as of the next anniversary of the Effective Time. In the
event of any cancellation of coverage by EDS pursuant to this Section
2.2(b), GM shall have no obligation to provide such canceled coverage with
respect to any periods from and after the effective date of such
termination. The term "coverage" as used in this Section 2.2 shall be
deemed to include all applicable excess coverage.
(c) Occurrence Coverage for Prior Acts. GM shall take no action to
remove any EDS Covered Person from insurance coverage under any Insurance
Policy effective at, or at any time prior to, the Effective Time that is
written on an occurrence basis.
(d) Claims. GM agrees that after the Effective Time, EDS shall be
entitled to furnish notice of insurance claims directly to the insurers
under the Insurance Policies and otherwise to communicate directly with
such insurers, in a manner consistent with past practice. EDS shall provide
GM with copies of all such written notices of insurance claims
contemporaneously with the provision of such written notices to such
insurers. EDS shall provide GM with such other written communications
between EDS and the insurers related to such claims as reasonably requested
by GM.
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(e) Treatment of Certain Retentions and Deductibles. Responsibility
for deductible or self-insured amounts with respect to any Insurance Policy
provided or maintained after the Effective Time pursuant to Section 2.2(b)
or 2.2(c) as it relates to coverage for any EDS Covered Person shall be
borne 100% by (i) GM, in the case of automobile liability claims and (ii)
EDS, in all other cases. Notwithstanding the foregoing, if GM and EDS are
involved in the same claim, GM and EDS shall negotiate in good faith the
fair allocation of any self-insurance retention or other deductible payable
under the Insurance Policies. Such allocation shall be based upon all
relevant factors, including, without limitation and as appropriate, the
relative number of Persons affiliated with EDS or GM that are involved in
such claim and the nature of the allegations with respect to each such
Person.
(f) Adjustment of Premiums Applicable to Periods Prior to the
Effective Time. Any premiums that have been paid or are payable by EDS to
GM with respect to coverage under any of the Insurance Policies maintained
or provided prior to the Effective Time shall be pro-rated, and as soon as
practicable after the Effective Time shall be either refunded by GM to EDS
or paid by EDS to GM, as appropriate, so that EDS is responsible for only
those premiums relating to (i) any full policy year ending prior to the
Effective Time and (ii) the partial policy year ending at the Effective
Time.
(g) Pending and Prior Acts Claims. GM shall not charge EDS, and EDS
shall not be obligated to pay, any amounts (other than any applicable
deductible or self-insurance retention amounts or any premium amounts with
respect to periods prior to the Effective Time that are payable by EDS
pursuant to Section 2.2(f)) with respect to (i) pending claims under the
Insurance Policies or (ii) any other claims under the Insurance Policies
relating to occurrences before the Effective Time that are reported after
the Effective Time ; provided, however, that if (i) a third party insurance
provider has paid insurance proceeds for a pending claim under an Insurance
Policy, (ii) such insurance provider has reserved its right to
reimbursement in the event of a later determination that such proceeds were
not payable under the Insurance Policy, (iii) GM, EDS and the insurance
provider later agree that such proceeds are reimbursable to the insurance
provider, and (iv) GM actually repays any such amounts to such insurance
provider, then EDS shall promptly reimburse GM for such amounts actually
repaid to the third party insurance provider by GM. Notwithstanding the
first sentence of Section 2.2(e), the amounts of any deductibles or self-
insurance retentions payable by EDS that are applicable to claims pending
at the Effective Time shall be determined in accordance with past practice.
Without limiting the generality of the foregoing, EDS shall not be required
to pay any amounts in respect of adjusting services after the Effective
Time.
(h) Management of Covered Litigation. Except as otherwise provided in
Section 2.3 or 8, the management, defense and settlement of any claim
covered by any Insurance Policy that is brought by a third party shall be
handled as follows:
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(i) Unless Section 2.2(h)(ii) or 2.2(h)(iii) is applicable, GM
shall have the right to manage the defense of such claim, to settle
such claim in its sole discretion and to charge EDS, pursuant to
Section 2.2(e) or 2.2(g), for that portion of the settlement that is
within any applicable deductible or retention. EDS shall use
commercially reasonable efforts to cooperate with GM in its defense of
such claim. GM shall provide EDS with all information reasonably
requested by EDS regarding the defense of such claim. GM shall consult
with EDS prior to the settlement of such claim for an amount in excess
of $100,000 and shall consider in good faith any recommendations or
objections of EDS as to the amount or form of such settlement. GM
shall not, without the prior written consent of EDS, (x) settle or
compromise such claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the delivery by the
claimant or plaintiff to each applicable EDS Covered Person of a
written release from all liability in respect of such claim or (y)
settle or compromise such claim in any manner that would be reasonably
likely to have a material adverse effect on any EDS Covered Person.
(ii) Notwithstanding Section 2.2(h)(i), if (x) such claim
involves both GM or any GM Affiliate and EDS or any EDS Affiliate and
is covered by any Insurance Policy providing D&O Insurance coverage or
(y) EDS reasonably and in good faith determines that such claim is
significant to a material business interest of EDS, GM and EDS shall
jointly control the defense of, and cooperate with each other with
respect to defending, such claim. If either GM or EDS fails to jointly
defend any such claim, the party that does not so fail shall solely
defend such claim and the party failing to jointly defend shall use
commercially reasonable efforts to cooperate with the other party in
its defense of such claim. GM and EDS shall consult with each other
prior to the settlement of such claim, and shall consider in good
faith any recommendations or objections of the other as to the amount
or form of such settlement. GM shall have the right to settle such
claim, but GM shall not settle such claim without the prior written
consent of EDS, which consent shall not be unreasonably withheld. EDS
shall be responsible, and GM shall have the right to charge EDS,
pursuant to Section 2.2(e) or 2.2(g), for that portion of the
settlement that is within any applicable deductible or retention.
Notwithstanding the foregoing, if EDS reasonably and in good faith
determines that either a conflict of interest between any EDS Covered
Person and GM exists in respect of such claim (other than a conflict
with respect to whether such claim is in an amount within or in excess
of any applicable deductible or self-insurance retention), or there
may be defenses available to any EDS Covered Person that are different
from or in addition to those available to GM, EDS shall have the right
to manage the defense of such EDS Covered Person in respect of such
claim; however, EDS shall not settle such claim with respect to such
EDS Covered Person without the prior written consent of GM, which
consent shall not be unreasonably withheld.
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(iii) Notwithstanding Section 2.2(h)(i) or 2.2(h)(ii), if such
claim does not involve GM or any GM Affiliate and is covered by any
Insurance Policy providing D&O Insurance coverage, EDS shall have the
right to manage the defense of, including, without limitation, the
selection of counsel with respect to, such claim. EDS shall provide GM
with all information reasonably requested by GM regarding the defense
of such claim. EDS shall be entitled to settle such claim in an amount
below any applicable deductible or self-insurance retention. EDS shall
consult with GM prior to the settlement of such claim and shall
consider in good faith any recommendations or objections of GM as to
the amount or form of such settlement. Any settlement of such a claim
in excess of any applicable deductible or self-insurance retention
amount shall require the prior written consent of GM, which consent
shall not be unreasonably withheld.
(iv) Nothing in this Separation Agreement shall be construed to
allocate between a party and its directors, director nominees,
officers or employees responsibility for the defense of any action or
suit brought by or in the right of such party.
(i) Access to Insurance Information. Upon the reasonable request of
EDS from time to time during the period in which claims are open or can be
made under any Insurance Policy, (i) GM shall provide EDS with a true and
complete copy of each Insurance Policy and (ii) subject to Section 4, GM
shall provide EDS with reasonable access to all applicable risk management
data for the purpose of obtaining information with respect to any insurance
claim relating to any EDS Covered Person. GM shall provide EDS with
reasonable access to all litigation pleadings and other documents and
correspondence relating to any EDS Covered Person, and copies thereof as
reasonably requested by EDS. GM shall cause to be delivered to EDS all
updates of the EDS claims histories as reasonably requested by EDS until
all claims are closed, or until earlier notified by EDS. Notwithstanding
Section 6.1, all reasonable out-of-pocket costs and expenses (excluding
allocated compensation, salary and overhead expense) reasonably incurred by
GM in complying with this Section 2.2(i) shall be reimbursed by EDS upon
presentation of invoices therefor.
(j) Certain Workers' Compensation Insurance Premiums. GM acknowledges
that neither EDS nor any EDS Affiliate owes any amount in respect of
workers' compensation insurance coverage provided or maintained by or
through GM for the benefit of EDS or the EDS Affiliates during the 1992/93
policy year. GM hereby fully and unconditionally releases EDS and the EDS
Affiliates from any and all liability or obligation for the payment of any
premium allocation or other amount with respect to the provision of such
coverage. GM and EDS acknowledge that as of the Effective Time, no amounts
are payable by EDS to GM for workers' compensation insurance premiums.
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2.3 INDEMNIFICATION OF EDS INDEMNIFIED PARTIES.
(a) Indemnification of EDS Indemnified Parties. GM shall indemnify and
hold harmless each EDS Indemnified Party, in its capacity as such, in
accordance with section 5.1 of the GM Bylaws, as fully and to the same
extent as if such EDS Indemnified Party were a director or officer of GM,
from and against all amounts (including judgments, fines, payments in
settlement, costs and expenses of enforcing this Section 2.3, attorneys'
fees and other expenses) reasonably incurred by or on behalf of such EDS
Indemnified Party in connection with any Proceeding that is based upon, or
arises out of, any actual or alleged acts or omissions relating to:
(i) in the case of an E Team Party, the Split-Off or the
formulation, negotiation, approval, ratification, implementation or
consummation thereof;
(ii) in the case of an EDS Director, the approval, ratification,
implementation or consummation of the Split-Off or any of the elements
thereof, including the Special Inter-Company Payment, the Master
Service Agreement (and the other Service Agreements to be entered into
in connection therewith), this Separation Agreement and the Tax
Allocation Agreement; provided, however, that such indemnification
shall not apply to acts or omissions relating to (i) EDS' charter,
bylaws or stockholder rights plan, (ii) EDS' employee and director
benefits plans or compensation arrangements, (iii) EDS' management or
director indemnification agreements, or (iv) EDS' plans, proposals,
intentions or policies applicable after the Effective Time, including
EDS' proposed dividend policy, proposed business plan or proposed
restructuring activities; and
(iii) in the case of an EDS Board Nominee, the expression of any
views prior to the Effective Time at the request of GM or the Board of
Directors of GM with respect to EDS' proposed charter, bylaws,
stockholder rights plans or employee benefits plans.
GM agrees that, if and to the extent that a determination on the part of
the Board of Directors of GM is required under the DGCL or any other
mandatory provision of applicable law in order to authorize the payment of
any amounts pursuant to this Section 2.3(a), the Board of Directors of GM
shall make such determination at least as promptly as is its customary
practice with respect to similar determinations as to the indemnification
of directors and officers of GM.
(b) Other Bylaw Provisions. With respect to each matter for which any
EDS Indemnified Party is entitled to indemnification pursuant to Section
2.3(a), each EDS Indemnified Party shall be entitled to the benefit of all
other provisions and procedures set forth in the GM Indemnification Bylaw
(including, without limitation, the advancement of expenses pursuant to
Section 5.2 thereof) as fully and to the same extent as if such EDS
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Indemnified Party were a director or officer of GM. GM agrees that it shall
advance such expenses to each EDS Indemnified Party at least as promptly as
is its customary practice with respect to the advancement of expenses to
directors and officers of GM.
(c) Inapplicability to Certain Losses. Section 2.3(a) and (b) shall
not apply to any Losses incurred by any EDS Indemnified Party or EDS Board
Nominee arising out of (i) any untrue statement or alleged untrue statement
of a material fact contained in any section of the Form S-4 or (ii) the
omission or alleged omission to state in any section of the Form S-4 a
material fact required to be stated therein or necessary to make the
statements therein not misleading, as indemnification for such Losses is
provided for in Section 8.
(d) No Amendment. The obligations of GM under this Section 2.3 shall
not be terminated, modified or amended in such a manner as to adversely
affect in any material respect the rights granted to any EDS Indemnified
Party without the prior written consent of such EDS Indemnified Party.
(e) GM Board Resolution. GM shall not rescind or modify the resolution
of the GM Board of Directors adopted on August 7, 1995 authorizing certain
indemnification for certain EDS Indemnified Parties.
(f) EDS Reimbursement. As soon as practicable, but in any event within
10 days after presentation of an invoice therefor, EDS shall reimburse GM
for all amounts (including judgments, fines, payments in settlement, costs
and expenses) actually paid to, or on behalf of, an EDS Indemnified Party
pursuant to this Section 2.3. Any amounts under this Section 2.3(f) that
are not paid by EDS within 10 days after receipt of a written notice
specifying the delinquency of any such payment shall bear interest, from
the date of the original invoice therefor until paid, at the prime rate
established from time to time by Citibank N.A., New York. If any
reimbursement sought by GM pursuant to the first sentence of this Section
2.2(f) is judicially determined to be unenforceable, EDS shall contribute
to GM the amounts for which such reimbursement is held to be unenforceable.
The fact that at any time (i) EDS shall have a reimbursement or
contribution obligation pursuant to this Section 2.3(f), or (ii) EDS is in
breach of any reimbursement or contribution obligation pursuant to this
Section 2.3(f), shall not impair or diminish, or constitute an excuse for
nonperformance or delay in performance of, GM's obligations pursuant to the
other provisions of this Section 2.3.
(g) GM and EDS agree that all Losses relating to, arising out of, or
due to, directly or indirectly, the Split-Off or the formulation,
negotiation, approval, ratification, implementation or consummation thereof
or any of the elements thereof (including the Special Inter-Company
Payment, the Master Service Agreement (and the other Service Agreements to
be entered into in connection therewith), this Separation Agreement and the
Tax Allocation Agreement), including all Losses relating to, arising out
of, or due to, directly or indirectly, the lawsuits disclosed in the Form
S-4 under the caption "Special Factors -
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Certain Litigation," including Solomon v. General Motors Corporation, et
al., TRV Holding Company v. General Motors Corporation, et al. and Ward, et
al., as Trustees for the Eisenberg Children's Irrevocable Trust II v.
General Motors Corporation, et al. (collectively, "Split-Off Losses"),
shall be governed by this Section 2.3 (except as set forth in Section 7,
8.1(a), 8.1(b), 8.1(c), 8.1(e), 8.2(a), 8.2(b), 8.2(c), 8.2(e) or 8.3(d)).
Thus, GM shall have no liability to EDS, any EDS Affiliate or any of their
respective directors, officers or employees for any Split-Off Losses and
EDS shall have no liability to GM, any GM Affiliate or any of their
respective directors, officers or employees for any Split-Off Losses except
as provided in this Section 2.3 or Section 7, 8.1(a), 8.1(b), 8.1(c),
8.1(e), 8.2(a), 8.2(b), 8.2(c), 8.2(e) or 8.3(d). Nothing in this Section
2.3(g) shall affect any of the rights or obligations of the parties under
the Tax Allocation Agreement.
2.4 LEASES OF REAL PROPERTY. GM and EDS shall jointly review all
instances in which EDS maintains facilities in, or otherwise occupies, real
property owned or leased by GM and shall use commercially reasonable efforts in
each case to either negotiate and enter into a written lease incorporating terms
and conditions which are fair to both parties or terminate the arrangement on
mutually agreeable terms; provided, however, that the foregoing shall not apply
in any instance (i) involving facilities maintained, or real property occupied,
by EDS in connection with any Service Agreement or (ii) covered by a written
lease agreement between the parties.
2.5 EMPLOYEE BENEFIT MATTERS.
(a) General Rules.
(i) A participant in either of the GM Qualified Plans who
transferred from GM or a member of the GM Controlled Group to EDS,
with the consent of, or at the direction of, GM management, at any
time from September 1, 1985 to the Effective Time, will receive the
following treatment from the GM Qualified Plans. The GM Qualified
Plans will, for employees who remain continuously employed by EDS or a
member of the EDS Controlled Group until retirement with eligibility
for immediate commencement of retirement benefits from EDS or a member
of the EDS Controlled Group: (1) treat the transferred employee's
accrued GM service as unbroken; (2) treat base salary paid by EDS or a
member of the EDS Controlled Group as compensation for purposes of
calculating final average pay under the GM Qualified Plans; (3)
provide benefits under the terms of the GM Qualified Plans in effect
at the time of retirement from EDS; and (4) use credited service with
EDS or a member of the EDS Controlled Group in determining vesting,
but not accrual, under the GM Qualified Plans.
(ii) A participant in the EDS Qualified Plan who transferred from
EDS or a member of the EDS Controlled Group to GM or a GM Affiliate
whose employees are eligible to participate in the GM Qualified Plans,
with the consent of, or at the direction of, EDS management at any
time during which EDS was in the
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GM Controlled Group will receive the following treatment from the EDS
Qualified Plan. The EDS Qualified Plan will, for employees who remain
continuously employed by GM or a member of the GM Controlled Group
until retirement with eligibility for immediate commencement of
retirement benefits from GM or a member of the GM Controlled Group:
(1) treat the transferred employee's accrued EDS service as unbroken;
(2) consider income to the employees, as reported on Form W-2 and
adjusted in accordance with the terms of the EDS Qualified Plan, from
GM or a member of the GM Controlled Group for purposes of calculating
final average earnings under the EDS Qualified Plan; (3) provide EDS
Qualified Plan benefits under the plan terms in effect at the time of
retirement from GM; and (4) use credited service with GM or a member
of the GM Controlled Group in determining vesting, but not accrual,
under the EDS Qualified Plan.
(iii) To the extent the EDS salary history of an employee who
transferred from GM to EDS is used to calculate a GM Qualified Plan
benefit, EDS agrees to take no salary action for the purpose of
manipulating the GM Qualified Plan's obligation. To the extent the GM
salary history of an employee transferred from EDS to GM is used to
calculate an EDS Qualified Plan benefit, GM agrees to take no salary
action for the purpose of manipulating the EDS Qualified Plan's
obligation.
(iv) GM and EDS have provided and will continue to provide on a
cooperative basis data necessary to determine employee benefits for
employees who transferred from one company to the other, and data
necessary to administer their employee benefit plans in compliance
with applicable law. The parties hereby represent and warrant that the
above referenced data is, has been, and will be accurate and complete
in all material respects. For purposes of this paragraph, "GM" shall
mean GM's United States-based operations and its domestic affiliates
and "EDS" shall mean EDS' United States-based operations and its
domestic affiliates.
(v) Except as otherwise provided in the second sentence of this
Section 2.5(a)(v), employees who leave GM or a member of the GM
Controlled Group or EDS or a member of the EDS Controlled Group to
work for the other company after the Effective Time will be treated as
having terminated employment with the company they are leaving. EDS
employees who are working in the GM Marketing Division Customer
Assistance Center and who are hired by a GM marketing division
directly from such an EDS position will use GM credited service for
determining vesting of EDS Qualified Plan benefits.
(b) Issues Related to GM-Canada. Simultaneously with the execution
and delivery of this Separation Agreement, GM shall cause GM-Canada, and
EDS shall cause EDS-Canada, to execute and deliver the Canadian Transfer
Agreement, substantially in the form attached hereto as Exhibit A.
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(c) Issues Related to Hughes. For employees who transferred from
Hughes to EDS or a member of the EDS Controlled Group at any time from
September 1, 1985 to the Effective Time, no service or compensation at EDS
or a member of the EDS Controlled Group after the Effective Time will be
considered for any purpose under the Hughes Qualified Plans. For employees
who transferred from EDS or a member of the EDS Controlled Group to Hughes
at any time from September 1, 1985 to the Effective Time, no service or
compensation at Hughes after the Effective Time for which the employee is
given credit under any of the Hughes Qualified Plans will be considered for
any purpose under the EDS Qualified Plan.
(d) Issues Related to GMAC Mortgage.
(i) For employees who transferred from GMAC Mortgage to EDS or a
member of the EDS Controlled Group at any time from September 1, 1985
to the Effective Time, no service or compensation at EDS or a member
of the EDS Controlled Group after the Effective Time will be
considered for any purpose under the GMAC Mortgage Qualified Plans.
GMAC Mortgage will vest such transferred employees in their accrued
benefits under the GMAC Mortgage Qualified Plans as of the Effective
Time.
(ii) For employees who transferred from EDS or a member of the
EDS Controlled Group to GMAC Mortgage at any time from September 1,
1985 to the Effective Time, no service or compensation at GMAC
Mortgage after the Effective Time will be considered for any purpose
under the EDS Qualified Plan. EDS will vest such transferred employees
in their accrued benefits under the EDS Qualified Plan as of the
Effective Time.
(e) Communication with Employees. GM and EDS will cooperate in
devising communications to employees regarding the effects of the Split-
Off. Such cooperation will include providing each other the opportunity to
review and comment on such communications prior to distribution to
employees. The parties will also cooperate in devising the description or
summary of these communications which is internally distributed by the
parties.
(f) Necessary Amendments. GM, EDS and their respective Affiliates
agree to make such amendments to any plan, program, or policy which any may
sponsor as necessary to effectuate the provisions of this Separation
Agreement as soon as practicable following the Effective Time.
(g) Compliance with Applicable Requirements of ERISA and the Code.
Notwithstanding anything herein to the contrary, if compliance with any of
the provisions of this Section 2.5 would result in any plan sponsored by
GM, EDS or any of their Affiliates
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violating any requirement of ERISA or the Code, then compliance with such
provision shall not be required to the extent that compliance would so
violate these requirements.
(h) Third Party Rights. Nothing in this Section 2.5 shall give any
third party, including, but not limited to, any employee of GM, EDS or any
of their respective Affiliates, and any participant or beneficiary in any
plan sponsored by GM, EDS or any of their respective Affiliates, any right
or claim to any payment. GM, EDS and their respective Affiliates expressly
reserve the right to terminate any of their employees.
2.6 REGISTRATION RIGHTS AGREEMENT.
(a) GM hereby represents and warrants as follows:
(i) Other than as expressly provided in the Cooperation Agreement
or the Subtrust Letter Agreement, since March 12, 1995, (x) the
Registration Rights Agreement has not been modified or amended and (y)
GM has not waived the benefit of any term of the Registration Rights
Agreement, which waiver would have any adverse effect after the
Effective Time. As of the Effective Time, the Cooperation Agreement
shall terminate and be of no further force or effect.
(ii) Neither GM nor any GM Affiliate has entered into or agreed
to enter into any contract, agreement or understanding (other than the
Registration Rights Agreement) that would require registration of any
EDS Common Stock under the Securities Act from or after the Effective
Time.
(iii) GM has heretofore delivered to EDS a true and correct copy
of each of the Registration Rights Agreement, the Cooperation
Agreement and the Subtrust Letter Agreement.
(b) Simultaneously with the execution and delivery of this Separation
Agreement, EDS shall execute and deliver a Succession Agreement (the
"Succession Agreement"), substantially in the form of Exhibit D to the
Registration Rights Agreement. GM hereby assigns to EDS all of GM's right,
title and interest in and to the Subtrust Letter Agreement as it relates to
the Registration Rights Agreement (but not the Transfer Agreement). EDS
specifically does not assume any obligation of GM or any GM Affiliate with
respect to (i) any contract, agreement or understanding referred to in
Section 2.6(a)(ii) above (other than the Registration Rights Agreement) or
(ii) the Cooperation Agreement.
(c) EDS shall not modify or amend the Registration Rights Agreement in
any respect that would adversely affect GM's rights or obligations referred
to in section 1(c) of the Succession Agreement or any rights of GM under
section 10 of the Registration Rights Agreement with respect to any
registration prior to the Effective Time of shares of Class E Stock by GM
pursuant to such Registration Rights Agreement.
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2.7 TRANSFER AGREEMENT.
(a) GM hereby represents and warrants as follows:
(i) Since March 12, 1995, (x) the Transfer Agreement has not been
modified or amended and (y) GM has not waived the benefit of any
material term of the Transfer Agreement.
(ii) GM has heretofore delivered to EDS a true and correct copy
of the Transfer Agreement.
(b) Without the prior written consent of EDS, GM shall not (i) modify
or amend the Transfer Agreement in any material respect, (ii) permit or
consent to any modification or amendment of the Transfer Agreement in any
material respect, (iii) waive the benefit of any material term of the
Transfer Agreement, or (iv) take any other action, or omit to take any
action that would impair the validity of, or the material rights of GM
under, the Transfer Agreement.
2.8 PUBLICITY. EDS, with respect to EDS and all of the EDS Affiliates,
and GM, with respect to GM and all of the GM Affiliates, agree to take all
commercially reasonable action to discontinue their respective uses as promptly
after the Effective Time as is commercially reasonable of any printed material
that indicates a continued parent-subsidiary relationship between GM and EDS or
any of their respective Affiliates. This Section 2.8 shall not be deemed to
prohibit the use of printed material containing appropriate and accurate
references to the historical relationships between the parties or their
Affiliates.
2.9 FURTHER ASSURANCES. In addition to the actions specifically
provided for elsewhere in this Separation Agreement, each of the parties hereto
shall use its best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things commercially reasonably necessary, proper or
expeditious under applicable laws, regulations and agreements in order to
consummate and make effective the Split-Off as promptly as reasonably
practicable. Without limiting the generality of the foregoing, each party
hereto shall cooperate with the other party, and execute and deliver, or use its
best efforts to cause to have executed and delivered, all instruments, including
instruments of conveyance, assignment and transfer, and to make all filings
with, and to obtain all consents, approvals or authorizations of, any
governmental or regulatory authority in order to make effective the Split-Off.
3. GM-PBGC AGREEMENT MATTERS.
-------------------------
3.1 GM REPRESENTATIONS AND WARRANTIES. GM hereby represents and
warrants as follows:
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(a) No Amendment.
(i) Since March 3, 1995 and other than in connection with the GM-
PBGC Agreement Amendment, (x) the GM-PBGC Agreement has not been
modified or amended, (y) GM has not waived the benefit of any material
term of the GM-PBGC Agreement and (z) GM has not taken any other
action, or omitted to take any action, that would (1) impair the
validity of any of the Releases and Covenants Not to Sue or (2) impair
the rights of GM (to the extent related to delivering to EDS executed
Releases and Covenants Not to Sue), EDS, any EDS Releasee or any EDS
Transferee under the GM-PBGC Agreement or any of the Releases and
Covenants Not to Sue. Without limiting the generality of the
foregoing, GM has not waived the PBGC's obligation under section 9(c),
9(d) or 9(f)(ii) of the GM-PBGC Agreement to execute or deliver
specific executed Releases and Covenants Not to Sue.
(ii) GM has heretofore delivered to EDS a true and correct copy
of the GM-PBGC Agreement, including the GM-PBGC Agreement Amendment.
(b) Certification Process.
(i) GM has followed and complied in all material respects with
the provisions of section 9(d) of the GM-PBGC Agreement that are
contemplated to be followed prior to the Effective Time. Without
limiting the generality of the foregoing, GM has delivered or has
caused to be delivered to the PBGC the certificates, statements and
reports described in section 9(c)(2)(A) through (I) of the GM-PBGC
Agreement. GM has heretofore delivered to EDS a true and correct copy
of each such certificate, statement and report.
(ii) The PBGC has not delivered to GM a written notice of
disagreement as described in section 9(d)(iii) of the GM-PBGC
Agreement.
(c) Deposit of Releases in Escrow. GM has heretofore delivered to EDS
a true and correct copy of the GM-PBGC Escrow Agreement. The PBGC has
heretofore notified GM that the PBGC has, pursuant to the GM-PBGC Agreement
and the Escrow Agreement, delivered to the Escrow Agent 15 sets of final
executed Releases and Covenants Not to Sue.
3.2 GM COVENANTS.
(a) Delivery of Documents and Other Information.
(i) GM shall deliver or cause to be delivered to the GM-PBGC
Escrow Agent at the Effective Time (or, if not possible at the
Effective Time, as soon as practicable thereafter), an executed
certificate in the form of Appendix E1 to the GM-PBGC Agreement.
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(ii) GM shall deliver or cause to be delivered to the PBGC at the
Effective Time (or, if not possible at the Effective Time, as soon as
practicable thereafter), (x) the documents and records described in
section 9(c)(3)(i)(A) or (B) of the GM-PBGC Agreement and (y) the
statement described in section 9(c)(3)(ii)(A) of the GM-PBGC
Agreement.
(iii) At the Effective Time (or, if not possible at the Effective
Time, as soon as practicable thereafter), GM shall request that the
PBGC deliver or cause to be delivered to the GM-PBGC Escrow Agent,
within two Business Days after the PBGC's receipt of the documents,
records and statement referred to in subparagraph (ii) above, an
executed certificate in the form of Appendix E2 to the GM-PBGC
Agreement.
(iv) GM shall promptly provide EDS with copies of all material
information, certificates, statements and reports delivered by or on
behalf of GM to the PBGC in connection with the actions to be taken
under this Section 3.2.
(b) Delivery of Releases and Covenants Not to Sue.
(i) GM shall use commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or expeditious pursuant to the GM-PBGC
Agreement and the GM-PBGC Escrow Agreement to effect the delivery to
EDS of the executed Releases and Covenants Not To Sue, including
providing such information, certificates, statements and reports to
the PBGC and the GM-PBGC Escrow Agent to effect the same and the
institution of such legal action as may be reasonably necessary to
enforce the related obligations of the PBGC under the GM-PBGC
Agreement or the obligations of the GM-PBGC Escrow Agent under the GM-
PBGC Escrow Agreement.
(ii) GM shall keep EDS informed on a timely basis as to the
status of the actions to be taken under this Section 3.2 and the
delivery to EDS of the Releases and Covenants Not to Sue.
(c) Additional Releases. If executed Releases and Covenants Not to Sue
have theretofore been delivered to EDS, at any time and from time to time
thereafter at the request of EDS (i) subject to the limitation on the
number of occasions that the PBGC is obligated to provide additional
Releases and Covenants Not to Sue, as set forth in section 9(i) of the GM-
PBGC Agreement, GM shall request that the PBGC provide to EDS, pursuant to
section 9(i) of the GM-PBGC Agreement, such additional executed Releases
and Covenants Not to Sue as are reasonably requested by EDS (with EDS to
bear the cost thereof as provided in section 9(i) of the GM-PBGC
Agreement), and (ii) GM shall request that the PBGC certify and deliver,
pursuant to section 9(j) of the GM-PBGC Agreement, such additional copies
of
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Releases and Covenants Not to Sue as are reasonably requested by EDS (with
EDS to bear the PBGC's standard costs and charges for copying and
production of such documents as provided in section 9(j) of the GM-PBGC
Agreement). Except as may be requested by EDS pursuant to the preceding
sentence, GM shall not request that the PBGC provide any additional
executed Releases and Covenants Not to Sue pursuant to section 9(i) of the
GM-PBGC Agreement without the prior written consent of EDS.
(d) Identification of Specific EDS Transferees. At the request of EDS,
GM shall identify to the PBGC any specific EDS Transferee(s) whose name(s)
are to be inserted in an executed Release and Covenant Not to Sue
substantially in the form of Appendix R3 to the GM-PBGC Agreement at the
time of execution and delivery thereof and shall use commercially
reasonable efforts to obtain such executed Release and Covenant Not to Sue
from the PBGC for the benefit of such EDS Transferee(s) as set forth in the
GM-PBGC Agreement.
(e) Amendment or Waiver of GM-PBGC Agreement. Without the prior
written consent of EDS, GM shall not (i) modify or amend the GM-PBGC
Agreement, (ii) permit or consent to any modification or amendment of the
GM-PBGC Agreement, (iii) waive the benefit of any material term of the GM-
PBGC Agreement, or (iv) take any other action, or omit to take any action,
if in each such case such modification, amendment, waiver, action or
omission would (x) impair the validity of any of the Releases and Covenants
Not to Sue or (y) impair the rights of GM (to the extent related to
delivering to EDS executed Releases and Covenants Not to Sue), EDS, any EDS
Releasee or any EDS Transferee under the GM-PBGC Agreement or any of the
Releases and Covenants Not to Sue. Without limiting the generality of the
foregoing, GM shall not waive the PBGC's obligation under section 9(c),
9(d) or 9(f)(ii) of the GM-PBGC Agreement to execute or deliver specific
executed Releases and Covenants Not to Sue.
4. CONFIDENTIALITY.
---------------
4.1 TREATMENT OF CONFIDENTIAL INFORMATION.
(a) Restrictions on Disclosure. From and after the Effective Time,
each of EDS and GM agrees that it shall not, and shall not permit any of
its Affiliates or Representatives to, disclose any Confidential Information
to any Person. Notwithstanding the foregoing, each of EDS and GM and its
respective Affiliates and Representatives may disclose such Confidential
Information, and such information shall no longer be deemed Confidential
Information, to the extent that such party can demonstrate that such
Confidential Information is or was (i) available to such party outside the
context of the parties' parent-subsidiary relationship on a nonconfidential
basis prior to its disclosure by the other party, (ii) in the public domain
other than by the breach of this Separation Agreement, or (iii) lawfully
acquired outside the context of the parties' parent-subsidiary relationship
on
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a nonconfidential basis or independently developed by, or on behalf of,
such party by Persons who do not have access to, or descriptions of, any
such Confidential Information.
(b) Restrictions on Use. From and after the Effective Time, each of
EDS and GM agrees that it shall not, and shall not permit any of its
Affiliates or Representatives to, use any Confidential Information other
than for the specific purposes and within the specific relationships for
which it was originally disclosed to such party, Affiliate or
Representative, as the case may be. In particular, the parties acknowledge
that they have disclosed to each other a significant amount of highly
confidential and proprietary information during the course of the parties'
parent-subsidiary relationship, and each party agrees that any such
information which was provided outside the context of a Service Agreement
shall not be made available to or used by any Person engaged or
participating in the negotiation, implementation or review of any vendor-
customer relationship between EDS or any EDS Affiliate and GM or any GM
Affiliate. Without limiting the generality of the foregoing, GM shall not
use, and shall not permit its Affiliates or Representatives to use, for any
purpose, including without limitation in connection with the sourcing,
pricing or evaluation of information technology or other services provided,
or to be provided, pursuant to any Service Agreement, any information
relating to EDS that has been previously provided to or obtained by GM in
connection with any audit or review (including without limitation any
review of the transactions and arrangements relating to or arising out of
the Split-Off) conducted by or on behalf of the Board of Directors of GM,
including without limitation its Capital Stock Committee; provided,
however, that the Board of Directors of GM and its Capital Stock Committee
may continue to use such information solely for the purposes for which it
was originally provided. GM and EDS acknowledge and agree that information
obtained by either party pursuant to any vendor-customer relationship
(including the negotiation of any Service Agreement) and not as a result of
the parties' parent-subsidiary relationship may continue to be used by such
parties in connection with such vendor-customer relationship; provided,
however, that such continued use shall remain subject to any applicable
confidentiality provisions or restrictions on use that may be contained in
an applicable GM-EDS Contract.
(c) Policies and Procedures. EDS and GM shall each maintain current
policies and procedures, and develop such further policies and procedures
as shall from time to time become necessary or appropriate, to ensure
compliance with this Section 4.1.
4.2 LEGALLY REQUIRED DISCLOSURE OF CONFIDENTIAL INFORMATION. If either
party to this Separation Agreement or any of its respective Affiliates or
Representatives becomes legally required to disclose any Confidential
Information, such disclosing party shall promptly notify the other, owning party
and use commercially reasonable efforts to cooperate with the owning party so
that the owning party may seek a protective order or other appropriate remedy
and/or waive compliance with this Section 4. All expenses incurred in seeking a
protective order or other remedy shall be borne by the owning party. If such
protective order or other remedy is not obtained, or if the owning party waives
compliance with this Section 4, the disclosing party or its Affiliate or
Representative,
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as applicable, shall (a) disclose only that portion of the Confidential
Information which its legal counsel advises it is compelled to disclose or else
stand liable for contempt or suffer other similar significant corporate censure
or penalty, (b) use commercially reasonable efforts to obtain reliable assurance
requested by the owning party that confidential treatment will be accorded such
Confidential Information, and (c) promptly provide the owning party with a copy
of the Confidential Information so disclosed, in the same form and format so
disclosed.
5. CONTINUING INFORMATION SUPPORT.
------------------------------
5.1 ACCESS TO INFORMATION. Until the ten-year anniversary of the
Effective Time, EDS and GM each shall afford to the other, and shall cause their
respective Affiliates and Representatives to afford, reasonable access and
duplicating rights upon reasonable advance request and during normal business
hours to all information (other than information subject to the attorney-client
privilege) within such party's possession relating to such other party's
Business, assets or liabilities to the extent that such access is reasonably
required by such other party as a result of the parties' prior parent-subsidiary
relationship for audit, accounting, claims, litigation (except for litigation
between the parties hereto), regulatory or tax purposes, or for purposes of
fulfilling disclosure and reporting obligations. In connection therewith, EDS
and GM shall upon the request of the other party make available their respective
officers and employees (and those of their respective Affiliates) to the extent
that they are reasonably necessary to discuss and explain such information with
and to the other party. GM and EDS shall each cooperate with the other, and
shall cause their respective Affiliates to cooperate, in the provision of access
to information reasonably necessary for the preparation of reports required by
or filed under the Exchange Act with respect to any period entirely or partially
prior to the Effective Time. The access provided pursuant to this Section 5.1
shall be subject to such additional confidentiality and security provisions as
the disclosing party may reasonably deem necessary. This Section 5.1 shall not
supersede or be applicable in lieu of any provision governing access to
information contained in any Service Agreement or any GM-EDS Contract entered
into in connection with existing or potential litigation relating to Split-Off
Losses.
5.2 PRODUCTION OF WITNESSES. Until the six-year anniversary of the
Effective Time, each of EDS and GM shall use commercially reasonable efforts,
and shall cause each of their respective Affiliates to use commercially
reasonable efforts, to make available to the other, upon written request, its
directors, officers, employees and other Representatives as witnesses to the
extent that any such Person may reasonably be required (giving consideration to
the business demands upon such Persons) in connection with any legal,
administrative or other proceedings in which the requesting party may from time
to time be involved.
5.3 REIMBURSEMENT. Except with respect to costs and expenses incurred
in connection with any legal, administrative or other proceeding to which
Section 2.3, 7 or 8 applies, each party to this Separation Agreement providing
access, information or witnesses to the other party pursuant to Section 5.1 or
5.2 shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payment for all reasonable out-of-pocket costs and expenses
(excluding allocated
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compensation, salary and overhead expense) as may be reasonably incurred in
providing such information or witnesses.
5.4 RETENTION OF RECORDS. Except as otherwise required by law, each of
EDS and GM shall use commercially reasonable efforts to accommodate the other
with respect to retention and provision of copies of any significant information
in such party's possession or under its control relating to the Business,
assets, or liabilities of the other party. This Section 5.4 shall not supersede
or be applicable in lieu of any provision governing retention of records
contained in any Service Agreement.
6. EXPENSES.
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6.1 GENERAL. Except as otherwise provided in this Separation Agreement
or any GM-EDS Contract entered into in connection with the Split-Off, all costs
and expenses of any party hereto in connection with the Split-Off shall be paid
by the party that incurs such costs and expenses.
6.2 FEES OF PROFESSIONAL ADVISORS.
(a) With respect to the legal, accounting, financial and other
advisors listed on Exhibit F, EDS shall be responsible for (i) the payment
of the fees and expenses incurred by such advisors in connection with the
Split-Off and (ii) any indemnification, reimbursement or contribution
obligation EDS may have to such advisors. In addition, EDS shall be
responsible for any indemnification, reimbursement or contribution
obligation GM may have pursuant to those two separate engagement letters,
dated March 20, 1996, between GM and each of Lehman Brothers Inc. and
Morgan Stanley & Co. Incorporated. GM shall afford to EDS all of GM's
rights and benefits under paragraphs 4, 5 and 6 of such engagement letters.
(b) With respect to the legal, accounting, financial and other
advisors listed on Exhibit G, GM shall be responsible for (i) the payment
of the fees and expenses incurred by such advisors in connection with the
Split-Off and (ii) any indemnification, reimbursement or contribution
obligation GM may have to such advisors.
6.3 COSTS OF PREPARATION AND DISTRIBUTION OF CONSENT SOLICITATION AND
FORM S-4. Subject to Section 6.2, all reasonable out-of-pocket costs and
expenses of printing and distributing the Form S-4, the fees associated with
filing the Form S-4 with the SEC, the fees associated with making any other
federal, state, local or foreign governmental securities law filings in
connection with the Split-Off, and the fees and expenses of the Exchange Agent
or any consent solicitation agents, information agents or similar consultants
engaged by EDS or GM in connection with effecting the Split-Off (including the
expenses of printing and distributing the letter of transmittal and instructions
for the exchange of stock certificates) shall be paid as follows: (i) GM shall
pay all such costs, fees and expenses up to an aggregate of $3,000,000; and (ii)
all such costs, fees and expenses in excess of an aggregate of $3,000,000 shall
be paid 50% by GM and 50% by EDS.
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6.4 CERTAIN COSTS RELATING TO EDS COMMON STOCK. All costs of printing
and engraving and fees of any transfer agent engaged by EDS, and all fees
relating to listing EDS Common Stock on any stock exchange or similar
organization shall be paid by EDS.
6.5 ANNUAL FEE FOR LISTING OF STOCK GM hereby represents and warrants
that it has paid in full the continuing annual fee required by the New York
Stock Exchange for the listing of the Class E Stock thereon with respect to
1996. As soon as practicable after the Effective Time, EDS shall reimburse GM
for the portion of such fee allocable to the period within 1996 following the
Effective Time.
6.6 ALLOWANCE. In connection with the establishment of the amount of
the Special Inter-Company Payment, a $50,000,000 allowance (the "Allowance") is
hereby provided to EDS with respect to the resolution of various uncertain,
contingent and other matters arising directly or indirectly out of the
separation of GM and EDS. GM and EDS acknowledge and agree that prior to the
date hereof, a portion of such Allowance has been utilized by EDS and, as of the
Effective Time, $9,340,000 of such Allowance (the "Remainder") will remain.
EDS shall be entitled to apply such Remainder against any amounts that are or
may become payable by EDS or any EDS Affiliate to GM or any GM Affiliate in
connection with any uncertain, contingent or other matter arising prior to the
Effective Time directly or indirectly out of the separation of GM and EDS;
provided, however, that such Remainder shall not be applied against any items
specifically provided for in the Tax Allocation Agreement or this Separation
Agreement (other than any amounts payable by EDS pursuant to Section 2.2(f) or,
if applicable, amounts that are or become payable by EDS as a result of the
application of Section 8.1(f)). If any portion of the Remainder has not been
utilized by EDS or the EDS Affiliates as of the 18-month anniversary of the
Effective Time, the parties shall negotiate in good faith to ensure, to the
maximum extent practicable, that EDS will be able to utilize the full amount of
the Remainder in accordance with the intended scope of the Remainder. Any
portion of the Remainder that has not been utilized by EDS or the EDS Affiliates
as of the two-year anniversary of the Effective Time (the "Expiration Date")
shall be eliminated and shall be no longer available for utilization by EDS;
provided, however, that if the negotiations described above have not been
concluded and implemented by the Expiration Date, the Expiration Date shall be
automatically extended until such negotiations are concluded and the results
thereof implemented.
7. COVENANT TO PRESERVE TAX-FREE STATUS OF SPLIT-OFF.
-------------------------------------------------
7.1 REPRESENTATIONS AND WARRANTIES. EDS hereby represents and warrants
that (i) it has examined the Ruling Request and the Ruling, and (ii) the facts
presented and the representations made therein, to the extent descriptive of EDS
or the EDS Business (including, without limitation, the business purposes for
the Split-Off, the representations in the Ruling to the extent that they relate
to EDS or the EDS Business, and the plans, proposals, intentions and policies of
EDS), are true, correct and complete in all material respects.
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7.2 RESTRICTIONS ON EDS.
(a) Secondary Capital Stock Transactions. Until the first day after
the two-year anniversary of the Effective Time, EDS shall not enter into
any Proposed Acquisition Transaction or, to the extent EDS has the right to
prohibit any Proposed Acquisition Transaction, permit any Proposed
Acquisition Transaction to occur (whether by (i) redeeming rights under a
stockholders rights plan, (ii) finding a tender offer to be a "permitted
offer" under any such plan or otherwise causing any such plan to be
inapplicable or neutralized with respect to any Proposed Acquisition
Transaction, or (iii) approving any Proposed Acquisition Transaction,
whether for purposes of Section 203 of the DGCL or any similar corporate
statute, any "fair price" or other provision of EDS' charter or bylaws or
otherwise) unless prior to the consummation of such Proposed Acquisition
Transaction:
(x) GM has determined, in its sole and absolute discretion, which
discretion shall be exercised in good faith solely to preserve the
Tax-Free Status of the Split-Off, that such Proposed Acquisition
Transaction either (1) would constitute a Tax-Free Reorganization, or
(2) would not otherwise jeopardize the Tax-Free Status of the Split-
Off; or
(y) There has been obtained a ruling from the IRS, in form and
substance reasonably satisfactory to GM, that such Proposed
Acquisition Transaction would constitute a Tax-Free Reorganization.
The foregoing shall not prohibit EDS from entering into a contract or
agreement to consummate any Proposed Acquisition Transaction if such
contract or agreement requires satisfaction of the requirements of
subparagraph (x) or (y) above prior to the consummation of such Proposed
Acquisition Transaction.
(b) Primary Capital Stock Transactions. Until the first day after the
six-month anniversary of the Effective Time, EDS shall not enter into any
transaction with any Person or group of related Persons if, as a result of
such transaction, such Person or group of related Persons would acquire
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 or group of
related Persons, would constitute (i) more than 20% of the total combined
voting power of all outstanding shares of Voting Stock of EDS or (ii) more
than 20% of the total number of outstanding shares of any class or series
of EDS Capital Stock other than Voting Stock of EDS, unless prior to the
consummation of such transaction GM has determined, in its sole and
absolute discretion, which discretion shall be exercised in good faith
solely to preserve the Tax-Free Status of the Split-Off, that such
transaction would not jeopardize the Tax-Free Status of the Split-Off.
Solely for purposes of this Section 7.2(b), any option, warrant or other
security that would permit such Person or group of related Persons to
acquire shares of Voting Stock of EDS or other EDS Capital Stock, or any
security convertible into or
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exchangeable for shares of Voting Stock of EDS or other EDS Capital Stock,
shall be treated as if it had been fully exercised, converted or exchanged.
Notwithstanding the foregoing, (i) the provisions of this Section 7.2(b)
shall not prohibit EDS from implementing, or otherwise complying with the
provisions of, any stockholders rights plan of EDS, and (ii) issuances of
shares of EDS Capital Stock that are coupled with (x) the redemption or
repurchase of outstanding shares of EDS Capital Stock and/or (y) the
distribution of an extraordinary dividend (as defined in Section 1059(c) of
the Code) shall be regarded as sales of outstanding shares of EDS Capital
Stock and shall be subject to the restrictions of Section 7.2(a). Solely
for purposes of the preceding sentence, an issuance is coupled with a
redemption, repurchase or extraordinary dividend distribution if, at the
time of such issuance, there exists a plan or intention on the part of EDS
to use the proceeds therefrom to fund such redemption, repurchase or
extraordinary dividend distribution, directly or indirectly, in whole or in
part. Such a plan or intention shall be deemed to exist at the time of such
issuance if such redemption, repurchase or extraordinary dividend
distribution occurs within the period that begins three months before the
date of such issuance and ends three months after the date of the issuance.
Notwithstanding the foregoing, EDS shall not be prohibited from issuing
shares of EDS Capital Stock and using the proceeds therefrom to redeem or
repurchase shares of EDS Capital Stock that were issued by EDS after the
Effective Time.
(c) Active Trade or Business. Until the first day after the two-year
anniversary of the Effective Time, EDS, either directly or through one or
more Subsidiaries directly or indirectly controlled by EDS, shall continue
the active conduct of the trade or business (as defined in Section
355(b)(2) of the Code) conducted at the Effective Time. EDS shall not (i)
liquidate, dispose of, or otherwise discontinue the conduct of any material
portion of such trade or business or (ii) dispose of any business or assets
that would cause EDS to be operated in a manner inconsistent in any
material respect with the business purposes for the Split-Off as set forth
in the Ruling Request unless GM has determined, in its sole and absolute
discretion, which discretion shall be exercised in good faith solely to
preserve the Tax-Free Status of the Split-Off, that such liquidation,
disposition, or discontinuance would not jeopardize the Tax-Free Status of
the Split-Off. EDS shall not under any circumstances liquidate, dispose of,
or otherwise discontinue the conduct of any portion of such trade or
business if such liquidation, disposition or discontinuance would breach
Section 7.2(d). EDS shall continue the active conduct of such trade or
business primarily through officers and employees of EDS or its
Subsidiaries (and not primarily through independent contractors) who are
not officers or employees of GM or of any GM Affiliates. Notwithstanding
the foregoing, (i) liquidations of any of EDS' Subsidiaries into EDS or one
or more Subsidiaries directly or indirectly controlled by EDS shall not be
deemed to breach this Section 7.2(c) and (ii) EDS shall not be prohibited
from liquidating, disposing of or otherwise discontinuing the conduct of
one or more trades or businesses, or any portion thereof, provided that, in
the case of this clause (ii), the aggregate value of the trades or
businesses, or portions thereof, so liquidated, disposed of or discontinued
shall not exceed $1 billion (as determined as of the Effective Time). For
purposes of the preceding sentence, asset retirements and discontinuances
of product lines within a trade or business the active conduct of which is
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continued shall not be deemed a liquidation, disposition or discontinuance
of a trade or business or portion thereof. Solely for purposes of this
Section 7.2(c), EDS shall not be treated as directly or indirectly
controlling a Subsidiary unless EDS owns, directly or indirectly, shares of
capital stock of such Subsidiary constituting (i) 80% or more of the total
combined voting power of all outstanding shares of Voting Stock of such
Subsidiary and (ii) 80% or more of the total number of outstanding shares
of each class or series of capital stock of such Subsidiary other than
Voting Stock.
(d) Continuity of Business. Until the first day after the two-year
anniversary of the Effective Time, (i) EDS shall not voluntarily dissolve
or liquidate, and (ii) except in the ordinary course of business, neither
EDS nor any Subsidiaries directly or indirectly controlled by EDS shall
sell, transfer, or otherwise dispose of or agree to dispose of assets
(including, for such purpose, any shares of capital stock of such
Subsidiaries) that, in the aggregate, constitute more than (x) 60% of the
gross assets of EDS or (y) 60% of the consolidated gross assets of EDS and
such Subsidiaries, unless prior to the consummation of such transaction GM
has determined, in its sole and absolute discretion, which discretion shall
be exercised in good faith solely to preserve the Tax-Free Status of the
Split-Off, that such transaction would not jeopardize the Tax-Free Status
of the Split-Off. The amount of gross assets of EDS and such Subsidiaries
shall be based on the fair market value of each such asset as of the
Effective Time. Sales, transfers or other dispositions by EDS or any of its
Subsidiaries to EDS or one or more Subsidiaries directly or indirectly
controlled by EDS shall not be included in any determinations under this
Section 7.2(d) of whether such 60% or more of the gross assets of EDS or
60% of the consolidated gross assets of EDS and such Subsidiaries have been
sold, transferred or otherwise disposed of. Solely for purposes of this
Section 7.2(d), EDS shall not be treated as directly or indirectly
controlling a Subsidiary unless EDS owns, directly or indirectly, shares of
capital stock of such Subsidiary constituting (i) 80% or more of the total
combined voting power of all outstanding shares of Voting Stock of such
Subsidiary and (ii) 80% or more of the total number of outstanding shares
of each class or series of capital stock of such Subsidiary other than
Voting Stock.
(e) Miscellaneous. Until the first day after the two-year anniversary
of the Effective Time, EDS shall not take, or permit any of its
Subsidiaries to take, any other actions or enter into any transaction or
series of transactions or agree to enter into any other transactions that
would be reasonably likely to jeopardize the Tax-Free Status of the Split-
Off, including any action or transaction that would be reasonably likely to
be inconsistent with any representation made to the IRS in connection with
the Ruling Request, unless prior to the consummation of such action or
transaction GM has determined, in its sole and absolute discretion, which
discretion shall be exercised in good faith solely to preserve the Tax-Free
status of the Split-Off, that such action or transaction would not
jeopardize the Tax-Free Status of the Split-Off. Notwithstanding the
foregoing, if and to the extent that any action or transaction is described
in and permitted pursuant to Section 7.2(a), (b), (c) or (d), such action
or transaction shall not be prohibited by this Section 7.2(e).
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7.3 COOPERATION AND OTHER COVENANTS.
(a) Notice of Subsequent EDS Ruling Requests. Until the first day
after the two-year anniversary of the Effective Time, EDS shall furnish GM
with a copy of any Subsequent EDS Ruling Request that relates to the Split-
Off or that could otherwise be reasonably expected to have an impact on the
Tax-Free Status of the Split-Off.
(b) Cooperation. EDS shall cooperate with GM and shall take (or
refrain from taking) all such actions as GM may reasonably request in
connection with obtaining (i) any GM determination referred to in Section
7.2(a), (b), (c), (d) or (e) or (ii) GM's receipt of a Subsequent Split-Off
Ruling. Such cooperation shall include, without limitation, providing any
information and/or representations reasonably requested by GM to enable GM
(or counsel for GM) to obtain and maintain any Subsequent Split-Off Ruling.
From and after any Representation Date in connection with obtaining any
such determination or GM's receipt of a Subsequent Split-Off Ruling and
until the first day after the two-year anniversary of the date of such
determination or receipt, EDS shall not take (nor shall it refrain from
taking) any action that, if EDS had intended to take (or refrain from
taking) such action at the relevant Representation Date, would have caused
such representation to be untrue.
(c) Notice. Until all restrictions set forth in Section 7.2 have
expired, EDS shall give GM written notice of any intention to effect or
permit a transaction described in Section 7.2 within a period of time
reasonably sufficient to enable GM to make the determination referred to in
Section 7.2(a), (b), (c), (d) or (e) or to prepare and seek any Subsequent
Split-Off Ruling in connection with such proposed transaction. Each such
notice shall set forth the terms and conditions of the proposed
transaction, including, without limitation, as applicable, the nature of
any related action proposed to be taken by the board of directors of EDS,
the approximate number of shares of EDS Capital Stock proposed to be
transferred or issued, the approximate value of EDS' assets (or assets of
any of EDS' Subsidiaries) proposed to be transferred, the proposed
timetable for such transaction, and the number of shares of EDS Capital
Stock otherwise then owned by the other party to the proposed transaction,
all with sufficient particularity to enable GM to make any such required
determination, including information required to prepare and seek a
Subsequent Split-Off Ruling in connection with such proposed transaction.
All information provided by EDS to GM pursuant to this Section 7 shall be
deemed subject to the confidentiality obligations of Section 4. Promptly,
but in any event within 15 days, after GM receives such written notice from
EDS, GM shall evaluate such information and notify EDS in writing of such
determination or of GM's intent to seek a Subsequent Split-Off Ruling and
the proposed date for submission of the request therefor, which date shall
not be more than 45 days after the date GM so notifies EDS of GM's intent
to seek a Subsequent Split-Off Ruling, provided that such 45-day period
shall be appropriately extended for any period of noncompliance by EDS with
Section 7.3(b). GM shall notify EDS promptly, but in any event within two
Business Days, after the receipt of a Subsequent Split-Off Ruling. If GM
makes a determination that a transaction described in Section 7.2 would
jeopardize the Tax-Free
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Status of the Split-Off, such notice to EDS shall set forth, in reasonable
detail, the reasons therefor and the reasons for not requesting a
Subsequent Split-Off Ruling.
7.4 INDEMNIFICATION FOR TAX LIABILITIES.
(a) General. Notwithstanding any other provision of this Agreement or
any provision of any of the Tax Allocation Agreements to the contrary but
subject to Section 7.4(b), EDS shall indemnify, defend and hold harmless GM
and each GM Affiliate (or any successor to any of them) against any and all
Tax-Related Losses incurred by GM in connection with any proposed tax
assessment or tax controversy with respect to the Split-Off to the extent
caused by any breach by EDS of any of its representations, warranties or
covenants made pursuant to this Section 7. All interest or penalties
incurred in connection with such Tax-Related Losses shall be computed for
the time period up to and including the date that EDS pays its
indemnification obligation in full.
(b) Exceptions to EDS' Indemnification. If GM (i) makes a
determination pursuant to Section 7.2(a), (b), (c), (d) or (e), by a
Subsequent Split-Off Ruling or otherwise, and (ii) delivers to EDS written
notice of such determination pursuant to Section 7.3(c), EDS shall have no
obligation pursuant to Section 7.4(a), except to the extent that any Tax-
Related Losses so incurred resulted from the inaccuracy, incorrectness or
incompleteness, in any material respect, of any representation provided by
EDS upon which such Subsequent Split-Off Ruling and/or determination was
based.
(c) Timing and Method of Tax Indemnification Payments. EDS shall pay
any amount due and payable to GM pursuant to this Section 7 on or before
the 90th day following the earlier of agreement or determination that such
amount is due and payable to GM. All payments pursuant to this Section 7.4
shall be made by wire transfer to the bank account designated by GM for
such purpose, and on the date of such wire transfer EDS shall give GM
notice of the transfer.
7.5 PROCEDURE FOR INDEMNIFICATION FOR TAX LIABILITIES.
(a) Notice of Claim. If GM receives notice of the assertion of any
Third-Party Claim with respect to which EDS is obligated under Section 7.4
to provide indemnification, GM shall give EDS notice thereof (together with
a copy of such Third-Party Claim, process or other legal pleading) promptly
after becoming aware of such Third-Party Claim; provided, however, that the
failure of GM to give notice as provided in this Section shall not relieve
EDS of its obligations under Section 7.4, except to the extent that EDS is
actually prejudiced by such failure to give notice. Such notice shall
describe such Third-Party Claim in reasonable detail.
(b) Obligation of Indemnifying Party. GM and EDS shall jointly
control the defense of, and cooperate with each other with respect to
defending, any Third-Party Claim
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with respect to which EDS is obligated under Section 7.4 to provide
indemnification, provided that EDS shall forfeit such joint control right
with respect to a particular Third-Party Claim if EDS or any EDS Affiliate
makes any public statement or filing, or takes any action (including, but
not limited to, the filing of any submission or pleading, or the giving of
a deposition or production of documents, in any administrative or court
proceeding) in connection with such Third-Party Claim that could reasonably
result in the shifting of liability for any Losses arising out of such
Third-Party Claim from EDS to GM (or any of its Affiliates). EDS and GM
shall exercise their rights to jointly control the defense of any such
Third-Party Claim solely for the purpose of defeating such Third-Party
Claim and neither EDS nor GM shall make any statements or take any actions
that could reasonably result in the shifting of liability for any Losses
arising out of such Third-Party Claim from the party making such statement
or taking such action (or any of its Affiliates) to the other party (or any
of its Affiliates). Statements made or actions taken by either EDS or GM in
connection with the defense of any such Third-Party Claim shall not
prejudice the rights of such party in any subsequent action or proceeding
between the parties. If either GM or EDS fails to jointly defend any such
Third-Party Claim, the other party shall solely defend such Third-Party
Claim and the party failing to jointly defend shall use commercially
reasonable efforts to cooperate with the other party in its defense of such
Third Party Claim; provided, however, that GM may not compromise or settle
any such Third-Party Claim without the prior written consent of EDS, which
consent shall not be unreasonably withheld. All costs and expenses of
either party in connection with, and during the course of, the joint
control of the defense of any such Third-Party Claim shall be initially
paid by the party that incurs such costs and expenses. Such costs and
expenses shall be reallocated and reimbursed in accordance with the
respective indemnification obligations of the parties at the conclusion of
the defense of such Third-Party Claim.
7.6 ARBITRATION. Any dispute between the parties arising out of or
relating to this Section 7, including the interpretation of this Section 7, or
any actual or purported breach of this Section 7, shall be resolved only in
accordance with the following provisions:
(a) Negotiation. GM and EDS shall attempt in good faith to resolve any
such dispute promptly through negotiations of the parties. In the event of
any such dispute, either party may deliver a Dispute Notice to the other
party, and within 20 Business Days of the receipt of such Dispute Notice,
the appropriate representatives of GM and EDS shall meet to attempt to
resolve such dispute. If such dispute has not been resolved within the
Negotiation Period, or if one of the parties fails or refuses to negotiate
such dispute, the issue shall be settled by arbitration pursuant to Section
7.6(b). The results of such arbitration shall be final and binding on the
parties.
(b) Arbitration Procedure. Either party may initiate arbitration with
regard to such dispute by giving the other party written notice either (i)
at any time following the end of the Negotiation Period, or (ii) if the
parties do not meet within 20 Business Days of the receipt of the Dispute
Notice, at any time thereafter. The arbitration shall be conducted
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by three arbitrators in accordance with the CPR Rules, except as otherwise
provided in this Section 7.6. Within 20 days following receipt of the
written notice of arbitration, GM and EDS shall each appoint one
arbitrator. The two arbitrators so appointed shall appoint the third
arbitrator. If either GM or EDS shall fail to appoint an arbitrator within
such 20-day period, the arbitration shall be by the sole arbitrator
appointed by the other party. Whether jointly selected by GM and EDS or
otherwise, each arbitrator selected to resolve such dispute shall be a tax
attorney who is generally recognized in the tax community as a qualified
and competent tax practitioner with experience in the tax area involved in
the issue or issues to be resolved. Such arbitrators shall be empowered to
determine whether EDS is required to indemnify GM pursuant to Section 7.4
and to determine the amount of the related indemnification payment. Each
party shall bear 50% of the aggregate expenses of the arbitrators. The
arbitration shall be governed by the United States Arbitration Act, 9
U.S.C. (S)1-14. The place of arbitration shall be New York, New York. The
final decision of the arbitrators shall be rendered no later than one year
from the date of the written notice of arbitration.
7.7 EXCLUSIVE REMEDIES. Except for the right to pursue equitable
remedies, the remedies provided in this Section 7 shall be deemed the sole and
exclusive remedies of the parties with respect to the subject matters of the
indemnification provisions of Section 7.4.
8. INDEMNIFICATION.
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8.1 INDEMNIFICATION BY EDS. Subject to Section 8.3, from and after the
Effective Time, EDS shall indemnify, defend and hold harmless GM, all GM
Affiliates and each of their respective directors, officers and employees (in
their capacities as such), from and against:
(a) all Losses of GM or any GM Affiliate relating to, arising out of,
or due to, directly or indirectly, any breach of any of the provisions of
this Separation Agreement by EDS.
(b) all Losses of GM, any GM Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained
in the EDS Disclosure Portions or the omission or alleged omission to state
in the EDS Disclosure Portions a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that EDS shall not be liable in any such case to the
extent that any such Losses relate to, arise out of or are based upon any
plans, proposals, intentions or policies of GM or any GM Affiliates
existing at the time of the effectiveness of the Form S-4 and of which EDS
did not then have knowledge.
(c) all Losses of GM, any GM Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained
in the Joint Disclosure Portions or the omission
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or alleged omission to state in the Joint Disclosure Portions a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that EDS shall be liable in any
such case only to the extent that any such Losses arise out of or are based
upon any plans, proposals, intentions or policies of EDS or any EDS
Affiliate existing at the time of the effectiveness of the Form S-4 and of
which GM did not then have knowledge.
(d) all Losses of GM, any GM Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact relating to
EDS or any EDS Affiliate contained in any report of GM with respect to any
period entirely or partially prior to the Effective Time required by or
filed under the Exchange Act relating to the EDS Business or the Class E
Stock, or any filing made prior to the Effective Time under the Securities
Act relating to the Class E Stock by GM, or the omission or alleged
omission to state in any such report or filing a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that EDS shall be liable in any such case
only to the extent that any such Losses arise out of or are based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made in any such report or filing in reliance upon and in
conformity with written information furnished to GM, any GM Affiliate or
any of their respective Representatives by or on behalf of EDS, any EDS
Affiliate or any of their respective Representatives specifically for use
in preparing such report or filing by GM; provided, further, that EDS shall
not be liable in any such case to the extent that any such Losses relate
to, arise out of or are based upon any plans, proposals, intentions or
policies of GM or any GM Affiliate existing at the time such report or
filing was made; provided, further, that this Section 8.1(d) shall not
apply to the Form S-4.
(e) all Losses of GM, any GM Affiliate or any of their respective
directors, officers or employees relating to or arising out of actions
taken (or omitted to be taken) from and after the Effective Time by EDS,
any EDS Affiliate or the EDS Transfer Agent in connection with (i)
effecting the exchange of certificates representing shares of EDS Common
Stock for certificates representing shares of Class E Stock, (ii)
recognizing the Persons who were record holders of Class E Stock
immediately prior to the Effective Time as the record holders of EDS Common
Stock or (iii) affording such Persons the dividend, voting and other rights
and privileges incident to the EDS Common Stock.
(f) except as otherwise provided in Section 8.1(a), (b), (c), (d) or
(e), all Losses of GM, any GM Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to,
directly or indirectly, the EDS Business, whether relating to, arising out
of, or due to occurrences or conditions prior to, on, or after the
Effective Time; provided, however, that EDS shall have no obligations under
this Section 8.1(f) with respect to any Losses relating to, arising out of
or due to, directly or indirectly, any intentional or negligent act or
omission to act by GM, any GM Affiliate or any of their respective
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Representatives, unless such intentional or negligent act or omission was
at the express direction of EDS, any EDS Affiliate or any of their
respective Representatives.
8.2 INDEMNIFICATION BY GM. Subject to Section 8.3, from and after the
Effective Time, GM shall indemnify, defend, and hold harmless EDS, all EDS
Affiliates, and each of their respective directors, officers and employees (in
their capacities as such), from and against:
(a) all Losses of EDS or any EDS Affiliate relating to, arising out
of, or due to, directly or indirectly, any breach of any of the provisions
of this Separation Agreement by GM.
(b) all Losses of EDS, any EDS Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained
in the GM Disclosure Portions or the omission or alleged omission to state
in the GM Disclosure Portions a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided,
however, that GM shall not be liable in any such case to the extent that
any such Losses relate to, arise out of or are based upon any plans,
proposals, intentions or policies of EDS or any EDS Affiliates existing at
the time of the effectiveness of the Form S-4 and of which GM did not then
have knowledge.
(c) all Losses of EDS, any EDS Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained
in the Joint Disclosure Portions or the omission or alleged omission to
state in the Joint Disclosure Portions a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that GM shall be liable in any such case only to the
extent that any such Losses arise out of or are based upon any plans,
proposals, intentions or policies of GM or any GM Affiliate existing at the
time of the effectiveness of the Form S-4 and of which EDS did not then
have knowledge.
(d) all Losses of EDS, any EDS Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained
in any report of GM with respect to any period entirely or partially prior
to the Effective Time required by or filed under the Exchange Act, or any
filing made prior to the Effective Time under the Securities Act by GM, or
the omission or alleged omission to state in any such report or filing a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that GM shall not be
liable in any such case to the extent that any such Losses relate to, arise
out of or are based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in any such report or filing
in reliance upon and in conformity with written information furnished to
GM, any GM Affiliate or any of their respective Representatives by or on
behalf of EDS, any EDS Affiliate or any of their
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respective Representatives specifically for use in preparing such report or
filing by GM; provided, further, that the foregoing proviso shall be deemed
inapplicable to the extent that the Losses referred to in such proviso
relate to, arise out of or are based upon any plans, proposals, intentions
or policies of GM or any GM Affiliate existing at the time such report or
filing was made; provided, further, that GM shall not be liable in any such
case to the extent that any such Losses relate to, arise out of or are
based upon any plans, proposals, intentions or policies of EDS or any EDS
Affiliates existing at the time such report or filing was made; provided,
further, that this Section 8.2(d) shall not apply to the Form S-4.
(e) all Losses of EDS, any EDS Affiliate or any of their respective
directors, officers or employees relating to or arising out of actions
taken (or omitted to be taken) at or prior to the Effective Time by GM, any
GM Affiliate or the GM Transfer Agent (or any predecessor thereof) in
connection with (i) recognizing any Person who is or was at any time a
record holder of Class E Stock as a record holder of Class E Stock or (ii)
affording such Persons the dividend, voting and other rights and privileges
incident to the Class E Stock.
(f) except as otherwise provided in Section 8.2(a), (b), (c), (d) or
(e), all Losses of EDS, any EDS Affiliate or any of their respective
directors, officers or employees relating to, arising out of, or due to,
directly or indirectly, the GM Business, whether relating to, arising out
of or due to occurrences or conditions prior to, on, or after the Effective
Time, including, without limitation, all Losses relating to, arising out
of, or due to any GM Pension Liability; provided, however, that GM shall
have no obligations under this Section 8.2(f) with respect to any Losses
relating to, arising out of or due to, directly or indirectly, any
intentional or negligent act or omission to act by EDS, any EDS Affiliate
or any of their respective Representatives, unless such intentional or
negligent act or omission was at the express direction of GM, any GM
Affiliate or any of their respective Representatives.
8.3 OTHER LIABILITIES.
(a) This Section 8 shall not be applicable to (i) any Tax-Related
Losses, which shall be governed by Section 7 of this Separation Agreement,
or (ii) except as provided in Section 8.4, any other Losses relating to,
arising out of, or due to Taxes, which shall be governed by the Tax
Allocation Agreements, as applicable.
(b) This Section 8 shall not be applicable to any Losses relating to,
arising out of, or due to any breach of the provisions of any GM-EDS
Contract, which Losses shall be governed by the terms of such GM-EDS
Contract.
(c) This Section 8 shall not be applicable to any Split-Off Losses,
except as provided in Section 2.3(g).
(d) Subject to Sections 8.1(c) and 8.2(c), with respect to all Losses
of GM, EDS or any of their respective Affiliates, directors, officers or
employees relating to, arising
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out of, or due to (i) any untrue statement or alleged untrue statement of a
material fact contained in any Joint Disclosure Portion or (ii) the
omission or alleged omission to state in any Joint Disclosure Portion a
material fact required to be stated therein or necessary to make the
statements therein not misleading, such Losses shall be equally divided
between, and paid by, EDS and GM.
8.4 TAX EFFECTS OF INDEMNIFICATION. The amount of any Loss for which
indemnification is provided under this Separation Agreement (other than pursuant
to Section 7) shall be (i) increased to take account of any net Tax cost
incurred by the Indemnitee arising from the receipt or accrual of an Indemnity
Payment hereunder (grossed up for such increase) and (ii) reduced to take
account of any net Tax benefit realized by the Indemnitee arising from incurring
or paying such Loss. In computing the amount of any such Tax cost or Tax
benefit, the Indemnitee shall be deemed to recognize all other items of income,
gain, loss, deduction or credit before recognizing any item arising from the
receipt or accrual of any Indemnity Payment hereunder or incurring or paying any
indemnified Loss. Any Indemnity Payment hereunder shall initially be made
without regard to this Section 8.4 and shall be increased or reduced to reflect
any such net Tax cost (including gross-up) or net Tax benefit only after the
Indemnitee has actually realized such cost or benefit. For purposes of this
Agreement, an Indemnitee shall he deemed to have "actually realized" a net Tax
cost or a net Tax benefit to the extent that, and at such time as, the amount of
Taxes payable by such Indemnitee is increased above or reduced below, as the
case may be, the amount of Taxes that such Indemnitee would be required to pay
but for the receipt or accrual of the Indemnity Payment or the incurrence or
payment of such Loss, as the case may be. The amount of any increase or
reduction hereunder shall be adjusted to reflect any final determination (which
shall include the execution of Form 870-AD or successor form) with respect to
the Indemnitee's liability for Taxes, and payments between GM and EDS to reflect
such adjustment shall be made if necessary.
8.5 EFFECT OF INSURANCE UPON INDEMNIFICATION. The amount which an
Indemnifying Party is required to pay to any Indemnitee pursuant to this Section
8 shall be reduced (including retroactively) by any Insurance Proceeds and other
amounts actually recovered by such Indemnitee in reduction of the related Loss,
it being understood and agreed that each of EDS and GM shall use commercially
reasonable efforts to collect any such proceeds or other amounts to which it or
any of its Affiliates is entitled, without regard to whether it is the
Indemnifying Party hereunder. No Indemnitee shall be required, however, to
collect any such proceeds or other amounts prior to being entitled to
indemnification from an Indemnifying Party hereunder. If an Indemnitee receives
an Indemnity Payment in respect of a Loss and subsequently receives Insurance
Proceeds or other amounts in respect of such Loss, then such Indemnitee shall
pay to such Indemnifying Party an amount equal to the difference between (a) the
sum of the amount of such Indemnity Payment and the amount of such Insurance
Proceeds or other amounts actually received and (b) the amount of such Loss,
adjusted (at such time as appropriate adjustment can be determined) in each case
to reflect any premium adjustment attributable to such claim. Settlements of
any claims covered by any Insurance Policies shall be subject to Section 2.2(h).
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8.6 PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY CLAIMS.
(a) Notice of Claim. If any Indemnitee receives notice of the
assertion of any Third-Party Claim with respect to which an Indemnifying
Party is obligated under this Separation Agreement to provide
indemnification, such Indemnitee shall give such Indemnifying Party notice
thereof (together with a copy of such Third-Party Claim, process or other
legal pleading) promptly after becoming aware of such Third-Party Claim;
provided, however, that the failure of any Indemnitee to give notice as
provided in this Section shall not relieve any Indemnifying Party of its
obligations under this Section 8, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
Such notice shall describe such Third-Party Claim in reasonable detail.
(b) Obligation of Indemnifying Party. An Indemnifying Party, at such
Indemnifying Party's own expense and through counsel chosen by such
Indemnifying Party (which counsel shall be reasonably acceptable to the
Indemnitee), may elect to defend any Third-Party Claim. If an Indemnifying
Party elects to defend a Third-Party Claim, then, within ten Business Days
after receiving notice of such Third-Party Claim (or sooner, if the nature
of such Third Party Claim so requires), such Indemnifying Party shall
notify the Indemnitee of its intent to do so, and such Indemnitee shall
cooperate in the defense of such Third-Party Claim. Such Indemnifying Party
shall pay such Indemnitee's reasonable out-of-pocket expenses incurred in
connection with such cooperation. Such Indemnifying Party shall keep the
Indemnitee reasonably informed as to the status of the defense of such
Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee
of its election to assume the defense of a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this
Section 8 for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof other than those expenses
referred to in the preceding sentence; provided, however, that such
Indemnitee shall have the right to employ one law firm as counsel, together
with a separate local law firm in each applicable jurisdiction ("Separate
Counsel"), to represent such Indemnitee in any action or group of related
actions (which firm or firms shall be reasonably acceptable to the
Indemnifying Party) if, in such Indemnitee's reasonable judgment at any
time, either a conflict of interest between such Indemnitee and such
Indemnifying Party exists in respect of such claim, or there may be
defenses available to such Indemnitee which are different from or in
addition to those available to such Indemnifying Party, and in that event
(i) the reasonable fees and expenses of such Separate Counsel shall be paid
by such Indemnifying Party (it being understood, however, that the
Indemnifying Party shall not be liable for the expenses of more than one
Separate Counsel (excluding local counsel) with respect to any Third-Party
Claim (even if against multiple Indemnitees)) and (ii) each of such
Indemnifying Party and such Indemnitee shall have the right to conduct its
own defense in respect of such claim. If an Indemnifying Party elects not
to defend against a Third-Party Claim, or fails to notify an Indemnitee of
its election as provided in this Section within the period of ten Business
Days described above, the Indemnitee may defend, compromise, and settle
such Third Party Claim
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and shall be entitled to indemnification hereunder (to the extent permitted
hereunder); provided, however, that no such Indemnitee may compromise or
settle any such Third-Party Claim without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the Indemnifying Party shall not, without
the prior written consent of the Indemnitee, (i) settle or compromise any
Third-Party Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the delivery by the claimant or
plaintiff to the Indemnitee of a written release from all liability in
respect of such Third-Party Claim or (ii) settle or compromise any Third-
Party Claim in any manner that would be reasonably likely to have a
material adverse effect on the Indemnitee.
(c) Joint Defense of Certain Claims. Notwithstanding the provisions of
Section 8.6(b), GM and EDS shall jointly control the defense of, and
cooperate with each other with respect to defending, any Third-Party Claim
with respect to which each party is claiming that it is entitled to
indemnification under Section 8.1 or 8.2. If either GM or EDS fails to
jointly defend any such Third-Party Claim, the other party shall solely
defend such Third-Party Claim and the party failing to jointly defend shall
use commercially reasonable efforts to cooperate with the other party in
its defense of such Third Party Claim; provided, however, that neither
party may compromise or settle any such Third-Party Claim without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. All costs and expenses of either party in connection with, and
during the course of, the joint control of the defense of any such Third-
Party Claim shall be initially paid by the party that incurs such costs and
expenses. Such costs and expenses shall be reallocated and reimbursed in
accordance with the respective indemnification obligations of the parties
at the conclusion of the defense of such Third-Party Claim.
8.7 PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY CLAIMS. If
any Indemnitee desires to assert against an Indemnifying Party any claim for
indemnification under this Section 8 other than a Third-Party Claim (a "Claim"),
the Indemnitee shall deliver to the Indemnifying Party notice of its demand for
satisfaction of such Claim (a "Request"), specifying in reasonable detail the
amount of such Claim and the basis for asserting such Claim. Within 30 days
after the Indemnifying Party has been given a Request, the Indemnifying Party
shall either (i) satisfy the Claim requested to be satisfied in such Request by
delivering to the Indemnitee payment by wire transfer or a certified or bank
cashier's check payable to the Indemnified Party in immediately available funds
in an amount equal to the amount of such Claim, or (ii) notify the Indemnitee
that the Indemnifying Party contests such Claim by delivering to the Indemnitee
a Dispute Notice pursuant to Section 9.1, stating that the Indemnifying Party
objects to such Claim and specifying in reasonable detail the basis for
contesting such Claim. Thereafter, the Indemnifying Party and the Indemnitee
shall resolve the Claim in accordance with Section 9.1.
8.8 EXCLUSIVE REMEDIES. Except for the right to pursue equitable
remedies, the remedies provided in this Section 8 shall be deemed the sole and
exclusive remedies of the parties with respect to the subject matters of the
indemnification provisions of this Section 8.
43
<PAGE>
9. MISCELLANEOUS.
-------------
9.1 DISPUTE RESOLUTION. GM and EDS shall attempt in good faith to
resolve any dispute between the parties arising out of or relating to this
Separation Agreement promptly through negotiations of the parties. In the event
of any such dispute, either party may deliver a Dispute Notice to the other
party, and within 20 Business Days of the receipt of such Dispute Notice, the
appropriate representatives of GM and EDS shall meet to attempt to resolve such
dispute.
9.2 SURVIVAL. The representations and warranties contained in this
Separation Agreement shall survive the Effective Time until the expiration of
all applicable statutes of limitations.
9.3 COMPLETE AGREEMENT. This Separation Agreement, and the exhibits and
schedules hereto shall constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and shall supersede all prior
and contemporaneous agreements and understandings, whether written or oral,
between the parties with respect to such subject matter.
9.4 AUTHORITY. Each of the parties hereto represents to the other that
(a) it has the corporate power and authority to execute, deliver and perform
this Separation Agreement, (b) the execution, delivery and performance of this
Separation Agreement by it has been duly authorized by all necessary corporate
action, (c) it has duly and validly executed and delivered this Separation
Agreement, and (d) this Separation Agreement is a legal, valid and binding
obligation, enforceable against it in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general equity principles.
9.5 GOVERNING LAW. This Separation Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (other than the
laws regarding conflicts of laws) as to all matters, including matters of
validity, construction, effect, performance and remedies.
9.6 CONSENT TO JURISDICTION. Any action, suit or proceeding arising out
of any claim that the parties cannot settle through good faith negotiations
(except any claim to which Section 7.6 applies) shall be litigated exclusively
in the state courts of Delaware. Each of the parties hereto hereby irrevocably
and unconditionally (a) submits to the jurisdiction of the state courts of
Delaware for any such action, suit or proceeding, (b) agrees not to commence any
such action, suit or proceeding except in the state courts of Delaware, (c)
waives, and agrees not to plead or to make, any objection to the venue of any
such action, suit or proceeding in the state courts of Delaware, (d) waives, and
agrees not to plead or to make, any claim that any such action, suit or
proceeding brought in the state courts of Delaware has been brought in an
improper or otherwise inconvenient forum, (e) waives, and agrees not to plead or
to make, any claim that the state courts of Delaware lack personal jurisdiction
over it, and (f) waives its right to remove any such action, suit or proceeding
to the federal courts except when such courts are vested with sole and exclusive
jurisdiction by statute. GM and EDS shall cooperate with each other in
connection with any such action, suit or proceeding to obtain reliable
assurances that confidential treatment will be accorded
44
<PAGE>
any information that either party shall reasonably deem to be confidential or
proprietary. Each of the parties hereto irrevocably designates and appoints its
respective Service Agent as its agent to receive service of process in any such
action, suit or proceeding. Each of the parties hereto further covenants and
agrees that, until the expiration of all applicable statutes of limitations
relating to potential claims under this Separation Agreement, each such party
shall maintain a duly appointed agent for the service of summonses and other
legal process in the State of Delaware, and shall promptly notify the other
party hereto of any change in the name or address of its Service Agent and the
name and address of any replacement for its Service Agent, if such agent is no
longer the Service Agent named herein. This Section 9.6 is meant to comply with
6 Del. C. (S) 2708.
9.7 NOTICES. All Notices shall be in writing and shall be deemed given
upon (a) a transmitter's confirmation of a receipt of a facsimile transmission
(but only if followed by confirmed delivery of a standard overnight courier the
following Business Day or if delivered by hand the following Business Day), or
(b) confirmed delivery of a standard overnight courier or delivered by hand, to
the parties at the following addresses (or at such other addresses for a party
as shall be specified by like notice):
If to GM to:
General Motors Corporation
3044 West Grand Boulevard
Detroit, Michigan 48202
Facsimile transmission: (313) 974-4529
Attention: Chief Executive Officer
With a copy (which shall not constitute effective notice) to:
General Motors Corporation
3031 West Grand Boulevard
Detroit, MI 48202
Facsimile transmission: (313) 974-0209
Attention: General Counsel
If to EDS, to:
Electronic Data Systems Corporation
Mail Stop: H2-7W-40
5400 Legacy Drive
Plano, Texas 75024
Facsimile transmission: (214) 605-2122
Attention: Chief Executive Officer
45
<PAGE>
With a copy (which shall not constitute effective notice) to:
Electronic Data Systems Corporation
Mail Stop: H3-3D-05
5400 Legacy Drive
Plano, Texas 75024
Facsimile transmission: (214) 605-5610
Attention: General Counsel
or to such other address as either party hereto may have furnished to the other
party by a Notice in writing in accordance with this Section. Any Notice
delivered pursuant to Section 2.2 shall also be sent to EDS Risk Management.
Any Notice delivered pursuant to Section 7 shall also be sent to GM's Chief Tax
Officer.
9.8 AMENDMENT AND MODIFICATION. This Separation Agreement may not be
amended or modified in any respect except by a written agreement signed by both
of the parties hereto.
9.9 BINDING EFFECT; ASSIGNMENT. This Separation Agreement and all of
the provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except with respect to a merger of either party with another Person,
neither this Separation Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party hereto without the prior
written consent of the other party, which consent shall not be unreasonably
withheld.
9.10 THIRD PARTY BENEFICIARIES. The EDS Indemnified Parties, the
Indemnitees and their respective successors, heirs, executors, administrators
and other estate representatives shall be third party beneficiaries of the
indemnification provisions of Sections 2.3, 7 and 8, as applicable, and shall be
entitled to enforce those provisions, and in connection with such enforcement
shall be subject to Section 9.6, in each such case as fully and to the same
extent as if they were parties to this Separation Agreement. Except as provided
in the previous sentence, nothing in this Separation Agreement, express or
implied, is intended to or shall confer upon any Person any legal or equitable
right, benefit or remedy of any nature whatsoever under or by reason of this
Separation Agreement, and no Person (other than as provided in the previous
sentence) shall be deemed a third party beneficiary under or by reason of this
Separation Agreement.
9.11 COUNTERPARTS. This Separation Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.12 WAIVER. The observance of any term of this Separation
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party entitled to enforce such term, but
such waiver shall be effective only if it is in writing signed by the
46
<PAGE>
party against which such waiver is to be asserted. Unless otherwise expressly
provided in this Separation Agreement, no delay or omission on the part of any
party in exercising any right or privilege under this Separation Agreement shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right or privilege under this Separation Agreement operate as a waiver of
any other right or privilege under this Separation Agreement nor shall any
single or partial exercise of any right or privilege preclude any other or
further exercise thereof or the exercise of any other right or privilege under
this Separation Agreement. No failure by either party to take any action or
assert any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
9.13 SEVERABILITY. Any provision of this Separation Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.14 REMEDIES. Each of GM and EDS shall be entitled to enforce its
rights under this Separation Agreement specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Separation Agreement and to exercise all other rights existing
in its favor. Each of GM and EDS acknowledges and agrees that under certain
circumstances the breach by GM or any of its Subsidiaries or EDS or any of its
Subsidiaries of a term or provision of this Separation Agreement will
materially and irreparably harm the other party, that money damages will
accordingly not be an adequate remedy for such breach and that the non-
defaulting party, in its sole discretion and in addition to its rights under
this Separation Agreement and any other remedies it may have at law or in
equity, may apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance and/or other
injunctive relief in order to enforce or prevent any breach of the provisions of
this Separation Agreement.
9.15 PERFORMANCE. Each of the parties hereto shall use
commercially reasonable efforts to cause to be performed all actions, agreements
and obligations set forth herein to be performed by any Affiliate of such party.
9.16 REFERENCES; CONSTRUCTION. The table of contents and the
section and other headings and subheadings contained in this Separation
Agreement and the Exhibits hereto are solely for the purpose of reference, are
not part of the agreement of the parties hereto, and shall not in any way affect
the meaning or interpretation of this Separation Agreement. All references to
days or months shall be deemed references to calendar days or months. All
references to "$" shall be deemed references to United States dollars. Unless
the context otherwise requires, any reference to a "Section" or "Exhibit" shall
be deemed to refer to a section of this Separation Agreement or an exhibit to
this Separation Agreement. The words "hereof," "herein" and "hereunder" and
words of
47
<PAGE>
similar import referring to this Separation Agreement refer to this Separation
Agreement as a whole and not to any particular provision of this Separation
Agreement. Whenever the words "include," "includes" or "including" are used in
this Separation Agreement, unless otherwise specifically provided, they shall be
deemed to be followed by the words "without limitation."
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Separation
Agreement to be duly executed and delivered as of the date and year first
written above.
ELECTRONIC DATA SYSTEMS CORPORATION
By:_________________________________
Name:_________________________
Title:________________________
GENERAL MOTORS CORPORATION
By:_________________________________
Name:_________________________
Title:________________________
49
<PAGE>
EXHIBIT A
TRANSFER AGREEMENT
DATED the ____ day of ____________, 1996
BETWEEN:
GENERAL MOTORS OF CANADA LIMITED
(hereinafter "GM")
- and -
E.D.S. OF CANADA, LTD.
(hereinafter "EDS")
WHEREAS GM maintains the General Motors Canada Retirement Program for Salaried
Employees (hereinafter the "GM Canada Plan"); and
WHEREAS some employees of EDS are participating in the GM Canadian Plan; and
WHEREAS pursuant to a Separation Agreement dated ____________________ between
Electronic Data Systems Corporation and General Motors Corporation (the
"Separation Agreement") in connection with the split-off of EDS from GM, GM and
EDS have agreed to enter into an agreement whereby EDS will establish a
successor pension plan which will recognize the benefits and service which
eligible members have accrued under the GM Canada Plan to the Effective Time and
GM will arrange to transfer assets to that successor plan in respect of the
transferred liabilities;
IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN THE PARTIES HERETO AGREE AS
FOLLOWS:
1. DEFINITIONS.
1.1 "EDS ACTUARY" means the actuary or firm of actuaries appointed by
EDS for the purposes of the EDS Canada Plan. This actuary shall be (or the firm
of actuaries shall include) a Fellow of the Canadian Institute of Actuaries.
1.2 "EDS CANADA PLAN" means the plan of EDS described in Section 2 of
this Agreement.
1.3 "EFFECTIVE TIME" means the Effective Time as defined in the
Separation Agreement.
A-1
<PAGE>
1.4 "GM ACTUARY" means the actuary or firm of actuaries appointed by
GM for the purposes of the GM Canada Plan. This actuary shall be (or the firm
of actuaries shall include) a Fellow of the Canadian Institute of Actuaries.
1.5 "GM CANADA PLAN CREDITED SERVICE" of a Transferring Member means
the years and fractions of years prior to the Effective Time which are
recognized as Credited Service (Contributory Credited Service and Non-
Contributory Credited Service as applicable) of the Transferring Member under
the terms of the GM Canada Plan.
1.6 "GRANTED SERVICE" means service credited pursuant to Section 6.01
of this Agreement.
1.7 "TRANSFER AMOUNT" means the amount determined pursuant to Section
4 of this Agreement to be transferred in cash or (if agreed to by GM and EDS)
assets in kind or in some combination thereof from the pension fund of the GM
Canada Plan to the pension fund of the EDS Canada Plan in accordance with
Section 5 hereof.
1.8 "TRANSFER DATE" means the date that the transfer of the Transfer
Amount contemplated by this Agreement occurs after approval by relevant
authorities as set out in paragraph 5 of this Agreement.
1.9 "TRANSFERRING MEMBER" means a person who is employed by EDS,
Electronic Data Systems Corporation, or a subsidiary thereof and participating
in the GM Canada Plan on the day preceding the Effective Time, who becomes a
member of the EDS Canada Plan as of the Effective Time, and who has not received
a return of member contributions or a lump sum transfer, and who is not
receiving periodic payment of a pension from the GM Canada Plan in respect of GM
Canada Plan Credited Service.
2. SUCCESSOR PLAN. EDS shall adopt a pension plan (or amend an existing
plan) to provide pension benefits for the Transferring Members and shall
register such plan (or amendment) with the appropriate regulatory authorities.
This successor plan shall contain provisions regarding service prior to the
Effective Time which provide benefits that are identical to the relevant
provisions of the GM Canada Plan in effect immediately prior to the Effective
Time (other than plant closure and permanent layoff benefits, which, subject to
regulatory approval obtained by EDS, need not be included in the EDS Canada
Plan). The EDS Canada Plan shall remain in effect, with identifical benefits to
those of the GM Canada Plan in effect immediately prior to the Effective Time
(other than plant closure and permanent layoff benefits if EDS obtains
regulatory approval with respect to the exclusion of such benefits), for a
minimum of two years following the Effective Time. The Transferring Members
shall cease accruing benefits under the GM Canada Plan as of the Effective Time.
A-2
<PAGE>
3. TRANSFER REPORT. The GM Actuary shall calculate the Transfer Amount
pursuant to Section 4 of this Agreement and prepare a draft transfer report.
The draft transfer report shall contain the information required by Policy
Statement No. 2 "Transfer of Assets Resulting from Sale of Business" as issued
by the Pension Commission of Ontario on July 28, 1988 (hereinafter the "Policy
Statement"). GM shall deliver the draft transfer report to EDS for review and
approval by the EDS Actuary. Such approval shall not be unreasonably withheld.
Once the EDS Actuary has approved the draft transfer report, the GM Actuary
shall finalize the report and file it with the Ontario Superintendent of
Pensions (the "Superintendent"), along with a request for the
Superintendent's approval to transfer assets pursuant to the terms of this
Agreement.
4. DETERMINATION OF TRANSFER AMOUNT. The Transfer Amount shall be
determined as of the Effective Time in respect of the benefits which
Transferring Members have accrued under the GM Canada Plan based on their
earnings and GM Canada Plan Credited Service to the Effective Time (as recorded
by GM) and shall be equal to the lesser of:
(a) the "solvency liabilities" (as that term is defined in section 1 of
Regulation 909 under the Pension Benefits Act, R.S.O. 1990, Chapter
P.8 (the "PBA") and excluding "plant closure benefits" and "permanent
layoff benefits" as permitted where an employer makes an election
under section 5(18) of the Regulation);
(b) the "asset transfer value" (as that term is defined in the Policy
Statement); and
(c) the "going concern liabilities" (as that term is defined in section 1
of Regulation 909 under the PBA);
in respect of the Transferring Members' benefits.
The GM Actuary shall calculate these liabilities and values using the
methods and assumptions specified in the attached Schedule A.
Notwithstanding the preceding paragraphs of this Section, if the
Superintendent will not approve the transfer unless the EDS Canada Plan
receives an amount greater than the Transfer Amount determined pursuant to
the preceding paragraphs of this Section, then EDS shall pay into the EDS
Canada Plan the amount of excess (the "Excess"), on such terms as are
acceptable to the Superintendent in order for the Superintendent to approve
the transfer of the Transfer Amount into the EDS Canada Plan in conjunction
with the contribution of the Excess by EDS. EDS shall, at is discretion, be
entitled to request the Superintendent to approve a lower Excess
contribution, and, if approved by the Superintendent, such lower excess
amount shall be contributed by EDS.
A-3
<PAGE>
5. TRANSFER OF ASSETS. GM shall arrange to have the Transfer Amount
(adjusted as set out below) paid by the custodian of the GM Canada Plan pension
fund to the custodian of the pension fund of the EDS Canada Plan within sixty
days of receiving approval for the transfer from the Superintendent. Such
amount shall be paid by cheque, by bank draft, by assets in kind or by some
combination thereof (as agreed to by GM and EDS). The Transfer Amount as
determined under Section 4 of this Agreement shall be adjusted forward to the
Transfer Date as follows:
5.1 The Transfer Amount calculated pursuant to Section 4 shall be
credited with:
(a) the rate of return earned by the pension fund of the GM Canada
Plan for the period from the Effective Time to the end of the
month preceding the Transfer Date, determined net of general plan
and fund administration expenses attributable to all members
allocated on a pro-rata basis as a percentage of total assets;
plus
(b) interest at the rate given on thirty day Government of Canada T-
bills from the first day of the month containing the Transfer
Date to the Transfer Date.
5.2 The Transfer Amount calculated pursuant to Section 5.01 shall be
reduced by the amount of any benefits paid from the GM Canada Plan to or in
respect of Transferring Members after the Effective Time and prior to the
Transfer Date (adjusted to reflect the applicable net rate of returns and
interest determined under Section 5.01 above).
6. TRANSFER OF BENEFITS. EDS shall cause the EDS Canada Plan to grant past
service benefits to Transferring Members on the basis described below:
6.1 Each Transferring Member shall be granted "pensionable service"
under the terms of the EDS Canada Plan for service prior to the Effective Time
equal to the Transferring Member's GM Canada Plan Credited Service.
6.2 Each Transferring Member's period of membership under the EDS
Canada Plan shall be deemed to include the period of participation recognized in
respect of the Transferring Member under the terms of the GM Canada Plan as of
the day prior to the Effective Time.
6.3 Each Transferring Member shall be credited under the EDS Canada
Plan with the total of the Transferring Member's required contributions plus
interest as of the Effective Time, as reported by GM pursuant to Section 9.01 of
this Agreement.
6.4 The record of earnings under the EDS Canada Plan for each
Transferring Member shall be deemed to include the record of earnings reported
in respect of the Transferring Member by GM pursuant to Section 9.01 of this
Agreement.
A-4
<PAGE>
6.5 The benefits of each Transferring Member in respect of Granted
Service shall not be less than the benefits which the Transferring Member would
have received for such service under the terms of the GM Canada Plan as it
existed at the Effective Time, determined after taking account of the
Transferring Member's earnings and participation in the EDS Canada Plan to the
date that is the earlier of (1) two years following the Effective Time, or (2)
the date the Transferring Member terminates participation in the EDS Canada
Plan. In the event an amendment to the EDS Canada Plan results in an actuarial
surplus attributable to the Transfer Amount and earnings thereon, such surplus
shall be used solely for the benefit of Transferring Members, and shall not (i)
be applied against employer contribution obligations (attributable to employees
other than Transferring Members) under the EDS Canada Plan or a successor plan
or (ii) be used to create a contribution holiday for the EDS Canada Plan or a
successor plan.
7. ASSUMPTION OF LIABILITIES. When the custodian of the pension fund for
the EDS Canada Plan receives the Transfer Amount as adjusted pursuant to Section
5 of this Agreement the EDS Canada Plan shall grant the benefits described in
Section 6 of this Agreement as at the Effective Time. Upon the completion of
such transfer, the benefits of the Transferred Members in respect of the service
credited under the EDS Canada Plan pursuant to Section 6.01 shall be determined
solely in accordance with the terms of the EDS Canada Plan as if the
Transferring Members had been members of the EDS Canada Plan during such period
of service and the GM Canada Plan shall be relieved of any further obligation to
the Transferring members.
8. STATEMENT OF BENEFITS. Within one year of the Transfer Date, EDS shall
provide each Transferring Member with a statement regarding the Transferring
Member's benefits, rights and obligations granted by the EDS Canada Plan
pursuant to Section 6 of this Agreement.
9. COOPERATION BETWEEN THE PARTIES. EDS and GM shall cooperate fully and
take the steps necessary to complete the transaction contemplated by this
Agreement. Without limiting the generality of the foregoing:
9.1 GM shall arrange to provide EDS with such data and records
regarding the Transferring Members as EDS (and the EDS Actuary) may require to:
(a) verify the draft transfer report;
(b) establish a record of earnings and service for each Transferring
Member; and
(c) establish a record of required contributions plus interest for
each Transferring Member;
plus such other data and records as EDS may reasonably require to
implement this Agreement.
A-5
<PAGE>
9.2 EDS shall arrange to distribute to the Transferring Members a
notice prepared by GM to satisfy the requirements of the Policy Statement.
10. THIRD PARTY RIGHTS. Nothing in this Agreement shall give any third
party, including, but not limited to, any employee of GM, EDS, and any
participant or beneficiary in the GM Canada Plan or the EDS Canada Plan, any
right or claim to any payment, except to the extent of benefits provided under a
plan sponsored by GM or EDS, or any right or claim to continued employment with
GM or EDS. GM and EDS expressly reserve the right to terminate any of their
employees.
11. GOVERNING LAW. This Agreement shall be governed by the laws of the
Province of Ontario and the laws of Canada applicable therein.
IN WITNESS WHEREOF the parties hereto execute this Agreement as of the date
indicated above.
GENERAL MOTORS OF CANADA LIMITED
___________________________________
___________________________________
E.D.S. OF CANADA, LTD
___________________________________
___________________________________
A-6
<PAGE>
SCHEDULE A
GENERAL MOTORS CANADIAN RETIREMENT PROGRAM
FOR SALARIED EMPLOYEES
ACTUARIAL BASIS - GOING CONCERN
GOING CONCERN ACTUARIAL ASSUMPTIONS
The following assumptions will be used in conducting the going concern funding
valuation at the Effective Time.
Economic Assumptions
- --------------------
Investment Yield/Discount Rate
- ------------------------------
An underlying long-term investment yield rate of 7% per annum net after payment
of investment and routine administration expenses will be used. This rate was
adjusted for current conditions in effect at the valuation date by assuming a
higher rate to be applicable for the period between the valuation date and
November 30, 2006. For this valuation at the Effective Time, the initial yield
rate was assumed to be 9%. These rates will be used to discount the expected
benefit payments to determine the actuarial liabilities.
Expenses
- --------
Costs of administering the Plan in excess of the investment and routine
administration expenses are assumed to be paid directly by the Employer as
incurred, and no provision was made for these.
Salary Increase
- ---------------
A long term salary increase assumption of 5% per annum will be assumed.
Employee Contributions
- ----------------------
Employee contributions will be assumed to be credited with interest at a rate of
8% per annum.
Year's Maximum Pensionable Earnings (YMPE)
- ------------------------------------------
The YMPE was projected to increase by 5% per annum. The 1996 YMPE of $35,400
was used as a starting point for the projected values.
Maximum Pension
- ---------------
A-7
<PAGE>
The current dollar limit on lifetime pensions under the Income Tax Act of
$1,722.22 applicable to each year of service (with a 35-year cap placed on pre-
January 1, 1992 service) will be assumed to remain unchanged until 2004 and to
increase by 5% per annum thereafter.
Inflation and Future Benefit Increases
- --------------------------------------
The benefits reflected in the going concern valuation will be those in effect at
the valuation date. No further benefit increases are provided under the plan
beyond the Effective Time.
Demographic Assumptions
- -----------------------
Retirement
- ----------
Under the Plan, different levels of benefits are available on retirement
depending upon the member's age and service and type of retirement. To reflect
these differences, we adopted retirement assumptions in accordance with the
following table.
A-8
<PAGE>
<TABLE>
<CAPTION>
AGE RETIREMENT RATES PER 1,000 MEMBERS
- ------------------------------------------
<S> <C> <C>
Voluntary Early
Attained Retirement Other Early
Age With 30 Years Retirement*
- ------------------------------------------
46 333.333
47 38.462
48 95.238
49 91.603
50 70.381
51 85.627
52 72.072
53 17.391
54 76.555
55 187.990 97.854
56 183.544 62.632
57 233.962 37.391
58 244.138 82.569
59 157.676 92.784
60 351.020 218.905
61 389.474 138.889
62 409.091 285.714
63 342.857 250.000
64 470.588 390.244
65 1,000.000 1,000.000
- ----------------------------------------
</TABLE>
* All other early retirements prior to age 60 are assumed to be mutually
satisfactory early retirements.
Layoffs (potential retirements) were assumed to retire immediately or at age 55
if later. Terminated vested members were assumed to retire at age 65.
Termination Rates
- -----------------
Moderate rates of termination of employment prior to death or retirement were
used. Sample values are given below.
Mortality
- ---------
A-9
<PAGE>
Mortality rates for non-disabled lives will be assumed to be equal to rates from
the 1983 Group Annuity Mortality Table with margins added for males and females.
Sample rates of mortality are given below.
Disability
- ----------
Disability incidence rates were based on 150% of the rates shown for Class 1 in
the Wyatt 1985 Disability Study. Sample values are given below. Mortality
rates after disability will be assumed to be equal to rates from the 1983 Group
Annuity Mortality Table with margins for males and females.
<TABLE>
<CAPTION>
----------------------------------------------------------------
Mortality, Disability Incidence
and Termination Rates Per 1,000 Members
---------------------------------------------------------
Mortality
----------------------- Disability
Age Male Female Incidence Termination
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
20 0.377 0.189 0.450 99.176
25 0.464 0.253 0.645 65.947
30 0.607 0.342 0.960 45.949
35 0.860 0.476 1.470 32.418
40 1.238 0.665 2.370 18.593
45 2.183 1.010 3.885 11.066
50 3.909 1.647 6.720 2.924
55 6.131 2.541 12.675
60 9.158 4.241 18.060
65 15.592 7.064
70 27.530 12.385
75 44.597 23.992
80 74.070 42.945
85 114.836 69.918
- -----------------------------------------------------------------
</TABLE>
Survivor Option/Automatic Survivor Benefit
- ------------------------------------------
The cost of providing the survivor option/automatic survivor benefit will be
calculated assuming 90% of the members would be eligible for the benefits at
retirement, 88.89% of the eligible members would not reject the automatic
survivor benefit and husbands would be three years older than their wives.
GOING CONCERN ACTUARIAL METHODS
A-10
<PAGE>
Liabilities
- -----------
The going concern valuation of the liabilities will be conducted using the
Projected Unit Credit actuarial cost method. This method is designed to
accumulate assets systematically to provide security for the benefits provided
under the terms of the plan in respect of service that has already been
rendered, without further recourse to the assets of the plan sponsor. Under
this method, for each member, the normal actuarial cost rate for benefits for
one year of service is determined as the present value of all benefits accrued
to the projected date of retirement or earlier termination divided by the
projected total service of the member at retirement or such earlier termination
of service.
The accrual actuarial liabilities for active members are determined as the
normal actuarial costs rate multiplied by the credited service of the member at
the date of the valuation. For inactive members, the accrued actuarial
liabilities are determined as the actuarial present value of benefits accrued in
respect of service up to the date of valuation. The accrued actuarial
liabilities are then compared with the actuarial value of the assets in the
pension fund to determine the funded position of the plan at the valuation date.
If any unfunded actuarial liability exists, it may be funded in one sum or over
a period of years, subject to any legislative restrictions.
Benefits Valued
- ---------------
The benefits valued will be those in effect at the Effective Time.
We assume that the supplementary benefits available to members on disability
retirement would be fully offset by disability pensions payable under the
Canada/Quebec Pension Plan.
A-11
<PAGE>
GENERAL MOTORS CANADIAN RETIREMENT PROGRAM
FOR SALARIED EMPLOYEES
ACTUARIAL BASIS - SOLVENCY
SOLVENCY VALUATION ACTUARIAL ASSUMPTIONS
The following assumptions will be used to determine the funded position on a
solvency basis as at the Effective Time.
Economic Assumptions
- --------------------
Interest Rates
- --------------
The interest rate assumption used will be in accordance with the September, 1993
Canadian Institute of Actuaries Transfer Value Recommendations and will be those
rates in effect on the Effective Time.
Expenses
- --------
All expenses associated with terminating the Plan will be assumed to be payable
by the Employer. No provision was made for any further expenses.
Salary Increase
- ---------------
No allowance will be made for salary increases beyond the valuation date.
Year's Maximum Pensionable Earnings (YMPE)
- ------------------------------------------
No allowance will be made for increases in the YMPE beyond the valuation date.
Maximum Pension
- ---------------
The current dollar limit on lifetime pensions under the Income Tax Act of
$1,722.22 applicable to each year of service (with a 35-year cap placed on
January 1, 1992 service) is assumed.
Demographic Assumptions
- -----------------------
Disability
- ----------
No allowance will be made for the possibility of becoming disabled after the
valuation date.
A-12
<PAGE>
Termination
- -----------
All employees will be assumed to terminate employment at the valuation date with
full vesting of accrued benefits.
Survivor Option/Automatic Survivor Benefit
- ------------------------------------------
It is assumed that 90% of the employee group were males and 10% were females.
It is assumed that 82% of employees (85% of males and 55% of females) would not
reject the automatic survivor benefit election at retirement and that on average
an employee is 29 months older than a non-employee spouse.
Mortality
- ---------
Mortality rates after retirement will be taken from the 1983 Group Annuity
Mortality Table with margins. A unisex table was derived by using 90% of the
male rates and 10% of the female rates. These rates were then applied to all
plan members regardless of sex. Sample values are given below.
<TABLE>
<CAPTION>
Mortality Rates
Age Per 1,000 Members
- ------------------------
<S> <C>
20 0.361
25 0.439
30 0.583
35 0.822
40 1.182
45 2.027
50 3.684
55 5.771
60 8.668
65 14.737
70 26.015
75 42.539
80 70.958
85 110.348
- ------------------------
</TABLE>
A-13
<PAGE>
SOLVENCY VALUATION ACTUARIAL METHODS
Liabilities
- -----------
The traditional unit credit actuarial cost method will be used. Under this
method, for each member, the accrued actuarial liabilities are determined as the
present value of all benefits accrued to the valuation date.
Benefits Valued
- ---------------
Under the Plan, different levels of benefits are available on retirement
depending on the member's age and service and type of retirement. For each
employee, we determined when, if ever, the employee would be eligible for
retirement under each of the retirement provisions and the amounts of benefits
payable based on the employee's credited service at the valuation date.
Employees with age plus Plan membership totaling at least 50 years were assumed
to grow into the benefits provided under the Plan for layoffs due to remote plan
closure. Employees with at least 10 years of service and age plus continuous
employment or plan membership totaling at least 55 years will be also assumed to
grow into a pro-rata special allowance if they would have completed 30 years of
service prior to age 60. In valuing the special allowance, we assumed no offset
for earnings from subsequent employment.
For each member, we determine the commuted value at the valuation date of all
benefits payable under each of the retirement possibilities and established the
solvency liability for such employee to be the commuted value for the retirement
possibility which produces the largest commuted value, but excluding the
additional liabilities for benefits in respect of future plant closures and
future permanent layoffs and for special allowances for employees who had not
completed 30 years of service at the valuation date.
Basic Benefit Rate and Special Allowance
- ----------------------------------------
For members still in service, the Basic Benefit Rate used in calculating the
Minimum Basic Benefit and Non-Contributory Pension and the monthly special
allowance rate will be the rates in effect at the valuation date (i.e., $44.30
and $2,260 respectively, at the Effective Time).
Inflation and Future Benefit Increases
- --------------------------------------
The benefits reflected in the valuation will be those in effect at the valuation
date. No allowance was made for subsequent benefit increases provided under the
Plan beyond the valuation date.
Pre-Retirement Death Benefits
- -----------------------------
A-14
<PAGE>
We make allowance for the pre-retirement death benefit related to the basic
lifetime pension by assuming no discount for mortality prior to retirement when
determining the commuted values of these benefits.
A-15
<PAGE>
EXHIBIT F
PROFESSIONAL ADVISOR FEES TO BE PAID BY EDS
Lehman Brothers Inc.
Morgan Stanley & Co. Incorporated
KPMG Peat Marwick LLP (with respect to any services provided to EDS or any EDS
Affiliate and not to include services provided to GM or any GM Affiliate)
Baker & Botts, L.L.P.
Prickett, Jones, Elliott, Kristol & Schnee
Hughes & Luce, L.L.P.
F-1
<PAGE>
EXHIBIT G
PROFESSIONAL ADVISOR FEES TO BE PAID BY GM
Merrill Lynch & Co.
Deloitte & Touche LLP
Kirkland & Ellis
Richards, Layton & Finger
Milbank, Tweed, Hadley & McCloy
Weil, Gotshal & Manges
McKinsey & Co., Inc.
KPMG Peat Marwick LLP (with respect to any services provided to GM or any GM
Affiliate and not to include services provided to EDS or any EDS Affiliate)
Groom & Nordberg
G-1
<PAGE>
EXHIBIT 2(C)
AMENDED AND RESTATED AGREEMENT FOR THE ALLOCATION
OF UNITED STATES FEDERAL, STATE AND LOCAL INCOME TAXES
This Amended and Restated Agreement for the Allocation of United States
Federal, State and Local Income Taxes (the "Agreement") is entered into by and
between General Motors Corporation, a Delaware corporation ("GM") and
Electronic Data Systems Corporation, a Delaware corporation ("EDS") for the
purpose of amending and restating the Agreement for the Allocation of United
States Federal Income Taxes that was entered into by and between GM and
Electronic Data Systems Corporation, a Texas corporation (the predecessor to
EDS, which is referred to as "EDS Texas") effective as of December 31, 1984
(the "Federal Agreement"), and for the purpose of amending and restating the
Agreement for the Allocation of United States State and Local Income Taxes
that was entered into by and between GM and EDS Texas effective as of December
31, 1984 (the "State and Local Agreement").
WITNESSETH:
Whereas, GM and EDS intend that capitalized terms shall have the meaning set
forth in Section 1.04 of this Agreement;
Whereas, GM is the common parent corporation of the GM Group within the
meaning of Section 1504 of the Code, which includes the EDS Group;
Whereas, the GM Group files a consolidated Federal income tax return;
Whereas, the GM Group files Consolidated State or Local Income Tax Returns
in various jurisdictions,
Whereas, GM and EDS entered into the Federal Agreement to provide a fair and
equitable method for the allocation of the consolidated Federal income tax
liability to each of them;
Whereas, GM and EDS entered into the State and Local Agreement to provide a
fair and equitable method for the allocation of State Tax Liabilities to each
of them;
Whereas, the effective date of this Agreement is intended to be concurrent
with the Split-Off;
Whereas, except as otherwise provided, GM and EDS agree and acknowledge that
the Split-Off has no effect on the relationship between them for any of the
Consolidated Tax Periods, and GM and EDS intend to restate the Federal
Agreement and to restate the State and Local Agreement to confirm and clarify
their understandings with respect to matters relating to the determination,
allocation and payment of Federal income tax liability, and state and local
income tax liabilities with respect to all Consolidated Tax Periods; and
Whereas, GM and EDS intend to amend the Federal Agreement and to amend the
State and Local Agreement to provide for, among other things, (i) the
allocation between GM and EDS of tax attributes available to be carried
forward to the Separate Return Tax Periods, (ii) the rights, duties and
responsibilities of the parties in connection with audits, protests, appeals,
litigation and other proceedings with respect to the Consolidated Tax Periods,
(iii) the treatment of any carryback item from a Separate Return Tax Period to
a Consolidated Tax Period, and (iv) the relationship of the parties as it
relates to income tax matters from the effective date of the Split-Off until
the date of the Final Determination of the last of the income tax liabilities
to be so finally determined.
Now, Therefore, in consideration of the premises and of the mutual covenants
and agreements hereinafter set forth, GM and EDS agree as follows:
Section l: Definitions and General Provisions.
1.01 Recitals Incorporated. The above recitals are incorporated herein by
reference and made a part of this Agreement.
1
<PAGE>
1.02 Effective Date. This Agreement shall be effective on the effective date
of the Split-Off; provided, however, that if this Agreement has not become
effective prior to September 15, 1996, it shall not become effective
thereafter in the absence of the written consent of both parties to extend the
effective date. This Agreement shall apply to Consolidated Tax Periods as
specifically set forth herein, or where this Agreement addresses issues not
contemplated by the Federal Agreement or the State and Local Agreement. This
Agreement, which incorporates the Federal Agreement and the State and Local
Agreement, shall continue in full force and effect until the Final
Determination of the tax liability has been made for each tax jurisdiction for
all Consolidated Tax Periods.
1.03 Application of the Code. Unless otherwise indicated, the words and
concepts used in this Agreement shall be given the same definitions and
meanings ascribed to them by the Code, the Regulations, State Law or State
Regulations. Any alteration, modification, addition, deletion, or other change
in the applicable provisions of the Code, the Regulations, State Law or State
Regulations shall automatically be applicable to this Agreement mutatis
mutandis. Unless otherwise indicated, all references herein to a particular
section of the Code, the Regulations, State Law or State Regulations shall
include any successor provision designated by a different or additional
section reference.
1.04 Definitions. For purposes of this Agreement, the terms set forth below
shall have the following meanings:
(a) "Actual Separate EDS Group Tax Liability" means the Federal income
tax liability of the EDS Group determined in the same manner as the
Separate EDS Group tax liability, except that the items of income, gain,
deduction, loss and credit of the EDS Group as reported in the GM Group
consolidated Federal income tax returns as actually filed or as adjusted
pursuant to a Final Determination, are taken into account; provided
however, that applicable limitations on deductions or credits shall be
determined on the basis of the actual items of income, gain, deduction or
credit of the EDS Group without regard to such items of other members of
the GM Group.
(b) "Agreement" means this Amended and Restated Agreement for the
Allocation of United States Federal, State and Local Income Taxes.
(c) "Business Day" means any day other than a Saturday, a Sunday, or a
day on which banking institutions located in the State of Michigan are
authorized or obligated by law or executive order to close.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Consolidated Return Item" means an item of income, gain, deduction
or credit that is computed or subject to a limitation only on a Federal tax
consolidated basis, including but not limited to, charitable contributions,
capital losses, foreign tax credit, research and experimentation credit and
Code Section 1231 gains and losses.
(f) "Consolidated State or Local Income Tax Returns" means consolidated,
unitary, or combined state or local income, franchise, single business,
gross receipts, or other state or local tax returns, based or measured in
whole or in part by reference to gross receipts, gross income, or net
income, and means consolidated, unitary or combined capital or net worth
tax returns. Tax returns with respect to telecommunications, gross receipts
transactional taxes, and sales and use taxes, or other similar types of
transactional taxes shall not be considered "Consolidated State or Local
Income Tax Returns" for purposes of this Agreement.
(g) "Consolidated Tax Period" means any tax period of the GM Group ending
before, with, or which includes the effective date of the Split-Off during
which any member of the EDS Group was a member of the GM Group.
(h) "CPR Rules" means the Rules for Non-Administered Arbitration of
Business Disputes promulgated by the Center for Public Resources attached
hereto as Exhibit A.
(i) "Dispute Notice" means written notice of a dispute between GM and EDS
subject to arbitration under Section 6.05 of this Agreement, which shall
set forth generally the nature of the dispute.
2
<PAGE>
(j) "EDS" means Electronic Data Systems Corporation, a Delaware
corporation, and all predecessor and successor corporations, including
without limitation EDS Texas.
(k) "EDS Group" means EDS (and all predecessor and successor
corporations, including without limitation EDS Texas) and all corporations
which from time to time would be entitled to join with EDS in filing a
consolidated Federal, or a Consolidated State or Local Income Tax Return
with EDS as the common parent of such group if EDS were not a member of the
GM Group.
(l) "Federal Agreement" means that certain Agreement for the Allocation
of United States Federal Income Taxes that was entered into by and between
GM and EDS Texas effective as of December 31, 1984.
(m) "Final Determination" has the same meaning as the definition of
"determination" set forth in Section 1313(a) of the Code or similar
provisions of State Law.
(n) "GM" means General Motors Corporation, a Delaware corporation.
(o) "GM Group" means GM and all corporations which from time to time join
with GM in filing a consolidated Federal, or a Consolidated State or Local
Income Tax Return with GM as the common parent of such group.
(p) "GM Group Tax Liability" means the consolidated Federal income tax
liability, or the State Tax Liability, of the GM Group, determined as of
the end of the applicable Consolidated Tax Period, determined in accordance
with Section 1.1502-1, et seq. of the Regulations or in accordance with
State Law and State Regulations.
(q) "IRS" means the Internal Revenue Service.
(r) "Negotiation Period" means the period of twenty (20) Business Days
following the initial meeting of the representatives of GM and EDS
following the receipt of a Dispute Notice.
(s) "Regulations" means the regulations promulgated under the Code, in
effect from time to time.
(t) "Separate EDS Group Tax Liability" means the hypothetical
consolidated Federal income tax liability or the hypothetical State Tax
Liability, determined as of the end of the applicable Consolidated Tax
Period in accordance with Section 1.1502-1, et seq. of the Regulations or
in accordance with State Law and State Regulations as if the EDS Group were
a separate affiliated group of corporations filing a consolidated Federal
income tax return, or a Consolidated State or Local Income Tax Return,
including any elections which have been or could be made by EDS pursuant to
the Code, Regulations, State Law or State Regulations with the following
modifications:
(i) Any item of income, loss, expense or credit resulting from an
election by GM under Section 338 of the Code with respect to GM's
acquisition of EDS in 1984 shall not be taken into account.
(ii) Carryovers of losses or credits from the Separate EDS Group Tax
Liability for taxable years ending on or after October 18, 1984, shall
be taken into account, for purposes of computing Separate EDS Group Tax
Liability, in accordance with the applicable provisions of the Code,
the Regulations, State Law and State Regulations, regardless of whether
such carryovers were taken into account in computing the GM Group Tax
Liability for some preceding taxable year.
(u) "Separate Return Tax Period" means any tax period of EDS or any
member of the EDS Group not included in a Consolidated Tax Period, or any
tax period of the GM Group subsequent to the final Consolidated Tax Period.
(v) "Split-Off" means the anticipated transaction pursuant to which the
EDS Group will be split-off from the GM Group in a tax-free transaction
under Section 355 of the Code.
(w) "State and Local Agreement" means that certain Agreement for the
Allocation of United States State and Local Income Taxes that was entered
into by and between GM and EDS Texas effective December 31, 1984.
(x) "State Law" means provisions of state or local law that are similar
to provisions of the Code, determined on a jurisdiction by jurisdiction
basis, as amended from time to time.
3
<PAGE>
(y) "State Regulations" means regulations promulgated under State Law, in
effect from time to time.
(z) "State Tax Liability" means the liability in connection with
consolidated, unitary, or combined state or local income, franchise, single
business, gross receipts, or other state or local tax returns, based or
measured in whole or in part by reference to gross receipts, gross income,
or net income, and means the liability in connection with consolidated,
unitary or combined capital or net worth taxes. Liability for
telecommunications, gross receipts transactional taxes, and sales and use
taxes, or other similar types of transactional taxes shall not be
considered a "State Tax Liability" for purposes of this Agreement.
Section 2: Agreement To File Consolidated Returns and Pay Tax
2.01 Agreement To File. As long as EDS is a member of the GM Group, GM and
EDS (and all members of the EDS Group) agree to file consolidated Federal
income tax returns, and Consolidated State or Local Income Tax Returns in the
United States, wherever required by local taxing authorities or wherever the
option is elected by GM and agree to execute such documents and take such
action as is necessary or appropriate in connection therewith.
2.02 Elections. With respect to all Consolidated Tax Periods, all elections
that are available to the GM Group under the Regulations relating to the
filing of consolidated Federal income tax returns or Consolidated State or
Local Income Tax Returns shall be made by GM in its sole discretion. All tax
return filing positions for all Consolidated Tax Periods shall be made by GM
in its sole discretion.
2.03 Payment of Tax. For each Consolidated Tax Period GM shall pay to the
IRS or to the state or local jurisdiction, or to such other payee as may be
required by the Code or by State Law, the GM Group Tax Liability as shown on
the consolidated Federal income tax returns, or on the Consolidated State or
Local Income Tax Return filed with the IRS or with the state or local
jurisdiction.
Section 3: Tax Payments and Allocation of Tax Attributes
3.01 Estimated Tax Payments. (a) General. Not less than fifteen (15)
Business Days prior to the date on which GM is required to make payments of
estimated tax (as defined in Section 6154 of the Code and as defined in
applicable State Law) on behalf of the GM Group, for any quarter of any
Consolidated Tax Period, EDS shall submit to GM a calculation of the separate
EDS Group estimated tax, determined on the basis of the estimated Separate EDS
Group Tax Liability. The separate EDS Group estimated tax calculations for the
final quarter of the final Consolidated Tax Period shall be equal to the
estimated Separate EDS Group Tax Liability for the entire final Consolidated
Tax Period reduced by the estimated tax payments previously made by EDS with
respect to the relevant tax liability for the final Consolidated Tax Period.
The amount of estimated Federal, state (other than Michigan Single Business
Tax) or local tax, if any, shown in such calculation shall be paid by EDS to
GM on or before the due date of GM's payment of the estimated consolidated
Federal income taxes. The amount of estimated Michigan Single Business Tax, if
any, shown in such calculation shall be paid by EDS to GM on or before the due
date of GM's payment of estimated Michigan Single Business Tax.
(b) Underpayments. If the GM Group Tax Liability is increased under Section
6655 of the Code or a similar provision of State Law because of an
underpayment of estimated tax, EDS shall pay to GM, on the due date thereof,
such additional tax, if any, which would have been imposed on the EDS Group
had that Group paid the calculated separate EDS Group estimated tax and
incurred the Separate EDS Group Tax Liability. If the GM Group Tax Liability
is not increased under Section 6655 or a similar provision of State Law, but
if an additional tax would have been imposed on the EDS Group had that Group
paid the calculated separate EDS Group estimated tax and incurred the Separate
EDS Group Tax Liability, EDS shall pay to GM such additional tax on the date
it would have been due.
3.02 Payment of Separate EDS Group Tax Liability. (a) Consolidated Returns.
(i) General. Not later than the due date (including extensions) for
filing the GM Group consolidated Federal income tax return, or Consolidated
State or Local Income Tax Returns for any Consolidated Tax
4
<PAGE>
Period, EDS shall pay to GM or GM shall pay to EDS as the circumstances
warrant, the difference between the Separate EDS Group Tax Liability and
the estimated tax payments previously made by EDS with respect to the
relevant tax liability.
(ii) Final Consolidated Tax Period. Notwithstanding anything in this
Agreement to the contrary, the Separate EDS Group Tax Liability for the
Consolidated Tax Period that EDS ceases to be a member of the GM Group
shall be determined pursuant to Reg. (S)1.1502-76 (and similar provisions
of State Law or State Regulations) by including only that portion of the
taxable year ending on the date EDS ceases to be a member of the GM Group,
based on a closing of the books for income tax purposes and, immediately
before the Split-Off, items of income, gain, loss, deduction, and credit
will be taken into account (to the extent not previously taken into account
in the computation of the Separate EDS Group Tax Liability) as required by
the applicable intercompany transaction regulations (Reg. (S)(S)1.1502-13
and -14 as in effect before the publication of T.D. 8597, 1995-32 I.R.B. 6,
and as currently in effect; (S)1.1502-13 as published by T.D. 8597.).
(b) Separate State or Local Income Tax Returns During Consolidated Tax
Periods.
(i) Computation of Tax Liability. In any taxing jurisdiction in which EDS
(or any member of the EDS Group) is required to file (or does file) a
separate state or local tax return reflecting its separate state tax
liability for a period which includes a Consolidated Tax Period, and the
taxing jurisdiction follows, or there is reason to believe that such
jurisdiction will follow, the Code Section 338 election made by GM in
connection with its acquisition of EDS in 1984, EDS (or the relevant member
of the EDS Group) shall claim the benefits of such election in the
computation of its separate state tax liability.
(ii) Payments to GM. With respect to any period for which EDS' separate
state tax liability (or the separate state tax liability of the relevant
member of the EDS Group) is required to be computed according to clause (i)
above, EDS shall pay to GM the difference, if any, between the EDS separate
state tax liability computed without the benefits of the Code Section 338
election and the EDS separate state tax liability computed with the
benefits of such election; provided, however, that such payment for the
period in which the Split-Off occurs shall reflect only the portion of such
period preceding the Split-Off.
3.03 Method of Payment. All payments required by this Agreement shall be
made by (i) wire transfer to the appropriate bank account as may from time to
time be designated by the parties for such purpose, provided that on the date
of such wire transfer notice of the transfer is given to the recipient thereof
in accordance Section 8.06 of this Agreement or (ii) any other method agreed
to by the parties. All payments due under this Agreement shall be deemed to be
paid when available funds are actually received by the payee.
3.04 Setoff. Notwithstanding anything to the contrary in any agreement
between EDS and GM, but subject to the following sentence, each party has the
right to collect payments under this Agreement that are more than sixty (60)
calendar days past due by setoff against payments due to the other party under
this Agreement or any other agreement between them. Notwithstanding the
preceding sentence, in the event and to the extent that any payment to be made
under this Agreement is in dispute between the parties and the disputed matter
is subject to the dispute resolution procedure set forth in Section 6.05 of
this Agreement, the setoff provision of this Section 3.04 shall not apply to
the extent of the disputed amount.
3.05 Interest. If any payment required by this Agreement is not timely made,
interest shall be payable on the unpaid amount at a rate per annum equal to
the base rate established from time to time by Citibank, N.A., or a comparable
financial institution mutually selected by GM and EDS, but in no event to
exceed the maximum rate of interest allowed by applicable law. For this
purpose, a payment will be deemed to be paid only when available funds are
actually received by the payee.
3.06 Allocation of Consolidated Tax Attributes. (a) Federal Reg. Section
1.1502-79 Tax Attributes. If the GM Group has a consolidated net operating
loss or a consolidated net capital loss that can be carried to a Separate
Return Tax Period, or a consolidated unused investment credit, a consolidated
unused foreign tax credit,
5
<PAGE>
or a consolidated excess charitable contribution (as such terms are defined in
the Regulations) that can be carried to a Separate Return Tax Period the
portion, if any, which is attributable to EDS or any member of the EDS Group
shall be determined in accordance with Section 1.1502-79 of the Regulations,
based upon the computation of the Actual Separate EDS Group Tax Liability for
the applicable Consolidated Tax Periods. The portion, if any, of any GM Group
consolidated unused foreign tax credit which is attributable to EDS shall be
determined separately with respect to each of the items of income listed in
Section 904(d) of the Code.
(b) Other Federal Tax Attributes. If the GM Group has deductible or
creditable consolidated Federal tax attributes (other than adjustments to the
basis of certain of EDS' assets resulting from the 1990 and 1992 depreciation
method election and the election under (S)338 of the Code by GM with respect
to GM's acquisition of EDS in 1984) other than those described in Section
3.06(a) above, including, but not limited to, the minimum tax credit, the
research and experimentation credit or other general business credits, that
can be carried to a Separate Return Tax Period (the "carryforward attribute"),
the portion of the carryforward attribute, if any, attributable to EDS or any
member of the EDS Group shall be based upon the relevant tax attribute
carryover of the EDS Group determined consistently with the computation of the
Separate EDS Group Tax Liability for the final Consolidated Tax Period, which
computation shall be done on a basis consistent with past practice.
(c) State and Local Tax Attributes. Notwithstanding anything in this Section
3.06 to the contrary, no tax attributes (other than adjustments to the basis
of certain of EDS' assets resulting from the 1990 and 1992 depreciation method
election and the election under (S)338 of the Code by GM with respect to GM's
acquisition of EDS in 1984) arising from Consolidated State or Local Income
Tax Returns shall be attributable to EDS, unless under the provisions of
applicable State Law or State Regulations such tax attributes are to be
attributed to EDS.
(d) Calculations. Calculation of the portion of any consolidated tax
attribute available to carry forward to a Separate Return Tax Period
attributable to EDS or to any member of the EDS Group shall be made by GM in
accordance with Sections 3.06(a)-(c) above, and provided to EDS as soon as
practicable but not later than a date that permits EDS sufficient time to
prepare and to timely file its tax returns for the first Separate Return Tax
Period, taking all extensions of time to file tax returns into consideration.
(e) Tax Attributes to be Claimed for Separate Return Tax Periods. EDS shall
prepare and file all of its income tax returns for all Separate Return Tax
Periods taking into account the amount of the tax attributes carried forward
from the final Consolidated Tax Period provided to EDS by GM pursuant to
Section 3.06(d), or such tax attributes as finally determined.
(f) Earnings and Profits. As provided by (S)312(h) of the Code, earnings and
profits shall be allocated between GM and EDS under Reg. (S)1.312-10(b). The
allocation of earnings and profits shall be determined by GM and shall be
provided to EDS as soon as practicable but not later than a date that permits
EDS sufficient time to prepare and to timely file its tax returns for the
first Separate Return Tax Period, taking all extensions of time to file tax
returns into consideration.
3.07 Payments Related to Allocation of Consolidated Tax Attributes. (a)
General Provisions. GM and EDS hereby acknowledge that the consolidated tax
liabilities and related tax attributes of the GM Group for the Consolidated
Tax Periods have been allocated between the GM Group and the EDS Group based
upon the Separate EDS Group Tax Liability and payments by the EDS Group to GM
with regard to the EDS Group's share of the GM Group Tax Liability for the
Consolidated Tax Periods have been and will be made on that basis. Payments
required by this Section 3.07 and Section 3.08 are intended to compensate for
the difference, if any, between the actual allocation of tax attributes for
income tax return filing purposes and the historic economic allocation of
consolidated tax liabilities and related tax attributes between the GM Group
and the EDS Group. If any consolidated tax attribute attributable to the EDS
Group under Section 3.06(a)-(c) as calculated under Section 3.06(d) is greater
than the amount of such tax attribute that would have been attributable to the
EDS Group determined on the basis of the Separate EDS Group Tax Liability (an
"excess tax attribute" of EDS), EDS shall make one or more payments to GM as
provided in this Section 3.07. If any consolidated tax attribute attributable
6
<PAGE>
to the EDS Group under Section 3.06(a)-(c) as calculated under Section 3.06(d)
is less than the amount of such tax attribute that would have been
attributable to the EDS Group determined on the basis of the Separate EDS
Group Tax Liability (an "excess tax attribute" of GM), GM shall make one or
more payments to EDS as provided in this Section 3.07. For the purposes of
this Section 3.07 and Section 3.08, the amount of any tax attribute that would
have been attributable to the EDS Group if the tax attribute attributable to
the EDS Group were determined on the basis of the Separate EDS Group Tax
Liability, shall include the amount of such tax attribute that was generated
by the EDS Group to the extent that it was not fully utilized during
Consolidated Tax Periods for purposes of determining the Separate EDS Group
Tax Liability.
Notwithstanding anything herein to the contrary, adjustments to the basis of
certain of EDS' assets resulting from the 1990 and 1992 depreciation method
election and the election under Section 338 of the Code by GM with respect to
GM's acquisition of EDS in 1984 shall not be treated as tax attributes or
excess tax attributes for which payments are required to be made pursuant to
Sections 3.06-3.08 of this Agreement.
(b) Amount of Payments. The amount of the payments referred to in Section
3.07(a) above shall be equal to the amount of the tax benefit derived by a
party's utilization of its excess tax attribute. The amount of the tax benefit
derived shall be equal to the excess of (i) the hypothetical tax liability
that would have been reflected on the relevant tax return had the excess tax
attribute not been utilized over (ii) the actual tax liability on the tax
return on which the excess tax attribute is or has been utilized.
(c) Time for Making Payments. Payments pursuant to this Section 3.07 shall
be made within ten (10) Business Days after the due date, including extensions
of time to file returns, for filing the tax return that reflects the
utilization of the excess tax attribute, or if the excess tax attribute
already has been utilized as of the effective date of this Agreement, within
ten (10) Business Days after GM provides EDS with the calculation pursuant to
Section 3.06(d).
(d) Verification. GM shall have the right to engage the law firm Fulbright &
Jaworski to review all of the tax returns on which of any excess tax attribute
could be utilized for all EDS tax years subsequent to the Split-Off until the
excess tax attributes are fully utilized, expire, or the parties agree to a
single payment under Section 3.08. Any disclosure of EDS information by GM to
Fulbright & Jaworski for this purpose shall not constitute a breach of
confidentiality under this Agreement.
(e) Alternative Payment Arrangements. GM and EDS may, at any time after GM
provides EDS with the calculation of the portion of the consolidated tax
attributes attributable to EDS pursuant to Section 3.06(d), negotiate a single
payment to be made in lieu of the payments contemplated in Section 3.07(b).
The parties may consider, among other factors, the time value of the future
tax benefits, anticipated future tax rates, and the likelihood that the excess
tax attributes will be utilized. If the parties negotiate a single payment,
they must also agree upon the manner in which the amount of the payment
contemplated by Section 3.08 would be determined.
3.08 Redetermination of Tax Attribute Allocation. If there is a Final
Determination that results in any change to or adjustment of the portion of
any consolidated tax attribute attributable to EDS or to any member of the EDS
Group on any income tax return of the GM Group by the IRS, any court of
competent jurisdiction, or by any other taxing authority, then GM shall make a
payment to EDS, or EDS shall make a payment to GM as may be necessary to
adjust the payments between EDS and GM to reflect the payments that would have
been made under Section 3.07 had the adjusted amount of the tax attribute been
taken into account in computing the payments due under Section 3.07. Payments
due under this Section 3.08 shall be due and payable ten (10) Business Days
following the date that one party gives notice to the other party that a
payment is due, and such notice shall include a copy of the notice of
deficiency or other written communication from a taxing authority describing
the Final Determination and, if appropriate or necessary, detailed
calculations supporting the adjustment of the portion of the tax attribute
attributable to EDS.
Section 4: Adjustments of Tax Liabilities.
4.01 Adjustment of GM Group Tax Liability. If any item of income, gain,
loss, expense, deduction or credit that enters into the computation of the GM
Group Tax Liability is changed or adjusted by the IRS or by a state
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or locality and such change or adjustment is part of a Final Determination, GM
shall make such payments to EDS, or EDS shall make such payments to GM
(including interest and penalties imposed on the GM Group (or any member of
the GM Group) in connection with the adjustment or change) as may be necessary
to adjust the payments between EDS and GM to reflect payments that would have
been made under Sections 3.01 and 3.02 of this Agreement had the adjustments
as finally determined been taken into account in determining the amount of the
payments under Sections 3.01 and 3.02. A payment required under this Section
4.01 shall be due and payable ten (10) calendar days following the date that
one party gives notice to the other party that a payment is due. Notice under
this Section 4.01 shall include a copy of the notice of deficiency or other
written communication from an authority describing the Final Determination
and, if appropriate or necessary, detailed calculations supporting the amount
due.
4.02 Carryback Items from Separate Return Tax Periods. With respect to
carrybacks by EDS of net operating losses, net capital losses, unused tax
credits and other deductible or creditable tax attributes to a Consolidated
Tax Period from a Separate Return Tax Period which would be permitted under
the Code and the Regulations (or State Law or State Regulations) based on the
Consolidated Tax Period income tax returns actually filed, and taking into
consideration the separate return limitation year rules, whenever permitted to
do so by the Code, the Regulations, State Law or State Regulations, EDS shall
elect to relinquish any carryback period which would include any Consolidated
Tax Period. In cases where EDS cannot relinquish the carryback period, or if
the parties otherwise agree, GM shall cooperate with EDS in seeking tax
refunds from the appropriate taxing authority, at EDS' expense, and EDS shall
be entitled to such refund, including interest paid by the taxing authority in
connection with such refund; provided, however, that EDS shall indemnify and
hold GM harmless from and against any and all collateral tax consequences
resulting from or caused by the carryback of deductible or creditable tax
attributes by EDS from a Separate Return Tax Period to a Consolidated Tax
Period, including, but not limited to, tax attributes of GM that expire unused
(including tax attributes that expire during a tax period subsequent to the
tax period during which the EDS tax attribute carried back was generated) and
which would have been used but for EDS' carryback. The amount of such
indemnity shall be limited to the actual tax benefit to which the GM Group
would have been entitled in the absence of the carryback of the deductible or
creditable tax attribute of EDS. GM shall only be entitled to indemnification
under this Section 4.02 if GM has used its reasonable best efforts to avoid
the collateral tax consequence being indemnified.
In the event that (i) EDS or a member of the EDS Group has filed a refund
claim with a taxing authority for a Consolidated Tax Period as contemplated by
this Section 4.02, (ii) the refund claim has been allowed, and (iii) the
taxing authority has applied the refund to an amount owed by GM, then GM shall
pay EDS the amount of the refund, including the amount of interest that would
otherwise have been paid by the taxing authority to EDS or such member of the
EDS Group.
4.03 Other Adjustments. (a) If there is any change of or adjustment to any
item relating to the computation of payments under this Agreement that are not
otherwise provided for herein (such as a correction of a previous erroneous
calculation), GM shall make such payments to EDS, or EDS shall make such
payments to GM in such manner and at such time as may be necessary or
appropriate to reflect the intent of this Agreement.
(b) GM and EDS agree that all claims and causes of action that could have
been asserted under and pursuant to this Agreement and its predecessors on
December 31, 1995, with respect to all Consolidated Tax Periods for which
returns were required to be filed on or before such date, had been asserted on
or before the date that is forty-five (45) days after the date this Agreement
is executed, and may not be asserted thereafter; provided, however, that the
preceding clause shall not prohibit the assertion of claims and causes of
action resulting from adjustments by taxing authorities. GM shall have the
right to inspect the books and records of EDS to substantiate the Separate EDS
Group Tax Liability with respect to all Consolidated Tax Periods for which
returns were required to be filed on or before December 31, 1995. Claims or
causes of action shall be asserted by giving written notice to the party that
the claim or cause of action is asserted against and such claim or cause of
action shall be deemed to have been asserted on the date that the notice is
deemed given pursuant to Section 8.06 of this Agreement.
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(c) If any tax liabilities, interest or penalties are asserted against EDS
or any member of the EDS Group by any taxing authority with respect to GM
Mergeco Corporation, a Delaware corporation ("Mergeco"), GM shall be
responsible for and shall indemnify, defend and hold harmless EDS and each
member of the EDS Group against all such liabilities, interest and penalties
(including without limitation any taxes, interest or penalties relating to
Mergeco's formation or operations) provided, however, that GM shall not be
required to indemnify EDS or the EDS Group under this Section 4.03(c) if EDS
fails to satisfy any condition that has a material adverse prejudicial effect
on GM's ability to contest the issue, which shall include but not be limited
to:
(i) EDS or a member of the EDS Group gives GM prompt notice of any action
by any taxing authority which may result in any claim by EDS against GM
under this Section 4.03(c), but not later than a date that permits GM
sufficient time to protest, appeal or litigate the issue, provided,
however, that if prompt notice would not result in GM having sufficient
time to protest, appeal or litigate the issue, the notice requirements of
this clause (i) shall be deemed satisfied if EDS or any member of the EDS
Group institutes the protest, appeal, or litigation;
(ii) EDS or a member of the EDS Group authorizes GM to protest, appeal
and litigate the issue on behalf of EDS or a member of the EDS Group and at
GM's expense; and
(iii) EDS or a member of the EDS Group executes any authority or power of
attorney requested by GM in writing which is necessary or appropriate for
GM to protest, appeal or litigate the issue; and
(iv) EDS or a member of the EDS Group provides copies of supporting
detail or other workpapers or calculations which are requested by GM in
writing to support the calculation of items of income, gain, loss, expense,
deduction or credit that enters into the calculation of tax liability.
(d) Notwithstanding anything to the contrary in this Agreement, other than
Section 4.03(c), if a state or local taxing authority asserts tax liabilities,
interest or penalties against EDS or the EDS Group with respect to an issue
that involves a reporting position, filing status, or any other determination,
computation or position taken by EDS at the request of GM (referred to as the
"requested reporting position"), GM shall indemnify, defend and hold harmless
EDS or the EDS Group against (i) the asserted tax, but only to the extent of
EDS' previous tax payments to GM in connection with the requested reporting
position for the tax years in controversy, and (ii) the penalties and interest
which relate to the tax for which GM is required to indemnify EDS pursuant to
clause (i); provided, however, that GM shall not be required to indemnify EDS
under this Section 4.03(d) if EDS fails to satisfy any condition that has a
material adverse prejudicial effect on GM's ability to contest the issue,
which shall include but not be limited to:
(I) EDS or a member of the EDS Group gives GM prompt notice of any action
by any state or local taxing authority which may result in any claim by EDS
against GM under this Section 4.03(d), but not later than a date that
permits GM sufficient time to protest, appeal or litigate the issue
provided, however, that if prompt notice would not result in GM having
sufficient time to protest, appeal or litigate the issue, the notice
requirements of this clause (I) shall be deemed satisfied if EDS or any
member of the EDS Group institutes the protest, appeal, or litigation;
(II) EDS or a member of the EDS Group authorizes GM to protest, appeal
and litigate the requested reporting position issue on behalf of EDS or a
member of the EDS Group and at GM's expense;
(III) EDS or a member of the EDS Group executes any authority or power of
attorney requested by GM in writing which is necessary or appropriate for
GM to protest, appeal or litigate the requested reporting position issue;
and
(IV) EDS or a member of the EDS Group provides copies of supporting
detail or other workpapers or calculations which are requested by GM in
writing to support the calculation of items of income, gain, loss, expense,
deduction or credit that enters into the calculation of tax liability.
The indemnification contemplated by this Section 4.03(d) includes, but is
not limited to taxes, interest or penalties which result from a Final
Determination that EDS or the EDS Group should have filed a separate tax
return in any state or locality where EDS or the EDS Group joined in filing a
Consolidated State or Local Income Tax Return with GM.
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Section 5: Cooperation and Confidentiality
5.01 Cooperation. (a) General. EDS and GM shall each cooperate (and shall
cause each member of the GM Group and each member of the EDS Group to
cooperate) fully at such time and to the extent reasonably requested by the
other party in connection with the preparation and filing of any tax return or
claim for refund or the conduct of any audit, dispute, proceeding, suit or
action concerning any issues or other matters addressed in this Agreement.
Such cooperation shall include, to the extent relevant to the other party's
liability under this Agreement, without limitation, the following: (i)
forwarding promptly to the other party copies of all notices and forms or
other communications (including, but not limited to any IRS information
document requests, IRS revenue agents report or similar report, notice of
proposed adjustment, or notice of deficiency) received from or sent to any
taxing authority or any other administrative, judicial or other governmental
authority that concerns a tax liability under this Agreement or an issue that
may affect the other party's liability for tax or for payments under this
Agreement; (ii) upon the other party's request providing the other party the
opportunity to review and comment upon communications to any taxing authority,
(iii) retaining and providing to the other party on demand copies of tax
returns, books, records (including those concerning ownership and tax basis of
property which either party may possess), documentation or other information
relating to the tax returns, including accompanying schedules, related
workpapers, and documents relating to rulings or other determinations by
taxing authorities, until the termination of this Agreement, (iv) the
provision of additional information and explanations of documents and
information provided under this Agreement, (v) the execution of any document
that may be necessary or reasonably helpful in connection with the filing of a
tax return by GM or EDS or any member of their respective Groups, or in
connection with any audit, dispute, proceeding, suit or action, including such
waivers, consents or powers of attorney as may be necessary for a party to
exercise its rights under this Agreement, and (vi) the use of the parties'
reasonable efforts to obtain any documentation from a government authority or
a third party that may be necessary or reasonably helpful in connection with
any of the foregoing. GM and EDS shall each indemnify and hold the other
harmless from and against all penalties and interest that may be asserted
against one party by any taxing authority as a result of the other party's
failure to retain records as required by Federal, state or local law.
(b) Tax Controversies. Each party and the members of its respective Group
shall use reasonable efforts (including, but not limited to the duties and
responsibilities described in Section 6 of this Agreement) to keep the other
party advised as to the status of tax audits, controversies or litigation
concerning any Consolidated Tax Period liability or an issue for which such
other party may be liable under this Agreement and shall cooperate in a
defense with respect to such liability or an issue in any tax controversy.
(c) Tax Returns. This Section 5.01(c) shall apply solely for the purpose of
preparing and filing the GM Group's Consolidated Federal income tax returns
and the Consolidated State or Local Income Tax Returns for the Consolidated
Tax Period ending on December 31, 1995 and for the Consolidated Tax Period
that includes the effective date of the Split-Off. For the Consolidated Tax
Period ending on December 31, 1995, EDS shall provide GM with a draft Federal
income tax return and draft state and local income tax returns for each
jurisdiction in which EDS is included in the Consolidated State or Local
Income Tax Return of the GM Group on or before a date that permits GM
sufficient time to prepare and file the consolidated returns and that is
consistent with past practice. For the Consolidated Tax Period that includes
the effective date of the Split-Off, EDS shall provide GM with a draft Federal
income tax return and draft state and local income tax returns for each
jurisdiction in which EDS is included in the Consolidated State or Local
Income Tax Return of GM as soon as practicable, but in no event later than a
date that permits GM sufficient time to prepare and file the consolidated
returns and that is consistent with past practice. Each draft income tax
return provided to GM shall be signed by an officer of EDS in the space
provided for the taxpayer's signature on the appropriate income tax return
form. All such draft income tax returns shall be prepared on a basis
consistent with the preparation of income tax returns for prior tax years,
provided, however, that items of income, gain, deduction, loss and credit to
be included in the draft income tax returns for the Consolidated Tax Period
that includes the effective date of the Split-Off shall be determined by the
method described in Section 3.02(a)(ii). Notwithstanding any provision of
Section 5.02 of this Agreement to the contrary, GM shall have the right to
engage the law firm Fulbright & Jaworski to review the draft income tax
returns described in this Section 5.01(c), and any disclosure of EDS
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information by GM to Fulbright & Jaworski for this purpose shall not
constitute a breach of confidentiality under this Agreement.
(d) Employees and Facilities. Each party shall make its employees and
facilities available on a reasonable and mutually convenient basis in
connection with any of the foregoing matters.
(e) Interim Tax Information. EDS shall continue to provide GM with interim
financial and tax information for all Consolidated Tax Periods on a basis that
is consistent with past practice, and shall provide GM with any additional
information or explanations reasonably requested by GM in connection with such
interim information.
5.02 Confidentiality. Any information obtained by either party under this
Agreement shall be kept confidential, except as may be necessary in connection
with the filing of tax returns or claims for refund or in connection with an
audit, dispute, proceeding, suit or action concerning any issues or matters
addressed in this Agreement, or unless a party is compelled to disclose
information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law. Except as otherwise provided herein
with respect to Consolidated Tax Periods, EDS shall not be required to make
available to GM or its representatives any books, records, documents or other
information that EDS reasonably determines to be subject to attorney-client
privilege; provided, however, that EDS shall be required to make available to
GM any information reasonably requested by GM in connection with the
preparation of the GM Group's consolidated Federal income tax return, or
Consolidated State or Local Income Tax Returns, or the audit, protest,
appeals, litigation or other proceeding in connection such income tax returns.
Except as otherwise provided herein, GM shall not be required to make
available to EDS or its representatives any books, records, documents or other
information that GM reasonably determines to be subject to attorney-client
privilege; provided, however, that GM shall be required to make available to
EDS any information reasonably requested by EDS in connection with the
preparation of the EDS Group tax returns for any Consolidated Tax Period or
any Separate Return Tax Period, or any audit, protest, appeals, litigation or
other proceeding with respect to any Consolidated Tax Period.
Section 6: Audits, Protests, Appeals, Litigation and Dispute Resolution.
6.01 General Contest Rights--Notice. GM shall promptly notify EDS in writing
upon receipt by GM or any member of the GM Group of each written communication
with respect to any pending or threatened audit, dispute, suit, action,
proposed assessment or other proceeding in connection with any Consolidated
Tax Period concerning a liability of EDS under this Agreement or an issue for
which EDS may be liable under this Agreement. GM shall include with the notice
to EDS a true, correct and complete copy of the written communication
received.
6.02 Audits. (a) Control of Federal Audits. In connection with examinations
by Federal taxing authorities, EDS shall separately control examination issues
for which it is solely liable under this Agreement. Such control shall be
limited to (i) the responsibility for communicating with agents of the Federal
taxing authorities; and (ii) the authority to enter into settlements of
Federal income tax liabilities, provided that such settlement does not
directly result in an adjustment to any Consolidated Return Item. In the event
that a proposed settlement does directly result in an adjustment to any
Consolidated Return Item, EDS may nevertheless settle the issue provided that
such settlement does not materially (A) increase the difference between the
consolidated Federal GM Group Tax Liability and the Separate EDS Group Tax
Liability for any Consolidated Tax Period, (B) increase the GM Group Tax
Liability for any Separate Return Tax Period, or (C) otherwise increase the
amount of any tax for which EDS is not liable under this Agreement. EDS may
determine whether it has the authority described in this Section 6.02 by
giving notice to GM, including the details of any proposed settlement (whether
written, proposed by a taxing authority, proposed by EDS or otherwise) and
requesting GM's confirmation that EDS has the authority to enter into the
settlement described in the notice. If GM fails to respond within ninety (90)
calendar days of its receipt of the notice, GM shall be deemed to have
confirmed that EDS has the authority under Section 6.02(a)(ii) to enter into a
settlement as described in such notice and that such settlement does not have
one of the effects described in clauses (A)-(C) referenced in Section 6.02(a).
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Notwithstanding anything to the contrary in this Section 6.02(a), if a
taxing authority makes a written settlement offer with respect to any issue
for which EDS may be liable under this Agreement and EDS notifies GM in
writing that it desires to accept the settlement offer, GM may (at its sole
cost and expense) continue to contest, defend, or compromise such issue and,
in such event, the amount of the payment due to GM pursuant to Section 4 of
this Agreement shall not exceed the amount of the settlement offer plus
interest and penalties that would have been imposed pursuant to the settlement
offer.
If EDS is precluded from settling an issue pursuant to the provisions of
this Section 6.02(a), GM and EDS agree that the fair allocation of the tax
liability, including, without limitation, for purposes of Section 4 of this
Agreement, with respect to such issue as finally determined shall be the
subject of good faith negotiations between the parties. In the event the
parties are not able to agree upon an allocation of the tax liability, the
fair allocation of the tax liability shall be subject to the arbitration
procedure in Section 6.05, and the arbitrator shall consider, among other
factors, the amount for which the issue could have been settled by EDS with
the taxing authority had EDS not been precluded from settling the issue
pursuant to this Section 6.02.
GM shall reasonably cooperate with EDS and its counsel in the defense
against or compromise of any claim in any examination. Consistent with past
practice, GM shall give EDS notice and an opportunity to participate in any
meeting with Federal taxing authorities that are scheduled to address EDS
issues.
(b) Control of State or Local Audits. In connection with examinations or
audits of any Consolidated State or Local Income Tax Return which includes EDS
or a member of the EDS Group, GM shall have exclusive control of the
examination issues, including, but not limited to, the responsibility for
communicating with agents of the state or local taxing authority, and shall
have exclusive authority to enter into settlements, and shall bear all fees,
cost and expenses associated with such examinations or audit; provided,
however, that GM shall, consistent with past practice, provide EDS an
opportunity to review and comment upon GM's communications with state or local
taxing authorities. EDS or a member of the EDS Group shall promptly execute
and deliver to GM any power of attorney or other document reasonably requested
in writing by GM in connection with the examination of any state or local tax
return contemplated by this Section 6.02 (b).
If GM proposes to accept or compromise a proposed adjustment that would
result in an additional liability (or reduction of refund) of EDS or a member
of the EDS Group, GM shall notify EDS in a reasonable period of time. If EDS
does not consent to such acceptance or compromise, and provided that there is
reasonable basis to contest the issue involved, and EDS agrees to indemnify GM
for reasonable fees and costs of outside attorneys, accountants and
consultants or other reasonable outside expenses, incurred by GM during the
course of the audit by GM, exclusive of GM employee salaries, internal
administrative expenses and overhead costs, in continuing to contest the issue
at EDS' request, GM shall continue to contest the relevant issue or shall pay
any such additional liability (or reduction of refund).
6.03. Protest and Appeals. (a) Federal Protests and Appeals. GM and EDS
shall cooperate in the preparation and filing of any protest for any
Consolidated Tax Period in which EDS received audit adjustments which it seeks
to contest in the Appeals Division of the IRS. EDS shall be responsible for
the preparation of its portion of the GM Group protest in the form prescribed
by GM, and shall be responsible for presenting its issues in conference and
negotiating settlement alternatives with the Appeals Division of the IRS.
(b) State and Local Protests and Appeals. GM shall have the exclusive
control of the preparation or filing of any protest or appeal involving a
Consolidated State or Local Income Tax Return which includes EDS, and shall
bear all fees, costs and expenses associated with such protest or appeal;
provided, however, that GM shall, consistent with past practice, provide EDS
an opportunity to review and comment upon GM's communications with state or
local taxing authorities. If GM proposes to accept or compromise a proposed
adjustment that would result in an additional liability (or reduction of
refund) of EDS or a member of the EDS Group, GM shall notify EDS in a
reasonable period of time. If EDS does not consent to such acceptance or
compromise, and provided that there is reasonable basis to contest the issue
involved, and EDS agrees to indemnify GM for the reasonable fees and costs of
outside attorneys, accountants and consultants incurred by GM in continuing to
contest the
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issue, GM shall continue to contest the relevant issue or shall pay any such
additional liability (or reduction of refund). EDS or a member of the EDS
Group shall promptly execute and deliver to GM any power of attorney or other
document reasonably requested in writing by GM in connection with the
examination of any state or local tax return contemplated by this Section 6.03
(b).
6.04. Litigation. (a) General. If GM and EDS are not able to reach a
satisfactory settlement of all issues through administrative procedures for
any Consolidated Tax Period in any jurisdiction in which EDS or any member of
the EDS Group joined in the filing of a tax return with GM, GM shall control
the litigation of the issues, including choice of forum; provided, however,
that both parties must consent to appeal an adverse judgment (provided that
one party may prosecute the appeal of an adverse judgment without the other's
consent if the appealing party indemnifies the nonconsenting party against any
increase in such nonconsenting party's liability for taxes, interest, and
penalties over and above such nonconsenting party's liability for taxes,
interest and penalties under the judgment being appealed); provided, however,
that EDS shall prepare its portion of any filings and pleadings in a form
prescribed by GM, and shall be responsible for presenting its issues and
negotiating settlement alternatives. If GM elects to proceed in a refund
action, GM and EDS shall each pay any deficiency relating to the issues for
which it is liable under this Agreement.
(b) Settlement. In the event that a taxing authority has made a written
settlement offer with respect to any issue for which EDS may be liable under
this Agreement and EDS notifies GM in writing that it desires to accept the
settlement offer, GM may (at its sole cost and expense) continue to contest,
defend, or compromise such issue and, in such event, the amount of the payment
due to GM pursuant to Section 4 of this Agreement shall not exceed the amount
of the settlement offer plus interest and penalties that would have been
imposed pursuant to the settlement offer.
(c) Litigation Expense. Except as otherwise provided in this Agreement, each
party shall bear its own litigation expenses (including, without limitation,
attorney's fees, court costs, expenses of consultants and expert witnesses)
unless EDS is forced to litigate issues that it otherwise would settle, in
which event, all costs and expenses of such litigation shall be borne by GM.
6.05. Resolution of Disputed Items. The following provisions apply with
respect to the resolution of any dispute arising in connection with this
Agreement.
(a) Negotiation. GM and EDS shall attempt in good faith to resolve any
dispute promptly by negotiations of the parties. In the event of any such
dispute, either party may deliver a Dispute Notice to the other party, and
within twenty (20) Business Days of the receipt of such Dispute Notice, the
appropriate representatives of GM and EDS shall meet to attempt to resolve the
dispute. If the dispute has not been resolved within the Negotiation Period,
or if one of the parties fails or refuses to negotiate the dispute, the issue
shall be settled by arbitration pursuant to this Section 6.05, which shall be
final and binding on the parties.
(b) Arbitration Procedure. Either party may initiate arbitration by giving
the other party a written notice (the "Arbitration Notice") either (i) at any
time following the end of the Negotiation Period, or (ii) if the parties do
not meet within twenty (20) Business Days of the receipt of the Dispute
Notice, at any time thereafter. The arbitration shall be in accordance with
the CPR Rules, except as otherwise provided in this Section 6.05. The
arbitrators shall afford all discovery permitted by the Federal Rules of Civil
Procedure. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. (S)1-14. The place of arbitration shall be Detroit, Michigan.
Any deadlines specified in this Section 6.05 may be extended by mutual
agreement of the parties.
(c) Selection of Arbitrators. GM and EDS shall make every reasonable effort
to jointly select the arbitrator. If GM and EDS are unable to agree on the
designated arbitrator within 20 Business Days after either party gives the
Arbitration Notice, then the arbitration shall be by a panel of three
arbitrators. GM and EDS shall each appoint one arbitrator. The two arbitrators
so appointed shall appoint the third arbitrator. If either GM or EDS shall
fail to appoint an arbitrator within such 20-day period, the arbitration shall
be by the sole arbitrator appointed by the other party. Whether jointly
selected by GM and EDS or otherwise, each arbitrator shall be a
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tax attorney who is generally recognized in the tax community as a qualified
and competent tax practitioner with experience in the tax area involved in the
issue or issues to be resolved.
(d) Settlement Proposal. Each party shall present an overall settlement
proposal to the arbitrator which shall encompass all issues to be resolved.
The two proposals shall set the outer limits of the range within which the
arbitrator can make a determination as to the appropriate settlement result.
All costs of the arbitration process shall be borne by the party determined by
the arbitrator to have lost the arbitration. In the event the arbitrator makes
a determination which reflects a 50-50 settlement, GM and EDS shall share
equally the costs of the arbitration. In the event the arbitrator makes a
determination which reflects a divided settlement, the arbitrator shall
determine the proportion in which the parties shall share the costs of
arbitration.
(e) Time and Method of Making Payments Determined by Arbitration. All
amounts determined by arbitration to be payable by one party to the other
shall be due and payable on or before the 90th calendar day following the
determination that such amount is payable.
Section 7: Indemnity
GM agrees to indemnify, defend and hold harmless EDS and each member of the
EDS Group from and against any and all payments of Federal income tax
liabilities and State Tax Liabilities and Federal estimated income tax
liabilities and estimated State Tax Liabilities, including additions to tax,
interest, and penalties thereon, to any tax authority with respect to any
Consolidated Tax Period; provided, however, that except as otherwise
specifically provided in this Agreement, such indemnification shall not extend
to separate state tax liabilities or estimated separate state tax liabilities
for any tax jurisdiction in which EDS (or any member of the EDS Group) is
required to file (or does file) a separate state or local income tax return
directly with the taxing authority and not as a part of a GM return for a
period that includes a Consolidated Tax Period; provided further, however,
that such indemnification shall not extend to any payment required to be made
by EDS to GM pursuant to this Agreement.
Section 8: Miscellaneous.
8.01 Additional Members. The parties hereto specifically recognize that from
time to time other corporations may become members of the GM Group and/or the
EDS Group during a Consolidated Tax Period governed by this Agreement, and
they agree to use their best efforts to cause such corporations to be bound by
all of the terms and conditions hereof.
8.02 Successor and Assigns. This Agreement shall inure to the benefit of and
be binding upon the parties and their respective successors, predecessors and
assigns, but no assignment of this Agreement shall relieve any party of its
obligations without the written consent of the other party.
8.03 Entire Understanding. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
shall supersede all previous negotiations, commitments, and writings with
respect to such subject matter. The Federal Agreement and the State and Local
Agreement as in effect immediately prior to the effective date of this
Agreement shall be of no further force and effect. This Agreement is separate
from, and shall not effect or be effected by, the rights and obligations of
the parties pursuant to the Separation Agreement, or any other agreement
between the parties.
8.04 Amendments, No Waiver. Any provision of this Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed,
in the case of an amendment, by GM and EDS, or in the case of a waiver, by the
party benefited by the provision to be waived. No failure or delay by any
party in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
14
<PAGE>
8.05 Conflict of Law. Except for Section 6.05, which shall be governed by
the United States Arbitration Act, the validity, interpretation and
performance of this Agreement shall be controlled and construed under the laws
of the State of Michigan.
8.06 Notices. Every notice, demand, claim, or other communication required
or permitted to be given under this Agreement (a "Notice") shall be in writing
and may be personally served, provided a receipt is obtained therefore or may
be sent by certified mail, return receipt requested, postage prepaid, or may
be sent by facsimile, with acknowledgment of receipt requested, to the parties
at the following addresses (or at such other address as one party may specify
by Notice to the other party):
(a) TO: GM: (b) TO: EDS:
Chief Tax Officer Corporate Tax Director
GENERAL MOTORS CORPORATION ELECTRONIC DATA SYSTEMS CORPORATION
3044 W. Grand Blvd. 5400 Legacy HI-4A-66
Detroit, MI 48202 Plano, TX 75024
A Notice which is delivered personally shall be deemed given as of the date
specified in the written receipt thereof. A Notice mailed as provided herein
shall be deemed given on the third Business Day following the date so mailed.
A Notice by facsimile shall be deemed given upon the date it is transmitted.
Notification of a change of address may be given by either party to the other
as provided in this Section 8.06.
8.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.08 Change in Law. If, due to any change in applicable law or regulation or
the interpretation thereof by any court of law or other governing body having
jurisdiction subsequent to the date of this Agreement, performance of any
provision of or any transaction contemplated by this Agreement shall become
impracticable or impossible, the parties hereto shall use their best efforts
to find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such provision.
8.09 Titles and Headings. Titles and headings of sections of this Agreement
are inserted for the convenience of reference only and are not intended to be
a part of or to effect the meaning or interpretation of this Agreement.
8.10 Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event that an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
8.11 Severability. The parties agree that, if any provision of this
Agreement should be determined to be invalid or unenforceable, such provision
shall be deemed deleted from this Agreement with respect and only with
respect, to the operation of such provision in the particular jurisdiction in
which such determination was made, and only to the extend of the invalidity,
and any such invalidity or unenforcability in a particular jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. All other remaining provisions of this Agreement shall remain in
full force and effect for the particular jurisdiction and all other
jurisdictions.
In Witness Whereof, the parties hereto, by their duly authorized
representatives, have executed this Agreement on the dates written below.
General Motors Corporation Electronic Data Systems Corporation
/s/ Roger D. Wheeler /s/ R. Randall Capps
By: _________________________________ By: _________________________________
Roger D. Wheeler R. Randall Capps
Chief Tax Officer Date: Corporate Tax Director
April 2, 1996 April 2, 1996
Date: _______________________________ Date: _______________________________
15
<PAGE>
EXHIBIT 3(A)
RESTATED CERTIFICATE OF INCORPORATION
OF
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
UNDER SECTIONS 242 AND 245 OF THE
DELAWARE GENERAL CORPORATION LAW
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, hereby certifies that:
1. The current name of the Corporation is Electronic Data Systems
Holding Corporation. The name under which the Corporation was originally
incorporated was RGR Holdings, Inc. The original Certificate of Incorporation
of the Corporation (as amended, the "Certificate of Incorporation") was filed
with the Secretary of State of the State of Delaware on March 25, 1994.
2. The restatement of and amendments to the Certificate of
Incorporation have been duly adopted by a resolution of the Board of Directors
of the Corporation (the "Board of Directors") proposing and declaring advisable
this Restated Certificate of Incorporation, and the sole holder of all shares of
the Corporation's capital stock has duly approved and adopted this Restated
Certificate of Incorporation, all in accordance with the provisions of Sections
228, 242 and 245 of the General Corporation Law of the State of Delaware.
3. This Restated Certificate of Incorporation restates and amends the
Certificate of Incorporation of the Corporation. The amendments to the
Certificate of Incorporation effected by this Restated Certificate of
Incorporation include, but are not limited to, amendments (i) to increase the
number of authorized shares of capital stock that the Corporation shall have the
authority to issue to Two Billion Two Hundred Million (2,200,000,000), divided
into Two Billion (2,000,000,000) shares of common stock, par value $0.01 per
share, and Two Hundred Million (200,000,000) shares of preferred stock, par
value $0.01 per share, and to authorize the issuance of shares of preferred
stock of the Corporation from time to time in one or more series as may be
determined by the Board of Directors, (ii) to add provisions relating to
dividends, liquidation and voting with respect to common stock of the
Corporation, (iii) to add provisions regarding the denial of preemptive rights
and cumulative voting, (iv) to provide for the classification of the Board of
Directors, the procedure for removal of members of the Board of Directors and
the procedure for filling vacancies on the Board of Directors, (v) to prohibit
the taking of action by the stockholders of the Corporation by less than
unanimous written consent without a stockholders' meeting, (vi) to limit the
liability of a Director of the Corporation to the Corporation or any of its
stockholders to the extent permitted by Section 102(b)(7) of the General
Corporation Law of the State of Delaware, (vii) to require, for certain mergers
and other transactions, the affirmative vote of (a) holders of at least 80% of
the outstanding voting stock of the Corporation and (b) holders of at least 66-
2/3% of the outstanding voting stock of the Corporation, exclusive of voting
stock beneficially owned by the party whose interest in the transaction gives
rise to the requirement of the 80% vote, (viii) to provide for the amendment of
the Bylaws of the Corporation by the Board of Directors and by the
<PAGE>
stockholders of the Corporation and to establish the required vote for such
amendment, and (ix) to require, for certain amendments to the Certificate of
Incorporation, the affirmative vote of holders of at least 80% of the
outstanding voting stock of the Corporation.
4. The capital of the Corporation shall not be reduced under or by
reason of the foregoing amendments to the Certificate of Incorporation.
5. The Certificate of Incorporation is hereby superseded by this
Restated Certificate of Incorporation, which shall henceforth be the Certificate
of Incorporation of the Corporation.
6. The text of the Certificate of Incorporation is hereby restated
and amended to read in its entirety as follows (hereinafter, this Restated
Certificate of Incorporation, as it may be further amended or restated from time
to time, is referred to the "Restated Certificate of Incorporation").
RESTATED CERTIFICATE OF INCORPORATION
FIRST: The name of the Corporation is Electronic Data Systems Holding
Corporation.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Prentice-
Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful
business, act or activity for which corporations may be organized under the
provisions of the General Corporation Law of the State of Delaware, or any
successor statute (the "DGCL").
FOURTH: The aggregate number of shares of capital stock that the
Corporation shall have authority to issue is Two Billion Two Hundred Million
(2,200,000,000), divided into classes as follows:
(1) Two Billion (2,000,000,000) shares of common stock, par value
$0.01 per share ("Common Stock"), and
(2) Two Hundred Million (200,000,000) shares of preferred stock, par
value $0.01 per share ("Preferred Stock").
Shares of any class or series of capital stock of the Corporation may
be issued for such consideration and for such corporate purposes as the Board of
Directors may from time to time determine.
The following is a statement of the powers, preferences and rights,
and the qualifications, limitations or restrictions, of the Preferred Stock and
Common Stock.
<PAGE>
SECTION I. PREFERRED STOCK
Shares of Preferred Stock shall be issuable from time to time in one
or more series as may be determined by the Board of Directors. Each series
shall be distinctly designated. The Board of Directors is hereby expressly
granted the authority to fix, by resolution or resolutions adopted prior to and
providing for the issuance of any shares of each particular series of Preferred
Stock and incorporated in a certificate of designations filed with the Secretary
of State of the State of Delaware, the designation, powers (including voting
powers and voting rights, full or limited, or no voting powers) and preferences,
and the relative, participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, if any, of such series,
including, without limiting the generality of the foregoing, the following:
(1) the designation of, and the number of shares of Preferred Stock
which shall constitute, the series, which number may be increased (except as
otherwise fixed by the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time by action of
the Board of Directors;
(2) the rate and times at which (or the method of determination
thereof), and the terms and conditions upon which, dividends, if any, on
shares of the series shall be paid, the nature of any preferences or the
relative rights of priority of such dividends to the dividends payable, and
the qualifications, limitations or restrictions, if any, with respect to
such dividends payable, on any other shares of any class or classes of
capital stock of the Corporation or on any shares of other series of
Preferred Stock, and a statement whether or in what circumstances such
dividends shall be cumulative;
(3) whether shares of the series shall be convertible into or
exchangeable for shares of any class or series of capital stock or other
securities or property of the Corporation or of any other corporation or
entity, and, if so, the terms and conditions of such conversion or exchange,
including any provisions for the adjustment of the conversion or exchange
rate in such events as the Board of Directors shall determine;
(4) whether shares of the series shall be redeemable, and, if so, the
terms and conditions of such redemption (including whether redemption shall
be optional or mandatory), including the date or dates or event or events
upon or after the occurrence of which they shall be redeemable, and the
amount and type of consideration payable in case of redemption, which amount
per share may vary under different conditions and at different redemption
dates;
(5) the rights, if any, of holders of shares of the series upon the
voluntary or involuntary liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding-up of the Corporation, and the
relative rights of priority, if any, of payment of shares of the series;
(6) whether shares of the series shall have a sinking fund or purchase
account for the redemption or purchase of shares of the series, and if so,
the terms, conditions and amount of such sinking fund or purchase account;
<PAGE>
(7) whether shares of the series shall have voting rights in addition
to the voting rights as shall be provided by law and, if so, the terms of
such voting rights, which may, without limiting the generality of the
foregoing, include (a) the right to more or less than one vote per share on
any or all matters voted upon by the stockholders of the Corporation and (b)
the right to vote, as a series by itself or together with other series of
Preferred Stock or together with all series of Preferred Stock as a class
and/or with the Common Stock as a class, upon such matters, under such
circumstances and upon such conditions as the Board of Directors shall
determine, including, without limitation, the right, voting as a series by
itself or together with other series of Preferred Stock or together with all
series of Preferred Stock as a class and/or with the Common Stock as a
class, to elect one or more Directors of the Corporation under such
circumstances and upon such conditions as the Board of Directors shall
determine; and
(8) any other powers, preferences and relative, participating,
optional or other rights, and qualifications, limitations or restrictions of
shares of that series.
The relative powers, preferences and rights of each series of Preferred Stock in
relation to the powers, preferences and rights of each other series of Preferred
Stock shall, in each case, be as fixed from time to time by the Board of
Directors in the resolution or resolutions adopted pursuant to the authority
granted in this Section I of this Article Fourth, and the consent, by class or
series vote or otherwise, of holders of Preferred Stock of such of the series of
Preferred Stock as are from time to time outstanding shall not be required for
the issuance by the Board of Directors of any other series of Preferred Stock,
whether or not the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in such resolution or
resolutions adopted with respect to any series of Preferred Stock that the
consent of holders of at least a majority (or such greater proportion as shall
be therein fixed) of the outstanding shares of such series voting thereon shall
be required for the issuance of shares of any or all other series of Preferred
Stock.
SECTION II. COMMON STOCK
(1) Dividends. Subject to any requirements with respect to
preferential or participating dividends as shall be provided by the express
terms of any outstanding series of Preferred Stock, holders of the Common Stock
shall be entitled to receive such dividends thereon, if any, as may be declared
from time to time by the Board of Directors.
(2) Liquidation. In the event of liquidation, dissolution or winding-
up of the Corporation, whether voluntary or involuntary, holders of the Common
Stock shall be entitled to receive such assets and properties of the
Corporation, tangible and intangible, as are available for distribution to
stockholders of the Corporation, after there shall have been paid or set apart
for payment the full amounts necessary to satisfy any preferential or
participating rights to which holders of each outstanding series of Preferred
Stock are entitled by the express terms of such series.
(3) Voting. Each share of Common Stock shall entitle the holder
thereof to one vote on each matter submitted to a vote of holders of shares of
Common Stock. Holders of shares
<PAGE>
of Common Stock shall be entitled to vote on each matter submitted to a vote of
stockholders of the Corporation, except (a) as shall otherwise be provided with
respect to the election of one or more Directors of the Corporation by holders
of shares of one or more outstanding series of Preferred Stock under
circumstances as shall be provided by the Restated Certificate of Incorporation
or by any provisions established pursuant to Section I of this Article Fourth
and (b) to the extent holders of shares of one or more outstanding series of
Preferred Stock are entitled to vote separately as a class by law or under
circumstances as shall be provided by the Restated Certificate of Incorporation
or by any provisions established pursuant to Section I of this Article Fourth.
SECTION III. CAPITAL STOCK
(1) Regarding Preemptive Rights. No stockholder of the Corporation
shall by reason of his holding shares of any class or series of capital stock of
the Corporation have any preemptive or preferential right to purchase, acquire,
subscribe for or otherwise receive any additional, unissued or treasury shares
(whether now or hereafter acquired) of any class or series of capital stock of
the Corporation now or hereafter to be authorized, or any notes, debentures,
bonds or other securities convertible into or carrying any right, option or
warrant to purchase, acquire, subscribe for or otherwise receive shares of any
class or series of capital stock of the Corporation now or hereafter to be
authorized, whether or not the issuance of any such shares, or such notes,
debentures, bonds or other securities, would adversely affect the dividends or
voting or other rights of such stockholder, and the Board of Directors may issue
or authorize the issuance of shares of any class or series of capital stock of
the Corporation, or any notes, debentures, bonds or other securities convertible
into or carrying rights, options or warrants to purchase, acquire, subscribe for
or otherwise receive shares of any class or series of capital stock of the
Corporation, without offering any such shares of any such class, either in whole
or in part, to the existing stockholders of any such class.
(2) Cumulative Voting. Cumulative voting of shares of any class or
series of capital stock of the Corporation having voting rights is prohibited.
FIFTH: (1) In General. (a) The powers of the Corporation shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed by or under the direction of, the Board of
Directors. In addition to the authority and powers conferred upon the Board of
Directors by the DGCL, the Restated Certificate of Incorporation or the Bylaws
of the Corporation, the Board of Directors is hereby authorized and empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject to the provisions of the DGCL, the Restated
Certificate of Incorporation and any Bylaw of the Corporation adopted by the
stockholders of the Corporation; provided, however, that no Bylaw of the
Corporation hereafter adopted by the stockholders of the Corporation, nor any
amendment thereto, shall invalidate any prior act of the Board of Directors that
would have been valid if such Bylaw or amendment thereto had not been adopted.
(b) On and after the first date (the "Public Status Date") on which
the Corporation has outstanding a class of equity securities registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and except
as otherwise provided by the Restated
<PAGE>
Certificate of Incorporation or the Bylaws of the Corporation or to the extent
prohibited by Delaware law, the Board of Directors shall have the right to
establish the rights, powers, duties, rules and procedures that (i) from time to
time shall govern the Board of Directors, including, without limiting the
generality of the foregoing, the vote required for any action by the Board of
Directors and (ii) from time to time shall affect the Directors' power to manage
the business and affairs of the Corporation.
(2) Number, Election and Terms of Directors. (a) Subject to such
rights of holders of shares of one or more outstanding series of Preferred Stock
to elect one or more Directors of the Corporation under circumstances as shall
be provided by the Restated Certificate of Incorporation or by any provisions
established pursuant to Article Fourth hereof, the number of Directors of the
Corporation that shall constitute the Board of Directors shall not be less than
three (3) nor more than fifteen (15) and shall be fixed from time to time
exclusively by, and may be increased or decreased from time to time exclusively
by the affirmative vote of at least a majority of the Whole Board. The term
"Whole Board" shall mean the total number of Directors of the Corporation as so
fixed, whether or not there exist any vacancies in previously authorized
directorships.
(b) Election of Directors of the Corporation need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
(c) Each Director of the Corporation shall hold office for the full
term for which such Director is elected and until such Director's successor
shall have been duly elected and qualified or until his earlier death,
resignation or removal in accordance with the Restated Certificate of
Incorporation and the Bylaws of the Corporation.
(d) On and after the Public Status Date:
(i) The Directors of the Corporation, other than those who may
be elected by holders of shares of one or more outstanding series of Preferred
Stock under circumstances as shall be provided by the Restated Certificate of
Incorporation or by any provisions established pursuant to Article Fourth
hereof, shall be divided into three classes, Class I, Class II and Class III,
and the Board of Directors, by resolution or resolutions adopted on or prior to
the Public Status Date, shall designate the Directors of the Corporation who
shall first serve in Class I, Class II and Class III, effective as of the Public
Status Date. Such classes shall be as nearly equal in number of Directors as
possible. Each Director of the Corporation shall serve for a term ending on the
third annual meeting following the annual meeting at which such Director was
elected; provided, however, that the Directors of the Corporation first
designated to Class I shall serve for a term expiring at the annual meeting next
following the date of their designation as Class I Directors, the Directors of
the Corporation first designated to Class II shall serve for a term expiring at
the second annual meeting next following the date of their designation as Class
II Directors, and the Directors of the Corporation first designated to Class III
shall serve for a term expiring at the third annual meeting next following the
date of their designation as Class III Directors.
<PAGE>
(ii) At each annual election of Directors of the Corporation, such
Directors chosen to succeed those whose terms then expire shall be of the
same class as the Directors of the Corporation they succeed, unless, by
reason of any intervening changes in the authorized number of Directors of
the Corporation, the Board of Directors shall designate one or more
directorships whose term then expires as directorships of another class in
order more nearly to achieve equality of number of Directors of the
Corporation among the classes.
(iii) Notwithstanding that the three classes of Directors of the
Corporation shall be as nearly equal in number of Directors as possible, in
the event of any change in the authorized number of Directors of the
Corporation, each Director of the Corporation then continuing to serve as
such shall nevertheless continue as a Director of the class of which he is a
member until the expiration of his current term, or his prior death,
resignation or removal in accordance with the Restated Certificate of
Incorporation and the Bylaws of the Corporation. If any newly created
directorship may, consistent with the provision that the three classes shall
be as nearly equal in number of Directors of the Corporation as possible, be
allocated to one or two or more classes, the Board of Directors shall
allocate it to that of the available classes whose terms of office are due
to expire at the earliest date following such allocation.
(3) Removal of Directors. (a) No Director of the Corporation shall be
removed from such office by vote or other action of the stockholders of the
Corporation or otherwise, except by the affirmative vote of holders of at least
a majority of the then outstanding Voting Stock (as defined below), voting
together as a single class. The term "Voting Stock" shall mean all outstanding
shares of all classes and series of capital stock of the Corporation entitled to
vote generally in the election of Directors of the Corporation, considered as
one class; and, if the Corporation shall have shares of Voting Stock entitled to
more or less than one vote for any such share, each reference in the Restated
Certificate of Incorporation to a proportion or percentage in voting power of
Voting Stock shall be calculated by reference to the portion or percentage of
votes entitled to be cast by holders of such shares generally in the election of
Directors of the Corporation. Prior to the Public Status Date, any such removal
of a Director of the Corporation may be with or without cause. On and after the
Public Status Date, no Director of the Corporation shall be removed from such
office by vote or other action of the stockholders of the Corporation or
otherwise, except for cause, which shall be deemed to exist only if: (i) such
Director has been convicted, or such Director is granted immunity to testify
where another has been convicted, of a felony by a court of competent
jurisdiction (and such conviction is no longer subject to direct appeal); (ii)
such Director has been found by a court of competent jurisdiction (and such
finding is no longer subject to direct appeal) or by the affirmative vote of at
least a majority of the Whole Board at any regular or special meeting of the
Board of Directors called for such purpose to have been grossly negligent or
guilty of willful misconduct in the performance of his duties to the Corporation
in a matter of substantial importance to the Corporation; (iii) such Director
has been adjudicated by a court of competent jurisdiction to be mentally
incompetent, which mental incompetency directly affects his ability to perform
as a Director of the Corporation; (iv) such Director has been found by a court
of competent jurisdiction (and such finding is no longer subject to direct
appeal) or by the affirmative vote of at least a majority of the Whole Board at
any regular or special meeting of the Board of Directors called for such purpose
to have breached such Director's duty of loyalty to the Corporation or its
stockholders or to have engaged in any transaction with the Corporation from
which such Director
<PAGE>
derived an improper personal benefit; or (v) "cause" for removal otherwise
exists under Section 141(k)(1) of the DGCL. No Director of the Corporation so
removed may be nominated, re-elected or reinstated as a Director of the
Corporation so long as the cause for removal continues to exist.
(b) Notwithstanding paragraph 3(a) of this Article Fifth, whenever
holders of shares of one or more outstanding series of Preferred Stock are
entitled to elect one or more Directors of the Corporation under circumstances
as shall be provided by the Restated Certificate of Incorporation or by any
provisions established pursuant to Article Fourth hereof with respect to the
rights of holders of shares of one or more outstanding series of Preferred
Stock, any Director of the Corporation so elected may be removed in accordance
with such provisions.
(4) Vacancies. Unless otherwise provided by the Restated
Certificate of Incorporation or by any provisions established pursuant to
Article Fourth hereof with respect to the rights of holders of shares of one or
more outstanding series of Preferred Stock, newly created directorships
resulting from any increase in the authorized number of Directors of the
Corporation and any vacancies on the Board of Directors resulting from death,
resignation or removal in accordance with the Restated Certificate of
Incorporation and the Bylaws of the Corporation shall be filled only by the
affirmative vote of at least a majority of the remaining Directors of the
Corporation then in office, even if such remaining Directors constitute less
than a quorum of the Board of Directors. Any Director of the Corporation elected
in accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors of the Corporation in which the new
directorship was created or the vacancy occurred and until such Director's
successor shall have been elected and qualified or until his earlier death,
resignation or removal in accordance with the Restated Certificate of
Incorporation and the Bylaws of the Corporation. Unless otherwise provided by
the Restated Certificate of Incorporation or by any provisions established
pursuant to Article Fourth hereof with respect to the rights of holders of
shares of one or more outstanding series of Preferred Stock, no decrease in the
number of Directors of the Corporation constituting the Board of Directors shall
shorten the term of any incumbent Director of the Corporation.
SIXTH: No action required to be taken or that may be taken at any
annual or special meeting of the stockholders of the Corporation may be taken
without a meeting, and the power of the stockholders of the Corporation to
consent in writing to the taking of any action by written consent without a
meeting is specifically denied, except for action by unanimous written consent,
which is expressly allowed. Unless otherwise provided by the DGCL, by the
Restated Certificate of Incorporation or by any provisions established pursuant
to Article Fourth hereof with respect to the rights of holders of one or more
outstanding series of Preferred Stock, special meetings of the stockholders of
the Corporation may be called at any time only by the Chairman of the Board of
Directors of the Corporation, or by the Board of Directors pursuant to a
resolution approved by the affirmative vote of at least a majority of the Whole
Board, and no such special meeting may be called by any other person or persons.
SEVENTH: No Director of the Corporation shall be personally liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a Director of the Corporation involving any act or omission of
any such Director; provided, however,
<PAGE>
that this Article Seventh shall not eliminate or limit the liability of such a
Director (1) for any breach of such Director's duty of loyalty to the
Corporation 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, as the same exists or as such provision may hereafter
be amended, supplemented or replaced, or (4) for any transactions from which
such Director derived an improper personal benefit. If the DGCL is amended
after the filing of the Restated Certificate of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by such law, as so amended. Any repeal or modification
of this Article Seventh by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a Director of the Corporation existing at the time of such repeal
or modification.
EIGHTH: (1) On and after the Public Status Date, in addition to any
other affirmative vote that may be required by law, the Restated Certificate of
Incorporation or the Bylaws of the Corporation, and except as otherwise
expressly provided by paragraph (2) of this Article Eighth:
(a) any merger, consolidation or share exchange of the Corporation
or any subsidiary of the Corporation with (i) any Related Person or (ii) any
other Person (whether or not itself a Related Person) which is, or after such
merger, consolidation or share exchange would be, an Affiliate of a Related
Person; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Corporation or any subsidiary of the Corporation to, with or
for the benefit of any Related Person or any Affiliate of any Related Person, or
by any Related Person or any Affiliate of any Related Person to the Corporation
or any subsidiary of the Corporation, of any assets or properties having an
aggregate Fair Market Value of $10,000,000 or more; or
(c) any issuance or transfer by the Corporation or any subsidiary
of the Corporation of any securities of the Corporation or any subsidiary of the
Corporation to any Related Person or any Affiliate of any Related Person (except
(i) pursuant to the exercise, exchange or conversion of securities exercisable
for, exchangeable for or convertible into shares of any class or series of
capital stock of the Corporation or any subsidiary of the Corporation, which
securities were acquired by the Related Person prior to becoming a Related
Person, or (ii) pursuant to a dividend or distribution paid or made, or the
exercise, exchange or conversion of securities exercisable for, exchangeable for
or convertible into shares of any class or series of capital stock of the
Corporation or subsidiary of the Corporation, which security is distributed pro
rata to all holders of shares of any class or series of capital stock of the
Corporation subsequent to the time the Related Person became such, and provided
in the case of this clause (ii) that there is not an increase of more than 1% in
the Related Person's proportionate share of any class or series of capital stock
of the Corporation or of the outstanding Voting Stock as a result of such
dividend or distribution); or
<PAGE>
(d) any adoption of any plan or proposal by the Corporation for the
liquidation or dissolution of the Corporation voluntarily caused or proposed
by or on behalf of a Related Person or any Affiliate of any Related Person;
or
(e) any reclassification of securities (including any reverse
stock split) or recapitalization of the Corporation, or any merger,
consolidation or share exchange of the Corporation with any of its
subsidiaries or any other transaction (whether or not with or into or
otherwise involving a Related Person) which has the effect, either directly
or indirectly, of increasing by more than 1% the proportionate share of any
outstanding shares of any class or series of capital stock of the
Corporation, or the securities convertible into shares of any class or
series of capital stock of the Corporation or any subsidiary of the
Corporation, that is Beneficially Owned by any Related Person or any
Affiliate of any Related Person or otherwise increasing the voting power of
any outstanding shares of any class or series of capital stock of the
Corporation or any subsidiary of the Corporation possessed by any such
Related Person or Affiliate; or
(f) any series or combination of transactions having, directly or
indirectly, the same effect as any of the foregoing; or
(g) any agreement, contract or other arrangement entered into by
the Corporation providing, directly or indirectly, for any of the foregoing,
shall require the affirmative vote of holders of (x) at least 80% of the then
outstanding Voting Stock, voting together as a single class and (y) at least
66-2/3% of the then outstanding Voting Stock not Beneficially Owned, directly or
indirectly, by any Related Person with respect to such Business Combination,
voting together as a single class. Such affirmative vote shall be required on
and after the Public Status Date, notwithstanding the fact that no vote may be
required by, or that a lesser percentage or separate class vote may be specified
in, applicable law, any provision of the Restated Certificate of Incorporation
other than this Article Eighth, the Bylaws of the Corporation or any agreement
with any national securities exchange or otherwise.
(2) The provisions of paragraph (1) of this Article Eighth shall not
be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote that may be required by
applicable law, any provision of the Restated Certificate of Incorporation other
than this Article Eighth, the Bylaws of the Corporation and any agreement with
any national securities exchange or otherwise, if all of the conditions
specified in either of the following subparagraphs (a) or (b) are met:
(a) the cash, property, securities or other consideration to be
received per share by holders of shares of each and every outstanding class
or series of capital stock of the Corporation in the Business Combination
is, with respect to each such class or series, either (i) the same in form
and amount per share as that paid by the Related Person in a tender offer in
which such Related Person acquired at least 50% of the outstanding shares of
capital stock of such class or series and which was consummated not more
than one year prior to the date of such Business Combination or (ii) not
less in amount (as to cash) or Fair Market Value (as to consideration other
than cash) as of the date of the determination of the
<PAGE>
Highest Per Share Price (as to property, securities or other consideration)
than the Highest Per Share Price applicable to such class or series of
shares; provided, however, that in the event of any Business Combination in
which the Corporation survives, any shares retained by holders thereof shall
constitute consideration other than cash for purposes of this subparagraph
(a); or
(b) at least a majority of all Continuing Directors shall have
expressly approved such Business Combination either in advance of or
subsequent to such Related Person's having become a Related Person.
On and after the Public Status Date, in the case of any Business
Combination with a Related Person to which subparagraph (b) above does not
apply, at least a majority of all Continuing Directors, promptly following the
request of a Related Person, shall determine the Highest Per Share Price for
shares of each class or series of capital stock of the Corporation. Such
determination shall be announced not less than five (5) days prior to the
meeting at which holders of shares vote on the Business Combination. Such
determination shall be final, unless the Related Person becomes the Beneficial
Owner of additional shares after the date of the earlier determination, in which
case at least a majority of all Continuing Directors shall make a new
determination as to the Highest Per Share Price for each class or series of
shares prior to the consummation of the Business Combination.
A Related Person shall be deemed to have acquired a share at the time
that such Related Person became the Beneficial Owner thereof. With respect to
shares owned by Affiliates, Associates and other Persons whose ownership is
attributable to a Related Person, if the price paid by such Related Person for
such shares is not determinable by at least a majority of all Continuing
Directors, the price so paid shall be deemed to be the higher of (i) the price
paid upon the acquisition thereof by the Affiliate, Associate or other Person or
(ii) the share price of the shares in question at the time when the Related
Person became the Beneficial Owner thereof.
(3) For purposes of this Article Eighth:
(a) The term "Affiliate," used to indicate a relationship to a
specified Person, shall mean a Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, such specified Person.
(b) The term "Associate," used to indicate a relationship with a
specified Person, shall mean (i) any corporation, firm, partnership,
association or other organization (other than the Corporation or any wholly
owned subsidiary of the Corporation) of which such specified Person is a
director, officer or 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 specified Person has a beneficial interest of 10%
or more or as to which such specified Person serves as trustee or in a
similar fiduciary capacity; (iii) any Person who is a director or officer of
such specified Person or any of its parents or subsidiaries (other than the
Corporation or any wholly owned subsidiary of the Corporation); and (iv) any
relative or spouse of such specified Person or of any of its Associates, or
any relative of any such spouse, who has the same home as such specified
Person or such Associate.
<PAGE>
(c) A Person shall be a "Beneficial Owner" of any shares of any
class or series of capital stock of the Corporation (i) which such Person or
any of its Affiliates or Associates beneficially owns, directly or
indirectly; or (ii) which such Person or any of its Affiliates or Associates
has, directly or indirectly, (A) the right or obligation to acquire (whether
such right or obligation is exercisable 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, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
beneficial owner of any stock tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's Affiliates or Associates
until such tendered stock is accepted for purchase or exchange, or (B) the
right to vote or dispose of, 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 any stock because
of such Person's right to vote such stock if the agreement, arrangement or
understanding to vote such stock arises solely from a revocable proxy or
consent given in response to a proxy or consent solicitation made to ten
(10) or more Persons pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act; or
(iii) which is beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person or any
of its Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring,
holding, voting or disposing of such stock; or (iv) of which such Person
would be the Beneficial Owner pursuant to the terms of Rule 13d-3 of the
General Rules and Regulations under Exchange Act, as in effect on March 12,
1996. Notwithstanding anything in this definition of "Beneficial Owner" to
the contrary, neither General Motors Corporation, a Delaware corporation
("GM"), the board of directors of GM, any committee of such board, any
member of such board or committee, any pension plan or employee benefit plan
sponsored by GM or any of its Affiliates (other than the Hourly Plan (as
defined below)), nor any trustee of or other fiduciary with respect to any
such other plan (when acting in such capacity) shall be deemed to be the
ABeneficial Owner@ of, or to ABeneficially Own,@ any securities held for the
benefit of the General Motors Hourly-Rate Employees Pension Plan, or any
trustee of or other fiduciary with respect to such plan (when acting in such
capacity) (collectively, the "Hourly Plan"), or to be an Affiliate or
Associate of the Hourly Plan (and the Hourly Plan shall not be deemed to be
an Affiliate or Associate of any of the foregoing), solely by virtue of the
board of directors of GM or any committee thereof or the management of GM
acting under the authority thereof having the right to appoint, or terminate
the appointment of, trustees or investment managers for the Hourly Plan or
any such other pension plan or employee benefit plan sponsored by GM or any
of its Affiliates or to cause any subsidiary of GM that provides investment
management services for the Hourly Plan or any such other pension plan or
other employee benefit plan sponsored by GM or any of its Affiliates to
appoint, or terminate the appointment of, such trustees or investment
managers. Stock shall be deemed "Beneficially Owned" by the Beneficial Owner
or Owners thereof.
(d) The term "Business Combination" shall mean any transaction
which is referred to in any one or more of subparagraphs (a) through (g) of
paragraph (1) of this Article Eighth.
<PAGE>
(e) The term "Continuing Director" shall mean, with respect to a
Business Combination with any Related Person, any Director of the
Corporation, while a Director of the Corporation, (i) who is unaffiliated
with the Related Person, and (ii) who (A) was a Director of the Corporation
on or immediately before the Public Status Date, or (B) became a Director of
the Corporation prior to the time that the Related Person became a Related
Person, or (C) was recommended or nominated to become a Director of the
Corporation by at least a majority of all then Continuing Directors, acting
separately or as a part of any action taken by the Board of Directors or any
committee thereof. Without limiting the generality of the foregoing, a
Director of the Corporation shall be deemed to be affiliated with a Related
Person if such Director (i) is or at any previous time has been an officer,
director, employee or general partner of such Related Person; (ii) is or at
any previous time has been an Affiliate or Associate of such Related Person;
(iii) is or at any previous time has been a relative or spouse of such
Related Person or of any such officer, director, general partner, Affiliate
or Associate; (iv) performs services for, or is a member, employee, greater
than 5% stockholder or other equity owner of any organization (other than
the Corporation and its subsidiaries) that performs services for, such
Related Person or any Affiliate of such Related Person, or is a relative or
spouse of any such Person; or (v) was nominated for election as a Director
of the Corporation by such Related Person.
(f) The term "Fair Market Value" shall mean, in the case of
securities, the average of the closing sale prices during the thirty
(30)-day period immediately preceding the date in question of such security
on the principal United States securities exchange registered under the
Exchange Act on which such security is listed (or the composite tape
therefor) or, if such securities are not listed on any such exchange, the
average of the closing bid quotations with respect to such security during
the thirty (30)-day period preceding the date in question on the Nasdaq
National Market or any similar system then in use or, if no such quotations
are available, the fair market value on the date in question of such
security as determined in good faith by at least a majority of all
Continuing Directors; and in the case of property other than cash or
securities, the fair market value of such property on the date in question
as determined in good faith by at least a majority of all Continuing
Directors.
(g) The term "Highest Per Share Price" shall mean (i) as to shares
of any class or series of capital stock of the Corporation of which the
Related Person Beneficially Owns 10% or more of the outstanding shares, the
highest price that can be determined to have been paid or agreed to be paid
for any share or shares of that class or series by such Related Person in a
transaction that either (A) resulted in such Related Person Beneficially
Owning 10% or more thereof or (B) was effected at a time when such Related
Person Beneficially Owned 10% or more thereof, (ii) as to shares of any
class or series of capital stock of the Corporation of which the Related
Person Beneficially Owns shares, but not 10% or more of the outstanding
shares, the highest price that can be determined to have been paid or agreed
to be paid at any time by such Related Person for any share or shares of
that class or series that are then Beneficially Owned by such Related Person
or (iii) as to shares of any other class or series of capital stock of the
Corporation, the amount determined by at least a majority of all Continuing
Directors, on whatever basis they believe is appropriate, to be the per
share price equivalent of the highest price that can be determined to have
been paid or agreed to be paid at any time by the Related Person for shares
of any such other class or
<PAGE>
series of capital stock of the Corporation. In determining the Highest Per
Share Price, all purchases by the Related Person and its Affiliates and
Associates shall be taken into account regardless of whether the shares were
purchased before or after the Related Person became a Related Person and the
Highest Per Share Price 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. Additionally, for purposes of this subparagraph (g),
the price of any shares of Common Stock received by a stockholder from GM
pursuant to a transaction (the "Split-Off") in which outstanding shares of
Class E Common Stock, par value $0.10 per share, of GM ("GME Stock") are
converted into shares of Common Stock, shall be the price paid for such GME
Stock, as appropriately adjusted to account for the number of shares of
Common Stock so received for each share of GME Stock.
(h) The term "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, association, joint venture, trust,
estate or other entity or organization.
(i) The term "Related Person" shall mean any Person (other than the
Corporation or any subsidiary of the Corporation and other than any profit-
sharing, employee stock ownership or other employee benefit plan of the
Corporation or any subsidiary of the Corporation or any trustee of or
fiduciary with respect to any such plan when acting in such capacity) who or
which (i) is the Beneficial Owner of 10% or more of the aggregate voting
power of all outstanding Voting Stock; or (ii) is an Affiliate of the
Corporation and, at any time within the two (2)-year period immediately
prior to the date in question, was the Beneficial Owner of 10% or more of
the aggregate voting power of all outstanding Voting Stock; or (iii) is an
assignee of or has otherwise succeeded to any shares of any class or series
of capital stock of the Corporation which were at any time within the two
(2)-year period immediately prior to the date in question Beneficially Owned
by any Related Person, if such assignment or succession shall have occurred
in the course of a privately negotiated transaction rather than an open
market transaction. For the purposes of determining whether a Person is a
Related Person, the number of shares of any class or series of capital stock
of the Corporation deemed to be outstanding shall include shares of such
class or series 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 exercise of conversion
rights, exchange rights, warrants or options. Notwithstanding anything in
this definition of "Related Person" to the contrary, the Hourly Plan shall
not be a Related Person solely as a result of its becoming the Beneficial
Owner of any shares of Common Stock in the Split-Off but may thereafter
become a Related Person if the Hourly Plan or any Affiliate thereof shall
after the Split-Off purchase or otherwise become the Beneficial Owner of
additional shares of any class or series of capital stock of the Corporation
constituting 1% or more of the aggregate voting power of all outstanding
Voting Stock or any other Person (or Persons) who is (or collectively are)
the Beneficial Owner of shares of any class or series of capital stock of
the Corporation constituting 1% or more of the aggregate voting power of all
outstanding Voting Stock shall become an Affiliate of the Hourly Plan,
unless, in either case referred to in this sentence, the Hourly
<PAGE>
Plan, together with all Affiliates thereof, is not then the Beneficial Owner
of 10% or more of the aggregate voting power of all outstanding Voting
Stock.
(4) Nothing contained in this Article Eighth shall be construed to
relieve any Related Person from any fiduciary obligation imposed by law.
NINTH: (1) The Board of Directors is expressly empowered to adopt,
amend or repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of the Bylaws of the Corporation by the Board of Directors shall require,
in addition to any other affirmative vote that may be required by law, the
Restated Certificate of Incorporation or the Bylaws of the Corporation, the
affirmative vote of at least a majority of the Whole Board. The stockholders of
the Corporation shall also have the power to adopt, amend or repeal the Bylaws
of the Corporation at any annual or special meeting, by the affirmative vote of
holders of at least 66-2/3% of the then outstanding Voting Stock, voting
together as a single class, in addition to any other affirmative vote that may
be required by law, the Restated Certificate of Incorporation or the Bylaws of
the Corporation.
(2) Notwithstanding any other provision of the Restated Certificate
of Incorporation or the Bylaws of the Corporation (and in addition to any other
affirmative vote that may be required by law, the Restated Certificate of
Incorporation or the Bylaws of the Corporation), there shall be required to
amend, alter, change or repeal, directly or indirectly, or adopt any provision
inconsistent with, the provisions of Article Fifth hereof, Article Sixth,
Article Seventh hereof, Article Eighth hereof or this Article Ninth, the
affirmative vote of holders of at least 80% of the then outstanding Voting
Stock, voting together as a single class.
IN WITNESS WHEREOF, the Corporation has caused the Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers, this 12th day of March, 1996.
ELECTRONIC DATA SYSTEMS HOLDING
CORPORATION
/s/ John R. Castle, Jr.
By:_____________________________
John R. Castle, Jr.
Senior Vice President
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Restated Certificate of Incorporation of
the said Corporation, the said Board of Directors on March 12, 1996 adopted the
following resolution creating a series of 15,000,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Restated Certificate of Incorporation, a series of Preferred Stock, par
value $0.01 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other rights
of the shares of such series and the qualifications, limitations and
restrictions thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred
Stock that shall be designated as "Series A Junior Participating Preferred
Stock," and the number of shares constituting such series shall be 15,000,000.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided, however, that no decrease shall reduce the number of
shares of Series A Junior Participating Preferred Stock to less than the number
of shares then issued and outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating
<PAGE>
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior Participating
Preferred Stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of March, June, September and December
in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number (as defined
below) times the aggregate per share amount of all cash dividends, and the
Adjustment Number times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 1/4,860. In the event the Corporation
shall at any time after March 12, 1996 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event; provided, however, that upon the
effectiveness of the adjustment to the Corporation's common stock capitalization
to be undertaken in connection with, but in advance of, the merger in which
outstanding shares of Class E Common Stock, par value $0.10 per share of General
Motors Corporation, a Delaware corporation, will be converted into Common Stock
(whether such adjustment is effected by recapitalization or by dividend on the
outstanding shares of Common Stock in Common Stock), the Adjustment Number shall
be (in lieu of any other adjustment by reason of the same) 100 (subject to
subsequent adjustment as hereinabove provided).
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless
2
<PAGE>
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Junior Participating Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in the Restated Certificate
of Incorporation or by law, the holders of shares of Series A Junior
Participating Preferred Stock, the holders of shares of any other class or
series entitled to vote with the Common Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C)(i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") that shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, the holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) upon which these or like voting rights have been conferred and
are exercisable (the "Voting Preferred Stock") with dividends in arrears in an
amount equal to six quarterly dividends thereon, voting as a class, irrespective
of series, shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised unless the
holders of at least one-third in number of the shares of Voting Preferred Stock
outstanding shall be
3
<PAGE>
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Voting Preferred Stock of
such voting right. At any meeting at which the holders of Voting Preferred
Stock shall exercise such voting right initially during an existing default
period, they shall have the right, voting as a class, to elect Directors to fill
such vacancies, if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to elect two
Directors. If the number that may be so elected at any special meeting does not
amount to the required number, the holders of the Voting Preferred Stock shall,
to the extent not inconsistent with the Restated Certificate of Incorporation,
have the right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Voting Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote of the
holders of Voting Preferred Stock as herein provided or pursuant to the rights
of any equity securities ranking senior to or pari passu with the Series A
Junior Participating Preferred Stock.
(iii) Unless the holders of Voting Preferred Stock shall, during
an existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent of the total number of shares
of Voting Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Voting Preferred Stock, which
meeting shall thereupon be called by the Chairman of the Board, the President, a
Vice President or the Secretary of the Corporation. Notice of such meeting and
of any annual meeting at which holders of Voting Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of record
of Voting Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later than 60 days after
such order or request or, in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on similar notice
by any stockholder or stockholders owning in the aggregate not less than ten
percent of the total number of shares of Voting Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, after the holders of Voting Preferred
Stock shall have exercised their right to elect Directors voting as a class, (x)
the Directors so elected by the holders of Voting Preferred Stock shall continue
in office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3) be
filled by vote of a majority of the remaining Directors theretofore elected by
the holders of the class or classes of stock which elected the Director whose
office shall have become vacant. References in this paragraph (C) to Directors
elected by the holders of a particular class or classes of stock shall include
Directors elected by such Directors to fill vacancies as provided in clause (y)
of the foregoing sentence.
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(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Voting Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Voting Preferred
Stock as a class shall terminate and (z) the number of Directors shall be such
number as may be provided for in the Restated Certificate of Incorporation or
By-Laws irrespective of any increase made pursuant to the provisions of
paragraph (C) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Restated Certificate of
Incorporation or By-Laws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled by
a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
Series A Junior Participating Preferred Stock, or to all such holders and
the holders of any such shares ranking on a parity therewith, upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights
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and preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) the Adjustment Number. Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall, subject to the
prior rights of all other series of Preferred Stock, if any, ranking prior
thereto, receive their ratable and proportionate share of the remaining assets
to be distributed in the ratio of the Adjustment Number to 1 with respect to
such Series A Junior Participating Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
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(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6, but the sale, lease or conveyance of all or substantially all the
Corporation's assets shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. Redemption. (A) The Corporation, at its option, may redeem
shares of the Series A Junior Participating Preferred Stock in whole at any time
and in part from time to time, at a redemption price equal to the Adjustment
Number times the current per share market price (as such term is hereinafter
defined) of the Common Stock on the date of the mailing of the notice of
redemption, together with unpaid accumulated dividends to the date of such
redemption. The "current per share market price" on any date shall be deemed to
be the average of the closing price per share of such Common Stock for the ten
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date; provided, however, that in the event that the current per share
market price of the Common Stock is determined during a period following the
announcement of (A) a dividend or distribution on the Common Stock other than a
regular quarterly cash dividend or (B) any subdivision, combination or
reclassification of such Common Stock and the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, shall not have occurred prior to the commencement of such ten
Trading Day period, then, and in each such case, the current per share market
price shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sales price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange but sales price information is reported for such security,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or such other self-regulatory organization or
registered securities information processor (as such terms are used under the
Securities Exchange Act of 1934, as amended) that then reports information
concerning the Common Stock, or, if sales price information is not so reported,
the average of the high bid and low asked prices in the over-the-counter market
on such day, as reported by NASDAQ or such other entity, or, if on any such date
the Common Stock is not quoted by any such entity, the average of the closing
bid and asked prices
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<PAGE>
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Common Stock, the fair value of the
Common Stock on such date as determined in good faith by the Board of Directors
of the Corporation shall be used. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business, or, if
the Common Stock is not listed or admitted to trading on any national securities
exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if
the Common Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of Texas are not authorized or
obligated by law or executive order to close.
(B) In the event that fewer than all the outstanding shares of the
Series A Junior Participating Preferred Stock are to be redeemed, the number of
shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by any other method that may be
determined by the Board of Directors in its sole discretion to be equitable.
(C) Notice of any such redemption shall be given by mailing to the
holders of the shares of Series A Junior Participating Preferred Stock to be
redeemed a notice of such redemption, first class postage prepaid, not later
than the fifteenth day and not earlier than the sixtieth day before the date
fixed for redemption, at their last address as the same shall appear upon the
books of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of such shares to be redeemed
from such holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease to accrue
on the close of business on such redemption date. Any notice that is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the stockholder received such notice, and failure duly to
give such notice by mail, or any defect in such notice, to any holder of Series
A Junior Participating Preferred Stock shall not affect the validity of the
proceedings for the redemption of any other shares of Series A Junior
Participating Preferred Stock that are to be redeemed. On or after the date
fixed for redemption as stated in such notice, each holder of the shares called
for redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price. If fewer than all the
shares represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(D) The shares of Series A Junior Participating Preferred Stock shall
not be subject to the operation of any purchase, retirement or sinking fund.
9. Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the
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distribution of assets, unless the terms of any such series shall provide
otherwise, and shall rank senior to the Common Stock as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock
may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate and
does affirm the foregoing as true this 12th day of March, 1996.
/s/ John R. Castle, Jr.
________________________________
John R. Castle, Jr.
Senior Vice President
<PAGE>
EXHIBIT 3(B)
AMENDED AND RESTATED
BYLAWS
OF
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
(Adopted as of April 15, 1996)
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of Electronic Data Systems Holding
Corporation (the "Corporation") in the State of Delaware shall be 1013
Centre Road, Wilmington, Delaware. The name of the registered agent at such
address is The Prentice-Hall Corporation System, Inc.
1.2 Other Offices. The Corporation may also have offices at such other places
both within and outside the State of Delaware as the Board of Directors of
the Corporation (the "Board of Directors") may determine from time to time
or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders of the Corporation shall be
held at such place within or outside the State of Delaware as may be
designated by the Board of Directors or the officer calling the meeting.
2.2 Annual Meeting. The annual meeting of the stockholders of the Corporation
shall be held on the third Tuesday of May in each year, at ten o'clock A.M.
or on such other date and at such other time as shall be determined by the
Board of Directors and set forth in the notice of meeting, and on any
subsequent day or days or later time to which such meeting may be
adjourned, for the purposes of electing Directors of the Corporation and
transacting such other business as may properly come before the meeting.
The Board of Directors shall designate the place for the holding of such
meeting, and at least 10 days' notice shall be given to the stockholders of
the Corporation of the place so fixed. If the day designated herein is a
legal holiday, the annual meeting shall be held on the first succeeding day
which is not a legal holiday. If for any reason the annual meeting shall
not be held on the day designated herein, the Board of Directors shall
cause the annual meeting to be held as soon thereafter as may be
convenient. Failure to hold an annual meeting at the designated time or
otherwise shall not work a dissolution of the Corporation.
<PAGE>
2.3 Special Meetings. Unless otherwise provided by the provisions of the
General Corporation Law of the State of Delaware, or any successor statute
(the "DGCL"), or by or pursuant to the Restated Certificate of
Incorporation of the Corporation, as it may be further amended or restated
from time to time, including pursuant to any resolution or resolutions
adopted in accordance therewith by the Board of Directors providing for the
establishment of one or more series of preferred stock of the Corporation
(the "Certificate of Incorporation"), special meetings of the stockholders
of the Corporation may be called at any time only by the Chairman of the
Board of Directors or by the Board of Directors pursuant to a resolution
approved by the affirmative vote of at least a majority of the Whole Board,
and no such special meeting may be called by any other person or persons
(the term "Whole Board" shall mean the total number of Directors of the
Corporation as fixed in accordance with the Certificate of Incorporation,
whether or not there exist any vacancies in previously authorized
directorships). Upon written request of any person or persons referenced in
the immediately preceding sentence who are authorized to call special
meetings of the stockholders of the Corporation and who have duly called
such a special meeting, it shall be the duty of the Secretary of the
Corporation to fix the date of the meeting to be held not less than 10 nor
more than 60 days after the receipt of the request and to give due notice
thereof. If the Secretary shall neglect or refuse to fix the date of the
meeting and give notice thereof, the person or persons calling the meeting
may do so. Every special meeting of the stockholders of the Corporation
shall be held at such place within or outside the State of Delaware as the
Board of Directors or the officer calling the meeting may designate.
2.4 Notice of Meeting. Unless otherwise provided by the DGCL, whenever
stockholders of the Corporation are required or permitted to take any
action at a meeting, written or printed notice of the meeting, stating the
place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered
not less than 10 nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, the Chief Executive Officer or the Secretary of the Corporation, to
each stockholder of the Corporation entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to a stockholder of the Corporation at such
stockholder's address as it appears on the stock transfer records of the
Corporation, with postage thereon prepaid. Notice of any meeting of
stockholders of the Corporation need not be given to any stockholder of the
Corporation if waived by him in writing in accordance with Section 7.3
hereof. In addition, attendance at a meeting of the stockholders of the
Corporation shall constitute a waiver of notice of such meeting, except
when a stockholder of the Corporation attends a meeting for the express
purpose of objecting (and so expresses such objection at the beginning of
the meeting) to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
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2.5 Registered Holders of Shares; Closing of Share Transfer Records; and Record
Date.
(a) Registered Holders as Owners. Unless otherwise provided by Delaware
law, the Corporation may regard the person in whose name any shares
issued by the Corporation are registered in the stock transfer records
of the Corporation at any particular time (including, without
limitation, as of a record date fixed pursuant to Section 2.5(b)
hereof) as the owner of such shares at that time for purposes of voting
such shares, receiving distributions thereon or notices in respect
thereof, transferring such shares, exercising rights of dissent with
respect to such shares, entering into agreements with respect to such
shares, or giving proxies with respect to such shares; and neither the
Corporation nor any of its officers, Directors, employees or agents
shall be liable for regarding that person to be the owner of such
shares at that time for those purposes, regardless of whether that
person possesses a certificate for such shares.
(b) Record Date. For the purpose of determining stockholders of the
Corporation entitled to notice of or to vote at any meeting of
stockholders of the Corporation or any adjournment thereof, or
entitled to receive a distribution by the Corporation (other than a
distribution involving a purchase or redemption by the Corporation of
any of its own shares) or a share dividend, or in order to make a
determination of stockholders of the Corporation for any other proper
purpose, the Board of Directors may fix in advance a date as the
record date for any such determination of stockholders of the
Corporation, such date in any case to be not more than 60 days, and in
the case of a meeting of stockholders of the Corporation, not less
than 10 days, prior to the date on which the particular action
requiring such determination of stockholders of the Corporation is to
be taken. The Board of Directors shall not close the books of the
Corporation against transfers of shares during the whole or any part
of such period.
2.6 Quorum of Stockholders; Adjournment. Unless otherwise provided by the DGCL
or the Certificate of Incorporation, a majority of the outstanding shares
of all classes or series of capital stock of the Corporation entitled to
vote, present in person or represented by proxy, shall constitute a quorum
at any meeting of the stockholders of the Corporation, and the stockholders
of the Corporation present at any duly convened meeting may continue to do
business at such meeting or at any adjournment thereof notwithstanding any
withdrawal from the meeting of holders of shares counted in determining the
existence of a quorum. Unless otherwise provided by the Certificate of
Incorporation or these Bylaws, any meeting of the stockholders of the
Corporation may be adjourned from time to time, without notice other than
by announcement at the meeting at which such adjournment is taken, and at
any such adjourned meeting at which a quorum shall be present any action
may be taken that could have been taken at the meeting originally called;
provided, however, that if the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the
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adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
2.7 Voting by Stockholders.
----------------------
(a) Voting on Matters Other Than the Election of Directors. With respect
to any matters as to which no other voting requirement is specified by
the DGCL, the Certificate of Incorporation or these Bylaws, the
affirmative vote required for stockholder action shall be that of at
least a majority of the shares present in person or represented by
proxy at the meeting (as counted for purposes of determining the
existence of a quorum at the meeting). In the case of a matter
submitted for a vote of the stockholders of the Corporation as to
which a stockholder approval requirement is applicable under the
stockholder approval policy of the New York Stock Exchange or any
other exchange or quotation system on which the shares of any class or
series of capital stock of the Corporation is traded or quoted, the
requirements of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any other rule
promulgated under the Exchange Act requiring a vote of stockholders,
or any provision of the Internal Revenue Code, in each case for which
no higher voting requirement is specified by the DGCL, the Certificate
of Incorporation or these Bylaws, the vote required for approval shall
be the requisite vote specified in such stockholder approval policy,
Rule 16b-3 or such other rule promulgated under the Exchange Act or
Internal Revenue Code provision, as the case may be (or the highest
such requirement if more than one is applicable). For the approval of
the appointment of independent public accountants (if submitted for a
vote of the stockholders of the Corporation), the vote required for
approval shall be at least a majority of the votes cast on the matter.
(b) Voting in the Election of Directors. Unless otherwise provided by or
pursuant to the Certificate of Incorporation or these Bylaws in
accordance with the DGCL, at a meeting of stockholders of the
Corporation at which a quorum is present, Directors of the Corporation
shall be elected by a plurality of the votes cast by holders of
outstanding shares of all classes or series of capital stock of the
Corporation entitled to vote in the election of Directors of the
Corporation.
2.8 Stockholder Proposals.
---------------------
(a) The provisions of Section 2.8(b) hereof shall become effective upon
(and notwithstanding any other provision of these Bylaws shall not be
effective with respect to any action specified in Section 2.8(b)
hereof to be taken on any date prior to) the first date on which the
Corporation has outstanding a class of equity securities registered
under the Exchange Act (the "Public Status Date").
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(b) At an annual meeting of stockholders of the Corporation, only such
business shall be conducted, and only such proposals shall be acted
upon, as shall have been properly brought before such annual meeting.
To be properly brought before an annual meeting, business or proposals
must (i) be specified in the notice relating to the meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors in accordance with Section 2.4 hereof or (ii) be properly
brought before the meeting by a stockholder of the Corporation who (A)
is a stockholder of record at the time of the giving of such
stockholder's notice provided for in this Section 2.8(b), (B) shall be
entitled to vote at the annual meeting and (C) complies with the
requirements of this Section 2.8(b), and otherwise be proper subjects
for stockholder action and be properly introduced at the annual
meeting. For a proposal to be properly brought before an annual meeting
by a stockholder of the Corporation, in addition to any other
applicable requirements, such stockholder must have given timely
advance notice thereof in writing to the Secretary of the Corporation.
To be timely, such stockholder's notice must be delivered to, or mailed
and received at, the principal executive offices of the Corporation not
less than 90 days nor more than 150 days prior to the scheduled annual
meeting date, regardless of any postponements, deferrals or
adjournments of such annual meeting to a later date; provided, however,
that if the scheduled annual meeting date differs from the annual
meeting date prescribed by these Bylaws as in effect on the date of the
next preceding annual meeting of stockholders of the Corporation and if
less than 100 days' prior notice or public disclosure of the scheduled
annual meeting date is given or made, notice by such stockholder, to be
timely, must be so delivered or received not later than the close of
business on the 10th day following the earlier of the day on which the
notice of such meeting was mailed to stockholders of the Corporation or
the day on which such public disclosure was made. Any such
stockholder's notice to the Secretary of the Corporation shall set
forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of such stockholder proposing such business and
any other stockholders of the Corporation known by such stockholder to
be in favor of such proposal, (iii) the number of shares of each class
or series of capital stock of the Corporation Beneficially Owned (as
defined below) by such stockholder on the date of such notice and (iv)
any material interest of such stockholder in such proposal. A person
shall be the "beneficial owner" of any shares of any class or series of
capital stock of the Corporation of which such person would be the
beneficial owner pursuant to the terms of Rule 13d-3 promulgated under
the Exchange Act as in effect on March 12, 1996; stock shall be deemed
"Beneficially Owned" by the beneficial owner or owners thereof. The
presiding officer of the meeting of stockholders of the Corporation
shall determine whether the requirements of this Section 2.8(b) have
been met with respect to any stockholder proposal. If the presiding
officer determines that any stockholder proposal was not made in
accordance with the terms of this Section 2.8(b), he shall
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<PAGE>
so declare at the meeting and any such proposal shall not be acted
upon at the meeting. At a special meeting of stockholders of the
Corporation, only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly brought
before such special meeting. To be properly brought before such a
special meeting, business or proposals must (i) be specified in the
notice relating to the meeting (or any supplement thereto) given by or
at the direction of the Board of Directors in accordance with Section
2.4 hereof or (ii) constitute matters incident to the conduct of the
meeting as the presiding officer of the meeting shall determine to be
appropriate. In addition to the foregoing provisions of this Section
2.8(b), a stockholder of the Corporation shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder with respect to the matters set
forth in this Section 2.8(b).
ARTICLE III
DIRECTORS
3.1 Number, Classification and Tenure.
---------------------------------
(a) The powers of the Corporation shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be
managed by or under the direction of, the Board of Directors. In
addition to the authority and powers conferred upon the Board of
Directors by the DGCL, the Certificate of Incorporation or these
Bylaws, the Board of Directors is hereby authorized and empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject to the provisions of the
DGCL, the Certificate of Incorporation and any Bylaw of the
Corporation adopted by the stockholders of the Corporation; provided,
however, that no Bylaw of the Corporation hereafter adopted by the
stockholders of the Corporation, nor any amendment thereto, shall
invalidate any prior act of the Board of Directors that would have
been valid if such Bylaw or amendment thereto had not been adopted.
(b) On and after the Public Status Date and except as otherwise provided
by the Certificate of Incorporation or these Bylaws or to the extent
prohibited by Delaware law, the Board of Directors shall have the
right to establish the rights, powers, duties, rules and procedures
that (i) from time to time shall govern the Board of Directors,
including, without limiting the generality of the foregoing, the vote
required for any action by the Board of Directors and (ii) from time
to time shall affect the Directors' power to manage the business and
affairs of the Corporation.
(c) Within the limits specified in the Certificate of Incorporation, and
subject to such rights of holders of shares of one or more outstanding
series of preferred stock of the Corporation to elect one or more
Directors of the Corporation under circumstances
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as shall be provided by or pursuant to the Certificate of
Incorporation, the number of Directors of the Corporation that shall
constitute the Board of Directors shall be fixed from time to time
exclusively by, and may be increased or decreased from time to time
exclusively by, the affirmative vote of at least a majority of the
Whole Board.
(d) Each Director of the Corporation shall hold office for the full term
for which such Director is elected and until such Director's successor
shall have been duly elected and qualified or until his earlier death,
resignation or removal in accordance with the Certificate of
Incorporation and these Bylaws.
(e) On and after the Public Status Date, the Directors of the Corporation,
other than those who may be elected by holders of shares of one or
more outstanding series of preferred stock of the Corporation under
circumstances as shall be provided by or pursuant to the Certificate
of Incorporation, shall be divided into three classes as provided by
the Certificate of Incorporation.
(f) Unless otherwise provided by or pursuant to the Certificate of
Incorporation, newly created directorships resulting from any increase
in the authorized number of Directors of the Corporation and any
vacancies on the Board of Directors resulting from death, resignation
or removal in accordance with the Certificate of Incorporation and
these Bylaws shall be filled only by the affirmative vote of at least
a majority of the remaining Directors of the Corporation then in
office, even if such remaining Directors constitute less than a quorum
of the Board of Directors. Any Director of the Corporation elected in
accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of Directors of the
Corporation in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been elected
and qualified or until his earlier death, resignation or removal in
accordance with the Certificate of Incorporation and these Bylaws.
Unless otherwise provided by or pursuant to the Certificate of
Incorporation, no decrease in the number of Directors of the
Corporation constituting the Board of Directors shall shorten the term
of any incumbent Director of the Corporation. The term "Voting Stock"
shall mean all outstanding shares of all classes and series of capital
stock of the Corporation entitled to vote generally in the election of
Directors of the Corporation, considered as one class; and, if the
Corporation shall have shares of Voting Stock entitled to more or less
than one vote for any such share, each reference in these Bylaws to a
proportion or percentage in voting power of Voting Stock shall be
calculated by reference to the portion or percentage of votes entitled
to be cast by holders of such shares generally in the election of
Directors of the Corporation.
3.2 Qualifications. Directors of the Corporation need not be residents of the
State of Delaware or stockholders of the Corporation.
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3.3 Nomination of Directors.
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(a) The provisions of Section 3.3(b) hereof shall become effective upon
(and notwithstanding any other provision of these Bylaws shall not be
effective with respect to any action specified in Section 3.3(b)
hereof to be taken on any date prior to) the Public Status Date.
(b) Subject to such rights of holders of shares of one or more outstanding
series of preferred stock of the Corporation to elect one or more
Directors of the Corporation under circumstances as shall be provided
by or pursuant to the Certificate of Incorporation, only persons who
are nominated in accordance with the procedures set forth in this
Section 3.3(b) shall be eligible for election as, and to serve as,
Directors of the Corporation. Nominations of persons for election to
the Board of Directors may be made only at an annual meeting of the
stockholders of the Corporation at which Directors of the Corporation
are to be elected (i) by or at the direction of the Board of Directors
or (ii) by any stockholder of the Corporation who is a stockholder of
record at the time of the giving of such stockholder's notice provided
for in this Section 3.3(b), who shall be entitled to vote at such
meeting in the election of Directors of the Corporation and who
complies with the requirements of this Section 3.3(b). Any such
nomination by a stockholder of the Corporation shall be preceded by
timely advance notice in writing to the Secretary of the Corporation.
To be timely, such stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the
Corporation not less than 90 days nor more than 150 days prior to the
scheduled annual meeting date, regardless of any postponements,
deferrals or adjournments of such annual meeting to a later date;
provided, however, that if the scheduled annual meeting date differs
from the annual meeting date prescribed by these Bylaws as in effect
on the date of the next preceding annual meeting of stockholders of
the Corporation and if less than 100 days' prior notice or public
disclosure of the scheduled meeting date is given or made, notice by
such stockholder, to be timely, must be so delivered or received not
later than the close of business on the 10th day following the earlier
of the day on which the notice of such meeting was mailed to
stockholders of the Corporation or the day on which such public
disclosure was made. Any such stockholder's notice to the Secretary of
the Corporation shall set forth (i) as to each person whom such
stockholder proposes to nominate for election or re-election as a
Director of the Corporation, (A) the name, age, business address and
residence address of such person, (B) the principal occupation or
employment of such person, (C) the number of shares of each class or
series of capital stock of the Corporation Beneficially Owned by such
person on the date of such notice and (D) any other information
relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors of the Corporation,
or is otherwise required, in each case pursuant to Regulation 14A
promulgated under the Exchange Act (including, without limitation, the
written consent of such person to having such person's name placed
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in nomination at the meeting and to serve as a Director of the
Corporation if elected), and (ii) as to such stockholder giving the
notice, (A) the name and address, as they appear on the Corporation's
books, of such stockholder and any other stockholders of the
Corporation known by such stockholder to be in favor of such person
being nominated and (B) the number of shares of each class or series
of capital stock of the Corporation Beneficially Owned by such
stockholder on the date of such notice. The presiding officer of the
meeting of stockholders of the Corporation shall determine whether the
requirements of this Section 3.3(b) have been met with respect to any
nomination or intended nomination. If the presiding officer determines
that any nomination was not made in accordance with the requirements
of this Section 3.3(b), he shall so declare at the meeting and the
defective nomination shall be disregarded. In addition to the
foregoing provisions of this Section 3.3(b), a stockholder of the
Corporation shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations promulgated thereunder with
respect to the matters set forth in this Section 3.3(b).
3.4 Place of Meeting. Meetings of the Board of Directors, regular or special,
may be held either within or outside of the State of Delaware, at whatever
place is specified by the person or persons calling the meeting. In the
absence of specific designation, the meetings shall be held at the
principal office of the Corporation.
3.5 Regular Meetings. Regular meetings of the Board of Directors shall be held
at such place or places within or outside the State of Delaware, at such
hour and on such day as may be fixed by resolution of the Board of
Directors, without further notice of such meetings. The time or place of
holding regular meetings of the Board of Directors may be changed by the
Chairman of the Board or the Chief Executive Officer by giving written
notice thereof as provided by Section 3.7 hereof.
3.6 Special Meetings. Special meetings of the Board of Directors shall be held,
whenever called by the Chairman of the Board or the Chief Executive Officer
or Directors of the Corporation constituting at least a majority of the
Whole Board, at such place or places within or outside the State of
Delaware as may be stated in the notice of the meeting.
3.7 Attendance at and Notice of Meetings. Written notice of the time and place
of, and general nature of the business to be transacted at, all special
meetings of the Board of Directors, and written notice of any change in the
time or place of holding the regular meetings of the Board of Directors,
shall be given to each Director of the Corporation personally or by mail or
by telegraph, telecopier or similar communication at least one day before
the day of the meeting; provided, however, that notice of any meeting need
not be given to any Director of the Corporation if waived by him in writing
in accordance with Section 7.3 hereof, or if he shall be present at such
meeting. Attendance at a meeting of the Board of Directors shall constitute
presence in person at such meeting, except when a Director of the
Corporation attends a meeting for the express purpose of objecting (and so
expresses such objection at
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the beginning of the meeting) to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
3.8 Quorum of and Action by Directors. A majority of the Directors of the
Corporation in office (i.e., excluding any directorships in which
vacancies may exist) shall constitute a quorum of the Board of
Directors for the transaction of business; but a lesser number may
adjourn from day to day until a quorum is present. Unless otherwise
required by the Certificate of Incorporation, the DGCL or these
Bylaws, the affirmative vote of at least a majority of the Directors
of the Corporation present at a meeting at which a quorum is present,
shall be the act of the Board of Directors.
3.9 Board and Committee Action Without a Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at a meeting of the Board of
Directors or any committee thereof may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by
all the Directors of the Corporation or members of such committee, as
the case may be, and shall be filed with the Secretary of the
Corporation.
3.10 Board and Committee Telephone Meetings. Subject to the provisions
required or permitted by the DGCL for notice of meetings, unless
otherwise restricted by the Certificate of Incorporation or these
Bylaws, Directors of the Corporation, or members of any committee
designated by the Board of Directors, may participate in and hold a
meeting of such Board of Directors or committee by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 3.10 shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting (and
so expresses such objection at the beginning of the meeting) to the
transaction of any business on the ground that the meeting is not
lawfully called or convened.
3.11 Compensation. Directors of the Corporation shall receive such
compensation for their services as shall be determined by the Board of
Directors.
3.12 Removal.
(a) No Director of the Corporation shall be removed from such office
by vote or other action of the stockholders of the Corporation or
otherwise, except by the affirmative vote of holders of at least
a majority of the then outstanding Voting Stock, voting together
as a single class. Prior to the Public Status Date, any such
removal of a Director of the Corporation may be with or without
cause. On and after the Public Status Date, no Director of the
Corporation shall be removed from such office by vote or other
action of the stockholders of the Corporation or otherwise,
except for cause, which shall be deemed to exist only if: (i)
such Director has been convicted, or such Director is granted
immunity to testify where another has been convicted, of
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a felony by a court of competent jurisdiction (and such
conviction is no longer subject to direct appeal); (ii) such
Director has been found by a court of competent jurisdiction (and
such finding is no longer subject to direct appeal) or by the
affirmative vote of at least a majority of the Whole Board at any
regular or special meeting of the Board of Directors called for
such purpose to have been grossly negligent or guilty of willful
misconduct in the performance of his duties to the Corporation in
a matter of substantial importance to the Corporation; (iii) such
Director has been adjudicated by a court of competent
jurisdiction to be mentally incompetent, which mental
incompetency directly affects his ability to perform as a
Director of the Corporation; (iv) such Director has been found by
a court of competent jurisdiction (and such finding is no longer
subject to direct appeal) or by the affirmative vote of at least
a majority of the Whole Board at any regular or special meeting
of the Board of Directors called for such purpose to have
breached such Director's duty of loyalty to the Corporation or
its stockholders or to have engaged in any transaction with the
Corporation from which such Director derived an improper personal
benefit; or (v) "cause" for removal otherwise exists under
Section 141(k)(1) of the DGCL. No Director of the Corporation so
removed may be nominated, re-elected or reinstated as a Director
of the Corporation so long as the cause for removal continues to
exist. On and after the Public Status Date, any proposal by a
stockholder of the Corporation to remove a Director of the
Corporation, in order to be validly acted upon at any meeting,
shall comply with Section 2.8(b) hereof.
(b) Notwithstanding Section 3.12(a) hereof, whenever holders of
shares of one or more outstanding series of preferred stock of
the Corporation are entitled to elect one or more Directors of
the Corporation under circumstances as shall be provided by or
pursuant to the Certificate of Incorporation, any Director of the
Corporation so elected may be removed in accordance with such
provisions.
3.13 Committees of the Board of Directors.
(a) The Board of Directors, by resolution adopted by the affirmative vote
of at least a majority of the Board of Directors, may designate and
appoint from among its members one or more committees, each of which
shall be comprised of one or more of its members, and may designate
one or more of its members as alternate members of any committee, who
may, subject to any limitations by the Board of Directors, replace
absent or disqualified members at any meeting of that committee. Any
such committee, to the extent provided by such resolution or in the
Certificate of Incorporation or these Bylaws, shall have and may
exercise all of the authority of the Board of Directors to the extent
permitted by the DGCL.
(b) The Board of Directors shall have the power at any time to change
the membership of any committee of the Board of Directors and to
fill vacancies in it. A majority of
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the number of members of any such committee (excluding any
committee memberships in which vacancies may exist) shall
constitute a quorum of such committee for the transaction of
business unless a greater number is required by a resolution
adopted by the Board of Directors. The Board of Directors, or
each such committee in the absence of action by the Board of
Directors, may elect a chairman of such committee and appoint
such subcommittees and assistants as it may deem necessary.
Unless otherwise provided by resolution of the Board of
Directors, meetings of any committee shall be conducted (i) in
accordance with Sections 3.9, 3.10 and 7.3 hereof and (ii) in the
same manner that Sections 3.5, 3.6, 3.7 and 3.8 hereof apply to
meetings of the Board of Directors. Any member of any such
committee designated or appointed by the Board of Directors may
be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation will be served thereby, but
such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Election or appointment of a
member of a committee shall not of itself create contract rights.
(c) Any action taken by any committee of the Board of Directors shall
promptly be recorded in the minutes and filed with the Secretary
of the Corporation and shall be made available to any and all
Directors of the Corporation.
ARTICLE IV
OFFICERS
4.1 Officers. The officers of the Corporation shall consist of a Chief
Executive Officer, a President, any number of Vice Presidents, a Secretary,
a Chief Financial Officer, a Treasurer and a Controller, each of whom shall
be elected or appointed by the Board of Directors. Such other officers of
the Corporation, including a Chairman of the Board, a Vice Chairman of the
Board, a Chief Operating Officer, Senior Vice Presidents, assistant
officers of the Corporation, and agents as may be deemed necessary, may be
elected or appointed by the Board of Directors. Any two or more offices may
be held by the same person. Employees of the Corporation who serve in a
capacity with an officer's title for a Division, Strategic Business Unit,
Strategic Support Unit or a similar division or subdivision of the
Corporation shall not be deemed officers of the Corporation with respect to
such capacity. All officers and agents of the Corporation, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as is provided by these Bylaws,
or as may be determined by resolution of the Board of Directors not
inconsistent with these Bylaws.
4.2 Vacancies. Whenever any vacancies shall occur in any office of the
Corporation by death, resignation, removal, increase in the number of
offices of the Corporation, or otherwise, the same shall be filled by the
Board of Directors. If any such vacancy shall occur by death, resignation
or removal of an officer who was appointed by the Chief Executive Officer,
the
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Secretary, the Treasurer or the Controller in accordance with these Bylaws,
such vacancy may also be filled by the Chief Executive Officer, the
Secretary, the Treasurer or the Controller, as applicable. Any officer so
elected or appointed shall hold office until such officer's successor is
elected or appointed or until his earlier death, resignation or removal.
4.3 Removal. Any officer or agent elected or appointed by the Board of
Directors or appointed by the Chief Executive Officer, the Secretary, the
Treasurer or the Controller may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation will be
served thereby. Any officer or agent appointed by the Chief Executive
Officer, the Secretary, the Treasurer or the Controller may be removed by
the officer (or such officer's successor) who appointed such officer or
agent whenever in the judgment of the appointing officer (or such officer's
successor) the best interests of the Corporation will be served thereby.
Any such removal shall be without prejudice to the contract rights, if any,
of the officer or agent so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
4.4 Chairman of the Board. The Board of Directors may elect or appoint, from
among its members, a Chairman of the Board of the Corporation. The Chairman
of the Board, when present, shall preside at all meetings of the
stockholders of the Corporation and of the Board of Directors. The Chairman
of the Board shall perform, under the direction and subject to the control
of the Board of Directors, all duties incident to the office of Chairman of
the Board and such other duties as the Board of Directors may assign to the
Chairman of the Board from time to time. The Chairman of the Board may
execute (in facsimile or otherwise) and deliver certificates for shares of
the Corporation, any deeds, mortgages, bonds, contracts or other
instruments that the Board of Directors has authorized to be executed and
delivered, except in cases where the execution and delivery thereof shall
be expressly and exclusively delegated to one or more other officers or
agents of the Corporation by the Board of Directors or these Bylaws, or
where the execution and delivery thereof shall be required by law to be
executed and delivered by another person. The Chairman of the Board shall
have the power and authority to appoint one or more Vice Presidents of the
Corporation, including Senior Vice Presidents and Assistant Vice
Presidents, which power shall not be exclusive of any right of the Board of
Directors, the Vice Chairman of the Board, the Chief Executive Officer or
the President to elect or appoint such officers.
4.5 Vice Chairman of the Board. The Board of Directors may elect or appoint,
from among its members, a Vice Chairman of the Board of the Corporation.
The Vice Chairman of the Board shall perform, under the direction and
subject to the control of the Board of Directors and the Chairman of the
Board, all duties incident to the office of Vice Chairman of the Board and
such other duties as the Board of Directors or the Chairman of the Board
may assign to the Vice Chairman of the Board from time to time. In the
event of the death, disability or other absence of the Chairman of the
Board, the duties of the Chairman of the Board may be performed by the Vice
Chairman of the Board. The Vice Chairman of the
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Board may execute (in facsimile or otherwise) and deliver certificates for
shares of the Corporation, any deeds, mortgages, bonds, contracts or other
instruments that the Board of Directors has authorized to be executed and
delivered, except in cases where the execution and delivery thereof shall
be expressly and exclusively delegated to one or more other officers or
agents of the Corporation by the Board of Directors or these Bylaws, or
where the execution and delivery thereof shall be required by law to be
executed and delivered by another person. The Vice Chairman of the Board
shall have the power and authority to appoint one or more Vice Presidents
of the Corporation, including Senior Vice Presidents and Assistant Vice
Presidents, which power shall not be exclusive of any right of the Board of
Directors, the Chairman of the Board, the Chief Executive Officer or the
President to elect or appoint such officers.
4.6 Chief Executive Officer. The Chief Executive Officer in general shall
supervise and control all of the business and affairs of the Corporation,
under the direction and subject to the control of the Board of Directors,
the Chairman of the Board and such other officer or officers as the Board
of Directors or the Chairman of the Board may designate. The Chief
Executive Officer shall perform, under the direction and subject to the
control of the Board of Directors, the Chairman of the Board and such other
officer or officers as the Board of Directors or the Chairman of the Board
may designate, all duties incident to the office of Chief Executive Officer
and such other duties as the Board of Directors, the Chairman of the Board
or such other officer or officers may assign to the Chief Executive Officer
from time to time. The Chief Executive Officer may execute (in facsimile or
otherwise) and deliver certificates for shares of the Corporation, any
deeds, mortgages, bonds, contracts or other instruments that the Board of
Directors has authorized to be executed and delivered, except in cases
where the execution and delivery thereof shall be expressly and exclusively
delegated to one or more other officers or agents of the Corporation by the
Board of Directors or these Bylaws, or where the execution and delivery
thereof shall be required by law to be executed and delivered by another
person. The Chief Executive Officer shall have the power and authority to
appoint one or more Vice Presidents of the Corporation, including Senior
Vice Presidents and Assistant Vice Presidents, which power shall not be
exclusive of any right of the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board or the President to elect or appoint
such officers.
4.7 President. The President shall perform, under the direction and subject to
the control of the Board of Directors, the Chairman of the Board and such
other officer or officers as the Board of Directors or the Chairman of the
Board may designate, all duties incident to the office of President and
such other duties as the Board of Directors, the Chairman of the Board or
such other officer or officers may assign to the President from time to
time. In the event of the death, disability or other absence of the
Chairman of the Board and the Vice Chairman of the Board, the duties of the
Chairman of the Board may be performed by the President. The President may
execute (in facsimile or otherwise) and deliver certificates for shares of
the Corporation, any deeds, mortgages, bonds, contracts or other
instruments that the Board of Directors has authorized to be executed and
delivered, except in cases where the execution
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and delivery thereof shall be expressly and exclusively delegated to one or
more other officers or agents of the Corporation by the Board of Directors
or these Bylaws, or where the execution and delivery thereof shall be
required by law to be executed and delivered by another person. The
President shall have the power and authority to appoint one or more Vice
Presidents of the Corporation, including Senior Vice Presidents and
Assistant Vice Presidents, which power shall not be exclusive of any right
of the Board of Directors, the Chairman of the Board, the Vice Chairman of
the Board or the Chief Executive Officer to elect or appoint such officers.
4.8 Chief Operating Officer. The Chief Operating Officer shall perform, under
the direction and subject to the control of the Board of Directors, the
Chairman of the Board and such other officer or officers as the Board of
Directors or the Chairman of the Board may designate, all duties incident
to the office of Chief Operating Officer and such other duties as the Board
of Directors, the Chairman of the Board or such other officer or officers
may assign to the Chief Operating Officer from time to time. The Chief
Operating Officer may execute (in facsimile or otherwise) and deliver any
deeds, mortgages, bonds, contracts or other instruments that the Board of
Directors has authorized to be executed and delivered, except in cases
where the execution and delivery thereof shall be expressly and exclusively
delegated to one or more other officers or agents of the Corporation by the
Board of Directors or these Bylaws, or where the execution and delivery
thereof shall be required by law to be executed and delivered by another
person.
4.9 Vice President. Each Vice President of the Corporation shall perform, under
the direction and subject to the control of the Board of Directors, the
Chairman of the Board and such other officer or officers as the Board of
Directors or the Chairman of the Board may designate, such duties as the
Board of Directors, the Chairman of the Board or such other officer or
officers may assign to such Vice President from time to time.
4.10 Secretary. The Secretary of the Corporation shall attend all meetings of
the stockholders of the Corporation, the Board of Directors and committees
established by the Board of Directors (except where the committee has
appointed its own secretary) and shall record correctly the proceedings of
such meetings in a book suitable for such purposes. The Secretary shall
attest with a signature and the seal of the Corporation (in facsimile or
otherwise) all stock certificates issued by the Corporation and shall keep
a stock ledger in which all transactions pertaining to shares of all
classes and series of capital stock of the Corporation shall be correctly
recorded. The Secretary, or the President, shall also attest with a
signature and the seal of the Corporation (in facsimile or otherwise) all
deeds, conveyances or other instruments requiring the seal of the
Corporation. The Secretary shall have the power and authority on behalf of
the Corporation to execute any consents of stockholders, members, partners
or other owners and to attend, and to act and to vote in person or by proxy
in connection with, any meetings of the stockholders, members, partners or
other owners of any corporation, limited liability company, partnership or
other entity in which the Corporation may own stock, membership interests,
partnership interests or other securities,
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and in connection with any such meeting, the Secretary shall possess and
may exercise any and all the rights and powers incident to the ownership of
such stock, membership interests, partnership interests or other securities
that the Corporation, as the owner thereof, may possess and exercise. This
power and authority shall not be exclusive of any right of the Board of
Directors to grant such power and authority to any other person. The
Chairman of the Board, the Chief Executive Officer or the Secretary shall
give, or cause to be given, notice of all meetings of the stockholders of
the Corporation and special meetings of the Board of Directors or
committees established by the Board of Directors. The Secretary is
authorized to issue certificates, to which the corporate seal may be
affixed, attesting to the incumbency of officers of the Corporation or to
actions duly taken by the stockholders of the Corporation, the Board of
Directors or any committee established by the Board of Directors. The
Secretary shall perform, under the direction and subject to the control of
the Board of Directors, the Chairman of the Board and such other officer or
officers as the Board of Directors or the Chairman of the Board may
designate, all duties incident to the office of Secretary and such other
duties as the Board of Directors, the Chairman of the Board or such other
officer or officers may assign to the Secretary from time to time. The
duties of the Secretary may also be performed by any Assistant Secretary of
the Corporation. The Secretary shall have the power and authority to
appoint one or more Assistant Secretaries of the Corporation, which power
shall not be exclusive of any right of the Board of Directors to elect or
appoint such officer.
4.11 Chief Financial Officer. The Chief Financial Officer of the Corporation in
general shall supervise all of the financial affairs of the Corporation,
under the direction and subject to the control of the Board of Directors
and the President. The Chief Financial Officer shall have the power and
authority on behalf of the Corporation to execute (in facsimile or
otherwise) any consents of stockholders, members, partners or other owners
and to attend, and to act and to vote in person or by proxy in connection
with, any meetings of stockholders, members, partners or other owners of
any corporation, limited liability company, partnership or other entity in
which the Corporation may own stock, membership interests, partnership
interests or other securities, and in connection with any such meeting, the
Chief Financial Officer shall possess and may exercise any and all the
rights and powers incident to the ownership of such stock, membership
interests, partnership interests or other securities that the Corporation,
as the owner thereof, may possess and exercise. This power and authority
shall not be exclusive of any right of the Board of Directors to grant such
power and authority to any other person. The Chief Financial Officer shall
perform, under the direction and subject to the control of the Board of
Directors, the Chairman of the Board and such other officer or officers as
the Board of Directors or the Chairman of the Board may designate, all
duties incident to the office of Chief Financial Officer and such other
duties as the Board of Directors, the Chairman of the Board or such other
officer or officers may assign to the Chief Financial Officer from time to
time.
4.12 Treasurer. The Treasurer of the Corporation shall have the care and custody
of all the funds, notes, bonds, debentures, stock and other securities of
the Corporation that may come into
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the hands of the Treasurer, acting in such capacity. The Treasurer shall be
responsible for the investment and reinvestment of funds of the Corporation
in accordance with general investment policies determined from time to time
by the Corporation and shall ensure that the Corporation is adequately
funded at all times by arranging, under the direction and subject to the
control of the Board of Directors, for the issuance of debt, equity and
other forms of securities that may be necessary or appropriate. The
Treasurer may endorse (in facsimile or otherwise) checks, drafts, notes,
bonds, debentures and other instruments for the payment of money for
deposit or collection when necessary or appropriate and may deposit the
same to the credit of the Corporation in such banks or depositories as the
Board of Directors may designate from time to time, and the Treasurer may
endorse (in facsimile or otherwise) all commercial documents requiring
endorsements for or on behalf of the Corporation. The Treasurer may deliver
instructions to financial institutions by facsimile or otherwise. The
Treasurer may execute (in facsimile or otherwise) all receipts and vouchers
for payments made to the Corporation. The Treasurer shall render an account
of the Treasurer's transactions to the Board of Directors or its Audit
Committee as often as the Board of Directors or its Audit Committee shall
require from time to time. The Treasurer shall enter regularly in the books
to be kept by the Treasurer for that purpose, a full and adequate account
of all monies received and paid by the Treasurer on account of the
Corporation. The Treasurer shall have the power and authority on behalf of
the Corporation to execute (in facsimile or otherwise) any consents of
stockholders, members, partners or other owners and to attend, and to act
and to vote in person or by proxy in connection with, any meetings of
stockholders, members, partners or other owners of any corporation, limited
liability company, partnership or other entity in which the Corporation may
own stock, membership interests, partnership interests or other securities
and in connection with any such meeting, the Treasurer shall possess and
may exercise any and all the rights and powers incident to the ownership of
such stock, membership interests, partnership interests or other securities
that the Corporation, as the owner thereof, may possess and exercise. This
power and authority shall not be exclusive of any right of the Board of
Directors to grant such power and authority to any other person. If
requested by the Board of Directors, the Treasurer shall give a bond to the
Corporation for the faithful performance of the Treasurer's duties, the
expense of which bond shall be borne by the Corporation. The Treasurer
shall perform, under the direction and subject to the control of the Board
of Directors, the Chairman of the Board and such other officer or officers
as the Board of Directors or the Chairman of the Board may designate, all
duties incident to the office of Treasurer and such other duties as the
Board of Directors, the Chairman of the Board or such other officer or
officers may assign to the Treasurer from time to time. The duties of the
Treasurer may also be performed by any Assistant Treasurer of the
Corporation. The Treasurer shall have the power and authority to appoint
one or more Assistant Treasurers of the Corporation, which power shall not
be exclusive of any right of the Board of Directors to elect or appoint
such officer.
4.13 Controller. The Controller of the Corporation shall be the chief accounting
officer of the Corporation, shall maintain adequate records of all assets,
liabilities and transactions of the
-17-
<PAGE>
Corporation and shall be responsible for the design, installation and
maintenance of accounting and cost control systems and procedures
throughout the Corporation. The Controller also shall keep in books
belonging to the Corporation full and accurate accounts of receipts of, and
disbursements made by, the Corporation. The Controller shall render an
account of the Controller's transactions to the Board of Directors or its
Audit Committee as often as the Board of Directors or its Audit Committee
shall require from time to time. If requested by the Board of Directors,
the Controller shall give a bond to the Corporation for the faithful
performance of the Controller's duties, the expense of which bond shall be
borne by the Corporation. The Controller shall perform, under the direction
and subject to the control of the Board of Directors, the Chairman of the
Board and such other officer or officers as the Board of Directors or the
Chairman of the Board may designate, all duties incident to the office of
Controller and such other duties as the Board of Directors, the Chairman of
the Board or such other officer or officers may assign to the Controller
from time to time. The duties of the Controller may also be performed by
any Assistant Controller of the Corporation. The Controller shall have the
power and authority to appoint one or more Assistant Controllers of the
Corporation, which power shall not be exclusive of any right of the Board
of Directors to elect or appoint such officer.
4.14 Delegation of Authority. In the case of any absence of any officer of the
Corporation or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may delegate in writing some or all of
the powers or duties of such officer to any other officer or to any
Director, employee, stockholder or agent of the Corporation for whatever
period of time the Board of Directors deems appropriate.
ARTICLE V
CAPITAL STOCK
5.1 Stock Certificates. The certificates representing shares of all classes or
series of capital stock of the Corporation shall be in such form or forms
as shall be approved by the Board of Directors, or the Corporation's stock
may be represented by uncertificated shares. In the case of certificated
shares, the Corporation shall deliver certificates representing shares to
which stockholders of the Corporation are entitled. Certificates
representing such certificated shares shall be signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or a Vice
President and either the Treasurer, the Assistant Treasurer, the Secretary
or an Assistant Secretary, and may, but shall not be required to, bear the
seal of the Corporation or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles. In the event the original or
facsimile signature on a certificate is of an officer who has ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer at the
date of its issuance.
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<PAGE>
ARTICLE VI
INDEMNIFICATION
6.1 General. Each person who at any time shall serve or shall have served as a
Director, officer, employee or agent of the Corporation (including any
predecessor of the Corporation), or any person who is or was serving at the
written request of the Corporation (in accordance with written procedures
adopted from time to time by the Board of Directors) as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of 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 Corporation as,
and to the fullest extent, permitted by Section 145 of the DGCL or any
successor statutory provision, as from time to time amended. The foregoing
right of indemnification and to the advancement of expenses shall not be
deemed exclusive of any other rights to which those to be indemnified may
be entitled as a matter of law or under any agreement, vote of stockholders
or disinterested Directors of the Corporation, or other arrangement.
6.2 Insurance. The Corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation or who is or was serving at the
written request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against
any liability asserted against and incurred by such person in such capacity
or arising out of such person's status in such capacity, whether or not the
Corporation would have the power to indemnify such person against that
liability under this Article VI or the DGCL.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Bylaw Amendments. The Board of Directors is expressly empowered to adopt,
amend or repeal these Bylaws. Any adoption, amendment or repeal of these
Bylaws by the Board of Directors shall require, in addition to any other
affirmative vote that may be required by law, the Certificate of
Incorporation or these Bylaws, the affirmative vote of at least a majority
of the Whole Board. The stockholders of the Corporation shall also have the
power to adopt, amend or repeal these Bylaws at any annual or special
meeting, by the affirmative vote of holders of at least 66-2/3% of the then
outstanding Voting Stock, voting together as a single class, in addition to
any other affirmative vote that may be required by law, the Certificate of
Incorporation or these Bylaws. On and after the Public Status Date, any
proposal by a stockholder of the Corporation to adopt, amend or repeal
these Bylaws, in order to be validly acted upon at any meeting, shall
comply with Section 2.8(b) hereof.
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<PAGE>
7.2 Books and Records. The Corporation shall keep books and records of account
and shall keep minutes of the proceedings of its stockholders, its Board of
Directors and each committee of its Board of Directors.
7.3 Waiver of Notice. Whenever any notice is required to be given to any
stockholder of the Corporation, any Director of the Corporation or any
member of any committee of the Board of Directors, under the provisions of
the DGCL, the Certificate of Incorporation or these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Neither the business transacted at, nor the purpose
of, any regular or special meeting of such stockholders, Directors or
committees need be stated in the written waiver of notice of such meeting.
7.4 Resignations. Any Director or officer of the Corporation may resign at any
time. Such resignation shall be made in writing and shall take effect at
the time specified therein, or, if no time be specified, at the time of its
receipt by the Chairman of the Board, the Vice Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer or the
Secretary. The acceptance of a resignation shall not be necessary to make
it effective, unless expressly so provided by the resignation.
7.5 Seal. The seal of the Corporation shall be in such form as the Board of
Directors may adopt.
7.6 Fiscal Year. The fiscal year of the Corporation shall end on the 31st day
of December of each year or as otherwise provided by a resolution adopted
by the Board of Directors.
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<PAGE>
EXHIBIT 5
BAKER & BOTTS, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
April 16, 1996
Electronic Data Systems Holding Corporation
5400 Legacy Drive
Plano, Texas 75024-3105
Gentlemen:
As set forth in the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by Electronic Data Systems Holding Corporation, a
Delaware corporation (the "Company"), under the Securities Act of 1933, as
amended, relating to the distribution of 485,732,594 shares (the "Shares") of
the Company's Common Stock, par value $0.01 per share ("Company Common Stock"),
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.
As set forth in the Registration Statement, the distribution of the Shares
will occur in connection with the consummation of the merger (the "Split-Off
Merger") of GM Mergeco Corporation, a Delaware corporation ("Mergeco"), with and
into General Motors Corporation, a Delaware corporation ("General Motors"),
pursuant to the Agreement and Plan of Merger (the "Split-Off Merger Agreement")
to be entered into between General Motors and Mergeco. The Split-Off Merger
Agreement provides that each issued and outstanding share of General Motors
Class E Common Stock, par value $0.10 per share, shall be converted into one
Share.
In our capacity as your counsel in the connection referred to above, we
have familiarized ourselves with (i) the Restated Certificate of Incorporation
and Amended and Restated Bylaws of the Company, each as amended to date; (ii)
the Split-Off Merger Agreement, in the form attached as Appendix A to the
Solicitation Statement/Prospectus forming a part of the Registration Statement;
(iii) the Agreement and Plan of Merger (the "Interco Merger Agreement") to be
entered into 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, immediately prior to the consummation of the
Split-Off Merger, Interco shall merge with and into the Company and the issued
and outstanding shares of the Company shall be converted into 487,555,556 shares
of Company Common Stock; (iv) certain corporate records of the Company,
including minutes of the Company as furnished to us by representatives of the
Company; (v) certificates of public officials and of representatives of the
Company; and (vi) statutes and other instruments and documents pertaining to the
Company, as a basis for the opinions hereinafter expressed. In giving such
<PAGE>
Electronic Data Systems
Holding Corporation Page 2 April 16, 1996
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 as aforesaid, and subject to the assumptions,
limitations and qualifications hereinafter set forth, we are of the opinion
that:
1. The Company is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware.
2. When the Interco Merger has become effective under the laws of the
State of Delaware in accordance with the terms of the Interco Merger
Agreement, the Shares to be distributed in connection with the Split-Off
Merger and as described in the Registration Statement will be duly
authorized, validly issued, fully paid and nonassessable.
We have assumed that, immediately prior to consummation of the Interco
Merger, each of the parties thereto (i) will be duly organized, validly existing
and in good standing under the laws of the State of Delaware, (ii) will have
full corporate power and authority to enter into the Interco Merger Agreement
and perform its respective obligations thereunder, (iii) will have 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) will have duly executed and delivered
the Interco Merger Agreement.
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 with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to us under the caption "Legal Matters" in the Solicitation
Statement/Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ Baker & Botts, L.L.P.
<PAGE>
EXHIBIT 8
April 16, 1996
General Motors Corporation
3044 West Grand Boulevard
Detroit, Michigan 48202
Re: Split-Off of Electronic Data Systems Holding Corporation
--------------------------------------------------------
Dear Sirs :
In connection with the proposal to split off Electronic Data Systems
Holding Corporation ("EDS") from General Motors Corporation ("GM") (the "Split-
Off"), as described in the Registration Statement on Form S-4 (the "Registration
Statement") filed with the Securities and Exchange Commission on April 16, 1996,
you have requested our legal opinion concerning certain United States federal
income tax consequences of the Split-Off.
We have examined the Registration Statement, the private letter ruling,
dated December 27, 1995, wherein the Internal Revenue Service ruled that the
Split-Off will be tax-free to both GM and its shareholders for U.S. federal
income tax purposes (the "Ruling"), the representations made by you in the
ruling request filed with the Internal Revenue Service on August 30, 1995 (the
"Ruling Request"), and such other documents and such legal authorities as we
have deemed relevant for purposes of expressing the opinions contained herein.
Our opinion is based upon the applicable provisions of the Internal Revenue
Code of 1986, as amended through the date hereof (the "Code"), Treasury
regulations promulgated and proposed thereunder (the "Regulations"), current
positions of the Internal Revenue Service (the "IRS") contained in published
Revenue Rulings and Revenue Procedures and existing judicial decisions. In
rendering this opinion, we have expressly assumed that the representations made
by you and contained or described in the Registration Statement, the Ruling and
the Ruling Request are true and correct.
Based on the foregoing, and subject to the discussion set forth under the
caption "Certain U.S. Federal Income Tax Considerations" in the Prospectus that
forms part of the Registration Statement, our opinion as to the material federal
income tax consequences of the Split-Off is as follows:
<PAGE>
General Motors Corporation
April 16, 1996
Page 2
1. No gain or loss will be recognized by GM upon the exchange of EDS
Common Stock for General Motors Class E Common Stock ("Class E Common
Stock") pursuant to the Split-Off.
2. No gain or loss will be recognized by (and no amount will be included
in the income of) the holders of Class E Common Stock upon the receipt
of EDS Common Stock in exchange for Class E Common Stock pursuant to
the Split-Off.
3. The tax basis of EDS Common Stock received by each holder of Class E
Common Stock pursuant to the Split-Off will be the same as the basis of
the Class E Common Stock held by such holder immediately before the
Split-Off.
4. The holding period of the EDS Common Stock received by each holder of
Class E Common Stock will include the holding period of the Class E
Common Stock surrendered by such stockholder pursuant to the Split-Off,
provided that such stock is held as a capital asset on the date of the
Split-Off.
5. The discussion set forth under the caption "Certain U.S. Federal Income
Tax Considerations" in the Prospectus that forms part of the
Registration Statement is based upon reasonable interpretations of
existing law and fairly summarizes the U.S. federal income tax
considerations that are likely to be material to a holder of Class E
Common Stock.
The opinion set forth herein is based on relevant provisions of the Code,
the Regulations, and interpretations of the Code and the Regulations by the
courts and the IRS, all as they exist as of the date of this letter. All such
provisions of the Code, Regulations, judicial decisions, and admininistrative
interpretations are subject to change at any time and, in some circumstances,
with retroactive effect. Any such change could affect any or all of the
conclusions set forth in this opinion.
<PAGE>
General Motors Corporation
April 16, 1996
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus that forms part of the Registration Statement.
Very truly yours,
/s/ Kirkland & Ellis
<PAGE>
EXHIBIT 10(A)
GM/EDS DRAFT
APRIL 11, 1996
MASTER SERVICE AGREEMENT
BETWEEN
GENERAL MOTORS CORPORATION
AND
ELECTRONIC DATA SYSTEMS CORPORATION
GM/EDS CONFIDENTIAL
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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Page
----
<S> <C>
RECITALS................................................................... 1
ARTICLE I. INTRODUCTORY PROVISIONS
Section 1.1 Scope of Agreement................................... 2
Section 1.2 Definitions.......................................... 3
Section 1.3 Agreement............................................ 7
Section 1.4 Term................................................. 10
Section 1.5 Applicability of Provisions.......................... 11
Section 1.6 Fundamental Principle of Good Faith and Fair Dealing. 11
ARTICLE II. SERVICE AGREEMENTS
Section 2.1 Service Agreements................................... 11
Section 2.2 Service Agreement Objectives......................... 15
Section 2.3 Competitiveness...................................... 16
Section 2.4 Continued Services to Divested Business Units........ 17
Section 2.5 Extension of Service Agreements...................... 17
Section 2.6 Payment Terms........................................ 18
Section 2.7 Removal of PRR and Similar Provisions................ 20
ARTICLE III. OPERATIONAL PROVISIONS
Section 3.1 GM/EDS Relationship.................................. 20
Section 3.2 IT Strategy and Architecture......................... 20
Section 3.3 Contract Administration.............................. 21
Section 3.4 Attestation by Independent Public Accountants........ 25
Section 3.5 Audit by GM Central Office........................... 25
Section 3.6 Price Level Detail................................... 25
Section 3.7 Co-Negotiation....................................... 26
ARTICLE IV. STRUCTURAL COST REDUCTIONS
Section 4.1 Delco Electronics Structural Cost Reductions......... 28
Section 4.2 General IT Structural Cost Reductions................ 29
ARTICLE V. MARKET TESTING AND RESOURCING
Section 5.1 Initial Market Testing and Resourcing by GMIO........ 31
Section 5.2 Later Market Testing and Resourcing by GM............ 32
Section 5.3 General Limitations and Requirements................. 35
ARTICLE VI. GENERAL PROVISIONS
Section 6.1 Termination of MSA................................... 40
Section 6.2 Insurance............................................ 42
Section 6.3 Foreign Subsidiaries................................. 43
Section 6.4 Compliance with Advance Agreement.................... 43
Section 6.5 Amendment or Modification............................ 44
Section 6.6 Incorporation of Exhibit A........................... 44
Section 6.7 Prior Master Agreement............................... 44
Section 6.8 Governing Law........................................ 45
</TABLE>
i
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<TABLE>
<CAPTION>
EXHIBIT A. STANDARD TERMS AND CONDITIONS RECOMMENDED
FOR INCORPORATION INTO SERVICE AGREEMENTS
<S> <C>
ARTICLE A-I. DEFINITIONS AND INTERPRETATION
Section A1.1 Definitions.......................................... A-1
Section A1.2 Interpretation....................................... A-5
ARTICLE A-II. CONTRACT ADMINISTRATION AND REVIEW
Section A2.1 Management and Administration........................ A-6
Section A2.2 Performance Review................................... A-7
ARTICLE A-III. GM ASSETS AND SPACE
Section A3.1 GM Assets............................................ A-7
Section A3.2 GM Space............................................. A-8
ARTICLE A-IV. SOFTWARE AND INTELLECTUAL PROPERTY
Section A4.1 Ownership of Software................................ A-8
Section A4.2 Software Rights and Licenses......................... A-10
Section A4.3 Changes and Upgrades to Software..................... A-15
Section A4.4 Third Party Software Developers...................... A-16
Section A4.5 Intellectual Property................................ A-16
ARTICLE A-V. DATA PROTECTION AND AUDIT RIGHTS
Section A5.1 GM Data.............................................. A-17
Section A5.2 Safeguarding of GM Data.............................. A-18
Section A5.3 Nondisclosure........................................ A-18
Section A5.4 Data Center Security................................. A-19
Section A5.5 Audit Rights......................................... A-19
ARTICLE A-VI. EMPLOYEES
Section A6.1 EDS' Employees....................................... A-20
Section A6.2 Notice to EDS' Employees............................. A-20
Section A6.3 Premise and Work Rules............................... A-21
Section A6.4 Right of Access...................................... A-21
Section A6.5 Key EDS Employees for Critical Projects.............. A-21
ARTICLE A-VII. EDS COMPENSATION
Section A7.1 Uniform Published Rates.............................. A-22
Section A7.2 Fixed Price Methodology.............................. A-24
Section A7.3 Cost-Plus Pricing.................................... A-26
Section A7.4 Pricing Detail....................................... A-30
Section A7.5 Tax Matters.......................................... A-31
</TABLE>
ii
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<TABLE>
<CAPTION>
ARTICLE A-VIII. BILLING AND PAYMENT PROCEDURES
<S> <C>
Section A8.1 Billing Procedures................................... A-33
Section A8.2 Time of Payment...................................... A-34
ARTICLE A-IX. DISPUTES AND TERMINATION
Section A9.1 Negotiation of Disputes.............................. A-36
Section A9.2 Resolution of Disputes............................... A-36
Section A9.3 Termination.......................................... A-37
Section A9.4 Cancellation of Services and Cancellation Charges.... A-38
Section A9.5 Termination Assistance and Transition................ A-41
ARTICLE A-X. WARRANTIES
Section A10.1 Software Warranty.................................... A-44
Section A10.2 Hardware Warranty.................................... A-44
Section A10.3 Pass-Through Warranties.............................. A-44
Section A10.4 Survival of Warranties............................... A-45
Section A10.5 Disclaimer of Warranties............................. A-45
ARTICLE A-XI. INDEMNITIES AND LIABILITY
Section A11.1 Cross Indemnity...................................... A-45
Section A11.2 Proprietary Rights Indemnity......................... A-46
Section A11.3 Hardware Damage Indemnity............................ A-46
Section A11.4 Software License Indemnity........................... A-47
Section A11.5 Limitation of Liability.............................. A-47
ARTICLE A-XII. SPECIAL PROVISIONS RELATING TO MSA SERVICES
Section A12.1 GM's IT Strategy and Architecture.................... A-48
Section A12.2 Competitiveness...................................... A-48
Section A12.3 Market Testing and Resourcing........................ A-49
Section A12.4 Co-Negotiation....................................... A-49
Section A12.5 Use of Independent Auditors.......................... A-49
ARTICLE A-XIII. MISCELLANEOUS
Section A13.1 Binding Nature and Assignment........................ A-50
Section A13.2 Notices.............................................. A-50
Section A13.3 Counterparts......................................... A-51
Section A13.4 Headings............................................. A-51
Section A13.5 Approvals and Similar Actions........................ A-51
Section A13.6 Force Majeure........................................ A-51
Section A13.7 Severability......................................... A-52
Section A13.8 Waiver............................................... A-52
Section A13.9 Relationship of Parties.............................. A-52
Section A13.10 Services for Others.................................. A-53
Section A13.11 Hiring of Employees.................................. A-53
Section A13.12 Compliance With Laws................................. A-53
Section A13.13 Media Releases....................................... A-53
Section A13.14 Survival............................................. A-54
Section A13.15 Entire Agreement..................................... A-54
Section A13.16 Amendment or Modification............................ A-54
Section A13.17 Good Faith and Fair Dealing.......................... A-54
</TABLE>
iii
<PAGE>
EXHIBIT B. GM MAJOR SECTORS AS OF THE EFFECTIVE DATE
EXHIBIT C. MSA SERVICES AND MSA SCOPE DOCUMENTS
EXHIBIT D. PROCEDURES FOR NEGOTIATING SERVICE AGREEMENTS AND
RESOLVING IMPASSES
EXHIBIT E. GUIDELINES & METHODOLOGY FOR DETERMINING
ACHIEVEMENT OF IT STRUCTURAL COST REDUCTION TARGETS
EXHIBIT F. TERMINATION UPON CHANGE OF CONTROL
EXHIBIT G. CANCELLATION LOSSES ON THE DISPOSITION OF CAPITAL
ASSETS AND LONG-TERM LEASES
iv
<PAGE>
MASTER SERVICE AGREEMENT
------------------------
THIS MASTER SERVICE AGREEMENT (the "MSA"), effective as of ______________, 1996
(the "Effective Date"), is made and entered into by and between General Motors
Corporation, a Delaware corporation having its principal offices at 3044 West
Grand Boulevard, Detroit, Michigan 48202 ("GM Parent"), and Electronic Data
Systems Corporation, a Delaware corporation having its principal offices at 5400
Legacy Drive, Plano, Texas 75024 ("EDS Parent").
RECITALS
--------
WHEREAS, in order to implement the service relationship contemplated by the
acquisition of EDS Parent by GM Parent in 1984, GM Parent and EDS Parent entered
into a certain Master Agreement, dated effective as of September 1, 1985 (the
"Master Agreement"), which established certain standard terms and conditions
pursuant to which EDS Service Organizations would provide services to GM User
Organizations and set forth certain other understandings and agreements between
the parties;
WHEREAS, pursuant to the Master Agreement, GM User Organizations and EDS Service
Organizations have negotiated and entered into Service Agreements specifying the
services to be provided to the GM User Organizations and the amounts to be paid
to EDS for such services;
WHEREAS, on or about the Effective Date, GM Parent consummated a split-off and
related transactions pursuant to which EDS Parent ceased to be a subsidiary of
GM Parent and, in connection therewith, GM Parent and EDS Parent desire to
supersede and replace the Master Agreement with this MSA in order to (i) confirm
the continuation of EDS as the principal supplier to GM of information
technology services, (ii) confirm the understanding of GM and EDS that GM is to
continue to be the customer of EDS and will specify its IT strategy and
computing and communications architecture together with its business needs,
including reasonable performance levels, and that EDS will serve these
requirements, on a coordinated, integrated basis, by providing
1
<PAGE>
MSA Services which are competitive with respect to quality, service, price and
technology and which are appropriate for the stated business needs of GM, and
will be compensated fairly therefor, (iii) provide guidelines for GM to conduct
limited market testing with third party suppliers, (iv) implement certain
changes in the service relationships between GM User Organizations and EDS
Service Organizations governed by Service Agreements entered into prior to the
Effective Date, (v) facilitate the finalization of future Service Agreements,
(vi) provide a consistent basis for the interpretation of all Service
Agreements, and (vii) set forth certain other understandings and agreements
between the parties;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I. INTRODUCTORY PROVISIONS
-----------------------------------
1.1 Scope of Agreement. Subject to Section 1.3 below, this MSA establishes a
contractual framework for EDS' provision of MSA Services under Service
Agreements worldwide. In order to provide a uniform mechanism for
implementing the principles of this MSA, the provisions of this MSA, as
between EDS Parent and GM Parent, shall be applicable worldwide and shall
be implemented by GM Parent and EDS Parent, and their respective domestic
and foreign subsidiaries and business units, entering into Service
Agreements which incorporate the principles of the applicable provisions of
this MSA, modified as may be necessary by reason of local law or commercial
custom. GM Parent and EDS Parent each acknowledge and understand that their
respective subsidiaries are not parties to this MSA and will not be legally
bound by the provisions of this MSA unless and until they agree to be so
bound. However, during any period and to the extent that a locally
appropriate Service Agreement for any such MSA Services is not then
currently in effect, GM Parent and EDS Parent shall each remain obligated
to the other for the performance of the respective obligations of GM and
EDS stated herein.
2
<PAGE>
1.2 Definitions. Unless otherwise specified herein, the following terms shall
have the meanings set forth below wherever they are used in this MSA:
(a) The term "Agreement" shall mean (i) this MSA, or (ii) any Service
Agreement, including the applicable provisions of this MSA
incorporated therein.
(b) The term "Bid Revenue" shall mean, with respect to each competitive
bid that GM may conduct pursuant to Article V hereof, the aggregate
amount of revenue that GM would pay to EDS for the performance of the
MSA Services that are the subject of that competitive bid, during the
first full year that such MSA Services are to be performed, computed
as if the competitive bid were not conducted but GM nevertheless
obtained such MSA Services from EDS pursuant to the applicable Service
Agreements and other arrangements in place at the time of the
competitive bid.
(c) The term "Contracting Party" shall mean (i) with respect to this MSA,
GM Parent or EDS Parent, and (ii) with respect to any Service
Agreement, the GM User Organization receiving MSA Services pursuant to
the Service Agreement or the EDS Service Organization providing such
MSA Services.
(d) The term "Corporate Contract Manager" shall mean the individual
designated by GM Parent or EDS Parent, respectively, pursuant to
sub-Section 3.3(a) hereof.
(e) The term "EDS" shall mean, collectively, EDS Parent and the entities
and subsidiaries owned by EDS Parent. For purposes of this
definition, an entity or subsidiary will be deemed to be "owned by EDS
Parent" if EDS Parent, either directly or indirectly, (i) is the
beneficial owner of more than 50% of the equity of that entity or
subsidiary, or (ii) is the beneficial owner of more than 35% of the
equity of, and has management control of, that entity or subsidiary.
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(f) The term "EDS Major Sector" shall mean an EDS Service Organization
designated by EDS from time to time to coordinate the provision of MSA
Services by EDS to the GM User Organizations within a GM Major Sector.
(g) The term "EDS Service Organization" shall mean any functional entity,
division, subsidiary, department or group within EDS, including an EDS
Major Sector, which has been or shall be formed to provide MSA
Services to GM User Organizations.
(h) The term "GM" shall mean, collectively, GM Parent and the entities and
subsidiaries owned by GM Parent. For purposes of this definition, an
entity or subsidiary will be deemed to be "owned by GM Parent" if GM
Parent, either directly or indirectly, is the beneficial owner of:
(1) More than 65% of the equity of, and has management control of,
that entity or subsidiary and, as of August 1, 1995, EDS was
providing services under the Master Agreement pursuant to a
Service Agreement in support of the business operations of that
entity or subsidiary.
(2) 80% or more of the equity of that entity or subsidiary if, as of
August 1, 1995, EDS was not providing services under the Master
Agreement pursuant to a Service Agreement in support of the
business operations of that entity or subsidiary.
(i) The term "GM Central Office" shall mean the corporate headquarters of
GM Parent.
(j) The term "GM Major Sector" shall mean a GM User Organization
designated by GM from time to time to coordinate the receipt of MSA
Services from EDS by numerous GM User Organizations. As of the
Effective Date, the GM Major Sectors are listed in Exhibit B hereto.
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(k) The term "GM User Organization" shall mean any functional entity,
division, subsidiary, department or group within GM, including a GM
Major Sector, which has or shall have requirements for MSA Services
applicable to that functional entity, division, subsidiary, department
or group that this MSA provides are to be obtained from EDS. Each of
the following terms shall mean the GM User Organization indicated
below and any successors thereto:
(1) "Delco" means Delco Electronics Corporation.
(2) "Delphi" means Delphi Automotive Systems.
(3) "GMAC" means General Motors Acceptance Corporation.
(4) "GMIO" means GM International Operations.
(5) "MIC" means Motors Insurance Corporation.
(6) "NAO" means GM North American Operations.
(l) The term "IT" shall mean information technology consisting of computer
and information processing and communications.
(m) The term "Major Sector Contract Manager" shall mean the person
designated by either the GM Major Sector having responsibility for the
GM Contracting Party or the EDS Major Sector having responsibility for
the EDS Contracting Party, as applicable, pursuant to sub-Section
3.3(b) hereof.
(n) The term "Master Agreement" shall mean the Master Agreement, effective
as of September 1, 1985, made and entered into by and between GM
Parent and EDS Parent, as amended by the Addendum thereto dated May
29, 1987.
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(o) The term "MSA Scope Document" shall mean any document developed in
accordance with Section II of Exhibit C hereto.
(p) The term "MSA Services" shall mean those services described in Section
I of Exhibit C hereto.
(q) The term "Service Agreement" shall mean any written agreement, as
provided for in Section 2.1 hereof, that is entered into between a GM
User Organization and an EDS Service Organization for the provision of
MSA Services to that GM User Organization, whether entered into before
or after the Effective Date.
(r) The term "Software" shall mean the source code and object code
versions of any applications programs, operating system software,
computer software languages, utilities and other computer programs,
and documentation and supporting materials relating thereto, in
whatever form or media, including, but not limited to, the tangible
media upon which such applications programs, operating system
software, computer software languages, utilities and other computer
programs, and documentation and supporting materials relating thereto,
are recorded or printed, together with all corrections, improvements,
updates and releases thereof.
(s) The term "Unit Project Manager" shall mean any person designated
pursuant to sub-Section 3.3(c) hereof.
(t) The term "UPR Catalog" shall mean the catalog published by GM Parent
in accordance with Section A7.1 of Exhibit A hereto.
Other terms used in this MSA are defined in the context in which they are
used and, unless otherwise specified herein, shall have the meanings there
indicated wherever they are used in this MSA.
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1.3 Agreement. GM Parent and EDS Parent agree that, during the term of this
MSA and except as provided in Article V hereof and any other applicable
provision of this MSA, EDS shall supply to GM, and GM shall obtain from
EDS, GM's requirements for MSA Services, except that:
(a) With respect to any MSA Services reasonably requested from EDS by a GM
User Organization (which request shall not be unreasonably specific),
where it is mutually agreed that EDS lacks the technical proficiency
or resources to satisfactorily provide such MSA Services, either
directly or through a third party subcontract, within the timeframe
reasonably required by the GM User Organization, then the GM User
Organization may, with the prior approval of the GM Corporate Contract
Manager, obtain such MSA Services from a third party for so long as
EDS is unable to provide such MSA Services; provided, however, that
under no circumstances shall GM be required to cancel, renegotiate or
otherwise nullify a contract with a third party to obtain such MSA
Services during the period of time covered by that contract. In
addition, any MSA Services obtained by a GM User Organization from a
third party pursuant to this provision shall not count against either
the annual or aggregate limitations on competitive bidding and
resourcing set forth in Article V hereof.
(b) Unless agreed otherwise by GM Parent and EDS Parent, GM shall not be
required to obtain from EDS, and EDS shall not be required to provide
to GM, MSA Services for:
(1) Hughes Aircraft Corporation.
(2) Any other business or entity, or portion thereof, if and to the
extent that such business or entity, or portion thereof, was or
is acquired by GM Parent after January 1, 1985, except for (i)
GMAC Mortgage Corporation (but not
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including its subsidiary, Residential Funding Corporation), and
(ii) any other business or entity, or portion thereof, which
executed a Service Agreement prior to August 1, 1995. However, GM
Parent and EDS Parent acknowledge and agree that, unless it is
inappropriate in the circumstances, in the normal case it is
expected that EDS will be permitted to submit a bid to provide
MSA Services to businesses and entities, or portions thereof,
acquired by GM Parent after January 1, 1985. However, under no
circumstances shall the competitive bidding and resourcing of
such services count against either the annual or aggregate
limitations on competitive bidding and resourcing set forth in
Article V hereof.
(c) GM shall not be required to obtain from EDS, and EDS shall not be
required to provide to GM, services in any country to the extent and
for so long as the provision of those services by EDS to GM in that
country would violate any national law of that country.
(d) GM User Organizations outside of North America ("GM Overseas User
Organizations") shall not be required to obtain from EDS, and EDS
shall not be required to provide to GM Overseas User Organizations,
any MSA Services in any Emerging Market other than MSA Services that
(i) were being provided to a GM Overseas User Organization for the
same GM Major Business Function in the same GM Line of Business by an
EDS Service Organization in that Emerging Market prior to August 1,
1995, or (ii) are substantially similar to or a replacement of MSA
Services that were being provided to a GM Overseas User Organization
for the same GM Major Business Function in the same GM Line of
Business by an EDS Service Organization in that Emerging Market prior
to August 1, 1995. As used in this sub-Section 1.3(d):
(1) The term "Emerging Market" means any country other than
[Confidential information has been omitted.]
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Confidential treatment has been requested by EDS for the indicated portions of
this page.
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[Confidential information has been omitted.]
(2) The term "GM Line of Business" shall mean any of the GM Major
Sectors listed on Exhibit B hereto as of the Effective Date
modified to also designate each of the six divisional entities of
Delphi Automotive Systems Operations Outside of North America as
of the Effective Date as a separate GM Line of Business.
(3) The term "GM Major Business Function" shall mean any of the
following six (6) major business functions which may exist within
a GM Line of Business: (i) manufacturing, (ii) assembly, (iii)
distribution, (iv) sales and service, (v) administration, and
(vi) other. As applied to a specific facility or location, the
major business function of a specific facility or location shall
be based on the principal major business function conducted at
that facility or location. For example, the major business
function of a GM facility which manufactures and assembles
finished automobiles and also houses incidental administrative
activities is manufacturing.
(e) GM shall not be required to obtain from EDS, and EDS shall not be
required to provide to GM, any plant floor services other than (i)
plant floor services for all GM North American business units under
NAO and Delphi specifically set forth in the Plant Floor Systems
Services Agreement, entered into as of _________, 1996, between GM and
EDS, but excluding Saturn Corporation, and (ii) plant floor services
being provided to GM Overseas User Organizations as of the Effective
Date to the extent that, prior to the Effective Date, those plant
floor services were treated mutually by the parties as within the
scope of Section 1.3 of the Master
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Agreement, including the plant floor services provided for (x) the
European Production Information Control System (EPICs), (y) the
Component Production Information Control Systems (CPICs), and (z)
Manufacturing Resource Planning Systems. As used in this sub-Section
1.3(e), the term "plant floor services" shall mean those IT services
that are specific to plant floor operations and shall not include any
such services when used in any context other than in conjunction with
plant floor operations.
(f) Any other arrangement or relationship between the parties may be
mutually agreed upon and approved by the GM and EDS Corporate Contract
Managers.
The GM and EDS Corporate Contract Managers will develop mutually acceptable
business procedures for (i) reviewing any additional IT services or goods
desired by GM and determining which are MSA Services based on the
definition of MSA Services contained in this MSA, and (ii) designating
which out-of-scope services, if any, EDS and GM may mutually desire to
bring into scope under this MSA.
1.4 Term.
----
(a) The term of this MSA shall commence as of the Effective Date and shall
continue until the expiration of an initial term of ten (10) years.
The term of this MSA may be extended for an additional term upon
mutual agreement by GM Parent and EDS Parent prior to the end of the
initial term.
(b) Service Agreement terms which extend beyond the term of this MSA shall
be subject to the approval of the Corporate Contract Managers
according to sub-Section A9.3(c) of Exhibit A hereto. If this MSA
expires or is terminated, GM Parent and EDS Parent will not enforce
any Service Agreement term which purports to extend beyond the
expiration or termination of this MSA unless such extension is or has
been mutually agreed by the Corporate Contract Managers. With respect
to
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any Service Agreement which survives expiration or termination of this
MSA (as a result of such approval by the Corporate Contract Managers),
the provisions of this MSA that have been incorporated into such
Service Agreement shall remain valid provisions of that Service
Agreement unless and until the Contracting Parties thereto otherwise
agree, notwithstanding termination of this MSA.
1.5 Applicability of Provisions. The provisions of Exhibit A hereto are
intended to be applicable to both this MSA and each Service Agreement and,
when used in connection with a Service Agreement, a reference to the
applicable provisions of this MSA shall be considered a reference to the
provisions of Exhibit A hereto, except, subject to the provisions of
Section A1.2 of Exhibit A hereto, (i) to the extent that any such
provisions are expressly modified or excluded therefrom in a Service
Agreement, or (ii) any GM Major Sector and the corresponding EDS Major
Sector may negotiate different or additional standard terms and conditions
that will be applicable to Service Agreements between GM User Organizations
within that GM Major Sector and EDS Service Organizations within that EDS
Major Sector.
1.6 Fundamental Principle of Good Faith and Fair Dealing. In entering into
this MSA, GM Parent and EDS Parent each acknowledge and agree that all
aspects of the worldwide business relationship and dealings between GM and
EDS contemplated by this MSA and each Service Agreement, including the
performance of all obligations and the exercise of all rights under this
MSA and each Service Agreement, will be governed by the fundamental
principle of good faith and fair dealing. GM Parent and EDS Parent shall
assure that each GM User Organization and EDS Service Organization,
respectively, complies with this principle of good faith and fair dealing.
ARTICLE II. SERVICE AGREEMENTS
-------------------------------
2.1 Service Agreements. As of the Effective Date, each GM User Organization and
the corresponding EDS Service Organization have agreed upon and entered
into or shall, as
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soon as practicable, agree upon and enter into one or more Service
Agreements for the performance of MSA Services for that GM User
Organization on mutually agreeable terms and conditions, subject to the
limitations set forth in this MSA.
(a) If and to the extent applicable, each such Service Agreement shall:
(1) Refer to this MSA, which reference shall be deemed to incorporate
into the Service Agreement the applicable provisions of this MSA.
(2) Designate the date as of which the provisions of the Service
Agreement will be effective and the term or period of time during
which EDS will perform MSA Services pursuant to the Service
Agreement.
(3) Describe the obligations of EDS related to the Service Agreement,
including any hardware or software to be delivered in conformance
with GM's IT architecture and any MSA Services to be performed by
EDS pursuant to the Service Agreement, together with the general
performance standards and related provisions agreed to by the
parties.
(4) Describe the obligations of GM related to the Service Agreement,
including without limitation any space, facilities, equipment, or
other support to be provided by GM.
(5) Specify the mutually agreed upon pricing structure, method and
amounts of payment to be made to EDS for the MSA Services
performed pursuant to the Service Agreement and, with respect to
the provision of any Software previously developed by EDS for GM,
exclude therefrom any amounts for the development of such
Software if and to the extent such amounts have previously been
paid to EDS by GM.
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(6) Identify any hardware, software, system or EDS facility to be
used by EDS which is designated, consistent with Section 3.2
hereof, as so critical to the business operations of the GM
Contracting Party that the EDS Contracting Party may not modify,
upgrade, enhance or move the same without notice to and the
approval of the GM Contracting Party.
(7) Specify the acceptance criteria, test period and procedures for
any hardware or software to be provided to the GM Contracting
Party, including appropriate restrictions on the use of any such
hardware or software by the GM Contracting Party until it has
accepted the same in writing.
(8) Specify the appropriate mailing address for invoices and the
name, address and telephone number of the applicable GM and EDS
Unit Project Managers and Major Sector Contract Managers.
(b) In addition to the provisions specified in sub-Section 2.1(a) above,
EDS Parent and GM Parent will recommend to their respective
Contracting Parties that the following provisions be reviewed and
considered for possible inclusion in an applicable Service Agreement.
If and to the extent mutually agreed to be desirable by the
Contracting Parties thereto, each such Service Agreement may:
(1) Identify (i) EDS expenses to be rebilled to GM without profit or
mark-up, and (ii) amounts to be retained by GM until acceptance
of deliverables provided by EDS.
(2) Specify the method and amounts of performance incentive payments,
such as portions of documented cost savings or profit
improvements experienced by the GM Contracting Party as a result
of the MSA Services performed by EDS, that are to be payable to
EDS. GM Parent and EDS Parent shall each
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encourage their respective Contracting Parties to provide for
such performance incentive payments where appropriate.
(3) Establish specific measurable standards of performance applicable
to EDS' performance under the Service Agreement, such as function
point analysis for application software development and hardware
and software availability standards, as well as related remedies
and rewards available if the EDS Contracting Party's performance
fails to meet or exceeds those performance standards. Any such
remedies and rewards shall be designed to incent and reward good
performance and not to distort the intended economic effects of
the Service Agreement.
(4) Allocate the respective obligations of EDS and GM in connection
with the transportation, insurance, delivery, relocation and/or
installation of any hardware being provided by EDS to GM and in
connection with any site preparation therefor and any ongoing
maintenance obligations applicable thereto.
(5) Describe all support services to be provided by EDS to GM in
connection with the delivery to GM of software provided by EDS,
including without limitation the number of user manuals, level of
consulting services, amount of training services, documentation,
and ongoing support and maintenance services to be provided in
connection therewith.
(6) Delineate the manner in which secretarial, custodial, and/or
other supporting services will be made available by GM to EDS.
(7) Describe any reports, in addition to those required under Exhibit
A hereto, and the frequency of submittal.
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(8) If and to the extent that the MSA Services provided by EDS
pursuant to the Service Agreement relate to U.S. Government
contracts or subcontracts held by the GM Contracting Party, (i)
provide for an equitable distribution of the profits otherwise
obtainable by EDS that are allocable to such contracts and
subcontracts, and (ii) take into account any related costs
incurred by EDS that are specified as unallowable in applicable
federal regulations.
(9) Identify any provisions of Exhibit A hereto that are expressly
excluded from the Service Agreement and any provisions of the
Service Agreement that shall supersede and prevail over any
conflicting or inconsistent provisions of Exhibit A hereto,
subject to the provisions of Section A1.2 of Exhibit A hereto.
(10) Include any other provisions deemed necessary or desirable by the
Contracting Parties to the Service Agreement, such as, but not
limited to, provisions enabling the Service Agreement to conform
to the requirements of any applicable government contracts,
subject to the provisions of Section A1.2 of Exhibit A hereto.
Notwithstanding anything to the contrary herein, any Service Agreement
executed by the Major Sector Contract Manager or other authorized
representative of each Contracting Party thereto shall conclusively be
deemed to satisfy the provisions of this Section 2.1 and neither EDS nor GM
may thereafter claim that the Service Agreement is invalid or defective as
a result of any failure to comply with the provisions of this Section 2.1.
2.2 Service Agreement Objectives. Each applicable GM User Organization and EDS
Service Organization will negotiate in good faith to agree upon and enter
into fixed-price Service Agreements which meet the Competitiveness Standard
established in Section 2.3 hereof.
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2.3 Competitiveness. As provided in this Section 2.3, the MSA Services to be
provided to GM by EDS under Service Agreements shall be competitive with
respect to quality, service, price and technology giving due consideration
to the GM requirements that GM expects EDS to meet and other relevant
factors (the "Competitiveness Standard"), all subject to the following
provisions:
(a) As used in this Section 2.3, the term "Competitiveness Event" shall
mean the negotiation or renegotiation by a GM User Organization and an
EDS Service Organization of (i) a new or replacement Service
Agreement, (ii) the terms and conditions applicable to a new or
replacement MSA Service that is proposed to be provided under a then-
current Service Agreement, or (iii) the pricing of any MSA Services
when and to the extent that the negotiation or renegotiation of such
pricing is contractually provided for in a then-current Service
Agreement.
(b) The Competitiveness Standard and methodology set forth in this Section
2.3 will apply to each Competitiveness Event and will govern the
resolution of any disagreement or negotiation impasse that may arise
between a GM User Organization and an EDS Service Organization in
connection with that Competitiveness Event.
(c) If a GM User Organization and an EDS Service Organization reach a
mutually acceptable agreement with respect to a particular
Competitiveness Event, that agreement will be deemed to satisfy the
Competitiveness Standard and methodology set forth in this Section 2.3
with respect to that Competitiveness Event for the duration of the
term of that agreement.
(d) If a Service Agreement provides a specific competitiveness mechanism
(such as a competitive assessment or benchmarking process) for use in
determining the competitiveness of specific MSA Services, (i) the
application of that specific competitiveness mechanism shall not in
and of itself constitute a Competitiveness
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Event as contemplated in this Section 2.3, and (ii) the specific
competitiveness mechanism shall be used to establish the
competitiveness of such specific MSA Services in lieu of the
Competitiveness Standard and methodology set forth in this Section
2.3. The above provisions notwithstanding, under no circumstances
shall such specific competitiveness mechanism preclude or otherwise
inhibit the occurrence of a Competitiveness Event pursuant to sub-
Section 2.3(a) hereof, or the utilization of the Competitiveness
Standard and methodology set forth in this Section 2.3, with regard to
MSA Services that the specific competitiveness mechanism was neither
designed nor intended to cover.
(e) If a GM User Organization and an EDS Service Organization are unable
to reach a mutually acceptable agreement with respect to a particular
Competitiveness Event, the methodology set forth in Exhibit D hereto
will be used to resolve that disagreement or negotiation impasse.
2.4 Continued Services to Divested Business Units. In any situation where an
existing Service Agreement does not accommodate the continued provision of
MSA Services to a divested GM business unit, EDS will negotiate in good
faith with the divested GM business unit to enter into an agreement
pursuant to which EDS will continue providing services to the divested GM
business unit on such terms and conditions as may be mutually agreed upon
by EDS and the divested GM business units.
2.5 Extension of Service Agreements. Notwithstanding any provision to the
contrary in any applicable existing Service Agreement, the terms of the
Major Sector Service Agreements, including the scopes of work thereunder,
in effect as of the Effective Date with respect to the following GM User
Organizations will be extended through the expiration date specified below
with respect to that GM User Organization:
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GM User Organization Expiration Date
-------------------- ---------------
NAO (including Corporate Staffs) December 31, 1999
GMAC (U.S. and Canada) December 31, 1999
MIC (U.S. and Canada) December 31, 1999
Delphi (U.S.) December 31, 1998
To the extent not completed prior to the Effective Date, GM Parent and EDS
Parent shall each cause their respective applicable Contracting Parties to
promptly amend each Service Agreement referred to above in order to extend
the term thereof as specified above. Additionally, to the extent not
completed prior to the Effective Date, GM Parent and EDS Parent shall
ensure that Allison Transmission, GM of Canada (including Delphi operations
in Canada), and GM de Mexico will promptly complete and execute Service
Agreements, which have been substantially negotiated prior to the Effective
Date, and which shall be coterminous with the NAO Service Agreement
referred to above.
2.6 Payment Terms. Notwithstanding any provision to the contrary in any
applicable Service Agreement, the time of payment for invoices submitted
pursuant to each Service Agreement in effect as of the Effective Date,
shall be modified as indicated below; provided, however, that under no
circumstances shall there be an acceleration in the time of payment for a
Contracting Party when compared to the mutually agreed corresponding
payment terms applicable to that Contracting Party that are in effect just
prior to the Effective Date.
(a) Through December 31, 1996, each Contracting Party will pay the other
Contracting Party's invoices for each month in 1996 in accordance with
the payment terms of the applicable Service Agreement in effect just
prior to the Effective Date.
(b) As of January 1, 1997, each Service Agreement in effect as of the
Effective Date that does not provide for longer payment terms will
require each Contracting
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Party to pay the other Contracting Party's invoices for each month of
1997 by the thirtieth (30th) day of the month in which the invoiced
MSA Services were provided.
(c) As of January 1, 1998, each Service Agreement in effect as of the
Effective Date with Delco, Delphi, Allison Transmission, and the GM
Locomotive Group that does not provide for longer payment terms will
require each Contracting Party to pay the other Contracting Party's
invoices for each month in 1998 and thereafter by the twentieth (20th)
day of the month following the month in which the invoiced MSA
Services were provided.
(d) As of January 1, 1999, each remaining Service Agreement in effect as
of the Effective Date that does not provide for longer payment terms
will require each Contracting Party to pay the other Contracting
Party's invoices for each month in 1999 and thereafter by the
twentieth (20th) day of the month following the month in which the
invoiced MSA Services were provided.
The Contracting Parties will submit invoices on or before the first (1st)
day of the month in which the MSA Services are provided for each month
through December of 1998. For January of 1999 and each subsequent month
during the term of each Service Agreement referred to above, the
Contracting Parties will submit invoices on or before the first (1st) day
of the month following the month in which the MSA Services are provided, or
such other day as may be mutually agreed upon by the Contracting Parties if
the Contracting Parties are able to agree upon a day which will (i) allow
the invoicing Contracting Party to invoice actual amounts payable for the
month in which MSA Services were provided without having to invoice for
estimated amounts payable for that month, and (ii) allow the paying
Contracting Party to pay the invoice on the twentieth (20th) day of the
month following the month in which the invoiced MSA Services were provided.
To the extent not completed prior to the Effective Date, GM Parent and EDS
Parent shall each cause
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their respective Contracting Parties to amend each applicable Service
Agreement to reflect the foregoing payment terms.
2.7 Removal of PRR and Similar Provisions. To the extent not completed prior to
the Effective Date, GM Parent and EDS Parent shall each cause their
respective Contracting Parties to amend the NAO Service Agreement to remove
the Performance Reduction Requirement provision and to amend other
applicable Service Agreements in effect as of the Effective Date, with the
exception of those relating to GM Overseas User Organizations, to remove
provisions similar to the Performance Reduction Requirement provision in
the NAO Service Agreement.
ARTICLE III. OPERATIONAL PROVISIONS
------------------------------------
3.1 GM/EDS Relationship. GM Parent and EDS Parent will establish a group,
which will include the Corporate Contract Managers and other executives key
to the GM/EDS relationship as may be designated by each party, to ensure
that the parties are acting in a manner consistent with the principles of
this MSA, and to address any issues that may arise in connection with this
MSA.
3.2 IT Strategy and Architecture. The respective roles and responsibilities of
GM and EDS in connection with the performance of the MSA Services pursuant
to the Service Agreements will be governed by the following:
(a) GM will be responsible for, and will decide and direct, its IT
strategies and requirements, including GM's computing and
communications architecture. This includes GM's right (i) to develop,
maintain and publish technology standards that support the
implementation of GM's architecture, and architecture and technology
compliance processes, and (ii) to identify and select vendors of
hardware and software used by EDS to provide MSA Services that are
performed for GM on a dedicated basis. In this regard, EDS will
cooperate, as reasonably
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requested by GM, in preparing and updating any such strategies and
requirements. Upon receiving such a request for assistance from GM
which is outside the scope of the MSA Services then being performed
under any Service Agreement, EDS may submit a proposal to GM for
additional compensation. If GM decides to use EDS' assistance after
receiving the EDS proposal, then GM and EDS will negotiate an
appropriate agreement to cover such services.
(b) EDS will be responsible for, and will decide and direct, its
performance of the MSA Services in furtherance of GM's IT strategies
and requirements, and will retain specific responsibility for the
computing and communications architecture and technology for EDS'
Information Processing Centers (IPCs).
(c) When establishing its strategies and requirements for the MSA
Services, GM will consult with EDS and will avoid "micromanagement" by
GM of EDS' performance of its responsibilities.
(d) In managing its own functions and operations in performing the MSA
Services, EDS will consult with GM and take into account GM's
legitimate suggestions and concerns regarding the delivery of the MSA
Services.
(e) To the extent feasible, the roles and responsibilities that EDS and GM
respectively will have initially with respect to GM's IT strategies
and EDS' performance of the MSA Services will be described in the MSA
Scope Documents in a manner consistent with the foregoing provisions
of this Section 3.2.
3.3 Contract Administration. Applicable managers will be designated in
accordance with the following:
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(a) GM Parent and EDS Parent shall each designate a Corporate Contract
Manager who, in addition to the responsibilities and authorities
specified in Section A2.1 of Exhibit A hereto, shall be responsible
for, among other things:
(1) The implementation, management and enforcement of this MSA on
behalf of that Parent, including overall management of its
performance under this MSA.
(2) Supporting the implementation of the Service Agreements by the
Major Sector Contract Managers or Unit Project Managers for the
Contracting Parties thereto, including through the formulation of
guidelines for use by the Major Sector Contract Managers or Unit
Project Managers to implement the Service Agreements.
(3) Exercising day-to-day responsibility for achieving resolution of
corporate-wide issues relating to this MSA or the Service
Agreements.
(4) Working with the Major Sector Contract Managers or Unit Project
Managers for the User Organizations or Service Organizations, as
applicable, of that Parent to establish uniform policies
applicable to the MSA Services provided to GM by EDS.
(5) Interfacing with any committees or other bodies of that Parent
with responsibility for reviewing or approving any matters
relating to this MSA or the Service Agreements and otherwise
satisfying any administrative requirements internally required by
that Parent.
(6) Monitoring the activities of the Major Sector Contract Managers
or Unit Project Managers for the User Organizations or Service
Organizations, as applicable, of that Parent.
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(b) Promptly after the Effective Date and as required thereafter to
maintain the accuracy of such information, GM Parent will provide EDS
Parent with written notice of the GM Major Sectors and the GM User
Organizations within each GM Major Sector. To the extent not
previously designated, each GM Major Sector will designate a Major
Sector Contract Manager for that GM Major Sector, and each EDS Major
Sector will designate a Major Sector Contract Manager for that EDS
Major Sector. GM Parent and EDS Parent agree that the Major Sector
Contract Manager for a particular GM Major Sector or EDS Major Sector,
if not previously designated, shall be designated within a reasonable
period of time after the applicable GM Major Sector or EDS Major
Sector receives a written request for such designation.
(c) To the extent not previously designated, each GM User Organization
will designate a Unit Project Manager for that GM User Organization,
and each EDS Service Organization will designate a Unit Project
Manager for that EDS Service Organization. GM Parent and EDS Parent
agree that the Unit Project Manager for a particular GM User
Organization or EDS Service Organization, if not previously
designated, shall be designated within a reasonable period of time
after the applicable GM User Organization or EDS Service Organization
receives a written request for such designation.
(d) The GM and EDS Corporate Contract Managers shall mutually designate a
reasonable number of key EDS management positions, which will include
the EDS Corporate Contract Manager and the EDS Major Sector Contract
Managers, that are critical to the GM/EDS relationship and the
successful performance of the MSA Services.
(1) Before an EDS employee is assigned to one of these key EDS
management positions, EDS will notify the GM Corporate Contract
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Manager of the proposed assignment, will introduce the EDS
employee to the appropriate GM representatives, and will provide
GM with a resume and any other information about the EDS employee
reasonably requested by the GM Corporate Contract Manager. If the
GM Corporate Contract Manager reasonably and in good faith
objects to the proposed assignment within five (5) working days
following actual receipt of the aforementioned notification, then
EDS will not assign that EDS employee to that position. However,
EDS may appoint another EDS employee to serve in that position on
an interim basis until an EDS employee who is reasonably
acceptable to the GM Corporate Contract Manager can be assigned
to that position.
(2) No EDS employee assigned to one of these key EDS management
positions will be reassigned for a period of one (1) year from
the date of such assignment without the prior consent of the GM
Corporate Contract Manager, which consent will not be
unreasonably withheld, unless the employee voluntarily resigns
from EDS' employment, is dismissed from EDS' employment for
cause, fails to properly perform his or her duties in the
reasonable judgment of EDS, or is unable to work as a result of
death or disability.
(3) If GM reasonably and in good faith decides that any employee
assigned to one of these key EDS management positions should not
continue in that position, then the GM Corporate Contract Manager
may request the removal of that employee by providing written
notice to the EDS Corporate Contract Manager specifying the
reasons for such request. EDS shall promptly investigate the
matters specified in the request and, if it determines that the
concerns are reasonable and valid, shall promptly remove that
employee from that position.
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Subject to the provisions of this Section 3.3, (i) GM Parent and EDS Parent
may, at any time and from time to time, designate a new Corporate Contract
Manager by notifying the other party's Corporate Contract Manager of the
new designation, (ii) each GM Major Sector and each EDS Major Sector may,
at any time and from time to time, designate a new Major Sector Contract
Manager by notifying the other party's Corporate Contract Manager and Major
Sector Contract Manager of the new designation, and (iii) each GM User
Organization and each EDS Service Organization may, at any time and from
time to time, designate a new Unit Project Manager by notifying the other
party's Major Sector Contract Manager and Unit Project Manager of the new
designation.
3.4 Attestation by Independent Public Accountants. Upon request by GM Parent,
an annual special report shall be obtained by EDS Parent from its
independent certified public accounting firm expressing an opinion as to
whether the amounts billed to GM by EDS for the then preceding year for MSA
Services provided by EDS pursuant to this MSA or pursuant to Service
Agreements, are fairly presented in accordance with the provisions of the
applicable Agreement(s). Unless waived by EDS Parent, GM Parent shall
reimburse EDS Parent for the expenses incurred by EDS Parent in obtaining
any such report.
3.5 Audit by GM Central Office. With respect to any MSA Services for which EDS
is to be compensated in accordance with Section A7.3 of Exhibit A hereto,
the GM Central Office may, at its expense, audit the books and records of
EDS to the extent necessary to verify the applicability and accuracy of
EDS' charges for such MSA Services. Any such audit may be conducted at any
time during normal business hours, upon reasonable notice to EDS, with or
without a dispute as to such charges.
3.6 Price Level Detail. Whenever additional MSA Services not being provided
under a current Service Agreement are required by a GM User Organization
(e.g., under a Request for Information Systems Services ("RISS"), System
Development Agreement ("SDA"), or other method) and the GM User
Organization so requests, the applicable EDS Service Organization will
present to the GM User Organization a business proposal
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containing a breakdown of the proposed price in such detail as will provide
sufficient information to enable the GM User Organization to reasonably
understand and evaluate the proposed options and make an informed business
decision. When reasonably requested by the GM User Organization, the EDS
Service Organization will provide a reasonable number of alternative
proposals that demonstrate the impact with respect to content, quality,
service levels, price and technology of various alternatives in order to
aid the GM User Organization in the evaluation of value and GM cost drivers
and provide a platform for rational business decisions. The price detail
presented by the EDS Service Organization will [Confidential information
has been omitted.] In addition, the price detail will identify the price
and source or nature of the pricing methodology (e.g., UPR catalog, fixed-
price, cost-plus, pass-through, specific pricing agreement or other
arrangement), will be sufficient to allow the GM User Organization to
perform a reasonable business analysis of value and competitiveness, and
will be consistent with the level of detail at which value judgments
related to additions, deletions, and modifications can reasonably be made.
3.7 Co-Negotiation. Upon GM's request, in situations where GM is willing to
make volume or other strategic commitments, EDS and GM will jointly
negotiate the GM price and terms with suppliers for items EDS will be
providing to GM under this MSA where the price and terms upon which EDS
will provide those items to GM are the GM price and terms, together with
any mark-up or additional fees which are mutually agreed upon, all in
accordance with and subject to the following:
(a) To the extent that the GM price and terms accepted by GM include GM
volume or strategic commitments to a supplier, GM shall make such
commitments to EDS.
(b) Following any such joint negotiation with a supplier that results in
price and terms that GM agrees to accept as the GM price and terms for
the applicable items, [Confidential information has been omitted.]
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[Confidential information has been omitted.]
(c) EDS may separately negotiate with suppliers for price and terms
applicable with respect to EDS, taking into account both GM's volume
and commitments, as well as EDS' additional volume and commitments,
under the following circumstances:
(1) EDS' total volume requirements (including volume requirements for
GM) are sufficiently greater than the GM volume so that, after
taking into account the particular supplier involved and the
items being purchased, it is reasonably to be expected that such
separate negotiations would result in an additional volume
discount; or
(2) After disclosing the potential terms to GM, EDS is willing to
agree to terms to which GM is unwilling to agree; provided,
however, that where there have previously been joint negotiations
with a supplier based on GM volumes and commitments, there shall
be no separate negotiations between EDS and the supplier based
solely on GM's volumes and commitments without GM's consent,
which will not be unreasonably withheld.
Regardless of the price and terms EDS negotiates for itself under
either of the above circumstances, EDS shall, unless GM otherwise
consents, remain obligated to [Confidential information has been
omitted.]
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(d) GM may initiate a joint renegotiation, with EDS and a supplier, of the
GM price and terms based on changes in volume, seasonal discounts,
market changes, price wars, or other similar opportunities presented
by changing market and economic conditions, as long as the
renegotiations are not materially detrimental to any prior volume or
strategic commitments GM has made to EDS.
(e) To the extent that the GM price and terms have been determined through
good faith co-negotiation with a supplier, GM may not subsequently
assert to EDS that such price and terms are non-competitive, but must
pursue any issue of non-competitiveness through joint renegotiation
with the supplier.
As used in this Section 3.7, the term "GM price and terms" means the price
and terms jointly negotiated and/or renegotiated by GM and EDS with a
supplier and accepted by GM.
ARTICLE IV. STRUCTURAL COST REDUCTIONS
---------------------------------------
4.1 Delco Electronics Structural Cost Reductions. GM Parent and EDS Parent
agree that, during 1996, EDS and Delco management shall work together to
achieve structural cost reductions in the MSA Services being provided to
Delco by EDS in the amount of $30 million. Such cost reductions shall be
measured [Confidential information has been omitted.] Subject to the above
restrictions, cost reductions related to changes in UPR Catalog rates and
volume usage (excluding reductions resulting from normal variations in
business usage) shall be included in determining the total structural cost
reductions achieved pursuant to this Section 4.1.
(a) The structural cost reduction target specified above represents firm
good faith business commitments on the part of both Delco and EDS, but
are not intended to be performance guarantees. In this regard, the
parties mutually agree to utilize their reasonable best efforts to
obtain such cost reductions, but recognize that
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there shall be no gain sharing or similar incentives for over
achievement, nor penalties or other liabilities in the event the
targeted reductions are not achieved.
(b) EDS shall also support the efforts of Delco management to reduce the
costs of "rebilled" commodities by a similar percentage during 1996
through changes in volume, selection of less expensive alternatives,
co-negotiation with third party vendors to secure price or cost
reductions, and similar actions.
(c) Similarly, EDS and Delco management shall commit to utilize their good
faith efforts to work together towards obtaining further structural
cost reductions on MSA Services throughout the remaining current term
of the Delco Electronics Service Agreement.
4.2 General IT Structural Cost Reductions. GM and EDS have established mutual
annual targets for IT structural cost reductions in base level MSA Services
provided to GM by EDS during calendar years 1996, 1997, 1998 and 1999 in
accordance with the following schedule:
Calendar Year Annual Target
------------- -------------
1996 $100,000,000
1997 $100,000,000
1998 $100,000,000
1999 $ 50,000,000
(a) The IT structural cost reduction targets specified above represent
firm good faith business commitments on the part of both EDS and GM,
but are not intended to be performance guarantees. In this regard, the
parties mutually agree to utilize their reasonable best efforts to
obtain such cost reductions, but recognize that there shall be no gain
sharing or similar incentives for over achievement, nor penalties or
other liabilities in the event the targeted reductions are not
achieved.
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(b) With regard to the annual target for 1996, the parties recognize that
achievement of the 1996 annual target will be more difficult in view
of the fact that the term of this MSA will not include a significant
portion of calendar year 1996. Nevertheless, EDS and GM agree to
strive in good faith to achieve the 1996 annual target; provided,
however, that any shortfall in achieving the 1996 annual target will
be carried over and added to the 1997 annual target.
(c) Cost reductions pursuant to this Section 4.2 will be calculated in
accordance with Exhibit E to this MSA. In this regard, Exhibit E
establishes the guidelines and methodology through which cost
reductions attributable to initiatives funded by GM, in whole or in
part, may be credited towards the achievement of annual targets. As
also set forth in Exhibit E, the parties have agreed on the amount
that will be credited towards the achievement of the 1996 annual
target for carry over amounts of savings initially realized in 1996
from 1995 cost reduction efforts pursuant to the Performance Reduction
Requirement provision of the NAO Service Agreement and similar
provisions of other Service Agreements in effect as of the Effective
Date.
(d) Cost reductions will be credited toward achievement of the annual
targets [Confidential information has been omitted.] in which the cost
reductions are realized, [Confidential information has been omitted.]
(e) The calculation of cost reductions to be credited toward achievement
of the annual targets pursuant to this Section 4.2 shall specifically
exclude (i) cost reductions achieved at GMIO or Delco, (ii) reductions
in the UPR Catalog rates or usage due to normal variations in business
usage, and (iii) reductions in GM's annual
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expenditures on new initiatives and application development. The above
provisions of this sub-Section notwithstanding, cost reductions
resulting from decreased usage of UPR Catalog items attributable to
process improvements or other efforts of EDS and cost reductions
resulting from the implementation of new initiatives and application
developments shall be credited towards the achievement of the annual
targets pursuant to this Section 4.2; provided, however, that such
inclusion is in accordance with the guidelines and methodology
established in Exhibit E hereto.
(f) GM will allocate the annual cost reduction target amounts among the GM
Major Sectors in North America (excluding Delco) roughly in proportion
to their relative charges for base level MSA Services and will reflect
the impact of the allocated cost reductions in the calendar year
commitments of those GM Major Sectors. GM will consult with EDS in
making these allocations. GM and EDS will each exert its good faith
efforts to achieve each GM Major Sector's allocated target, and, on
that basis, the parties agree that measurement of whether the
structural cost reductions have been achieved will be made on a GM
corporate basis taking into account over achievement of any particular
GM Major Sector's target, as well as any shortfall. With respect to
calendar year 1999, however, unless otherwise mutually agreed, the
entire annual cost reduction target amount shall be allocated to NAO,
and the achievement of such annual target shall be measured primarily
on the net IT structural costs reductions achieved within NAO.
ARTICLE V. MARKET TESTING AND RESOURCING
------------------------------------------
5.1 Initial Market Testing and Resourcing by GMIO. During each of 1996 and
1997, GMIO may expose to competitive bidding MSA Services so long as the
aggregate Bid Revenue associated with such MSA Services in each such year
does not exceed $30 million. Following such competitive bidding, GMIO, at
its discretion, may then source such MSA Services directly to third parties
or to EDS. In this regard, GMIO shall utilize its
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reasonable best efforts to complete such competitive bidding process during
each applicable year, but shall be allowed to complete the sourcing of MSA
Services associated with such bidding in the following year without regard
to the limitations in Section 5.2 hereof. The competitive bidding and the
sourcing of MSA Services to third parties described above, shall be subject
to the limitations and requirements set forth in this Section 5.1 and in
Section 5.3 hereof. With respect to any competitive bid that satisfies the
limitations on competitive bidding set forth in this Section 5.1 and
subject only to the aggregate limitations on resourcing set forth in sub-
Section 5.3(e) hereof, GMIO may accept any bid submitted in response to
that competitive bid regardless of whether or not the amount of the
accepted bid is greater or less than the Bid Revenue applicable to that
competitive bid.
(a) Excluded Services. In no event may GMIO expose to competitive
bidding, or resource, pursuant to this Section 5.1 the following MSA
Services:
(1) Any information processing resources listed on Attachment A, as
the same may be modified from time to time, to the Agreement for
Global Information Processing Resource Pricing, entered into as
of _____________, between GM Parent and EDS Parent.
(2) Any other MSA Services which are subject to a specific pricing
agreement entered into after February 1, 1996, so long as the
pricing term applicable to such MSA Services continues in force.
(b) No Further Limitation. Nothing in this Section 5.1 shall be
construed as a limitation or constraint on GMIO's ability to
participate in "Later Market Testing and Resourcing by GM" as
contemplated in Section 5.2.
5.2 Later Market Testing and Resourcing by GM. During the time periods
specified below, GM may expose MSA Services to competitive bidding and, at
its discretion, may then
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source such MSA Services directly to third parties or to EDS, subject to
the limitations and requirements set forth in this Section 5.2 and in
Section 5.3 hereof.
(a) Annual Limitations. During calendar year 1998 and each subsequent
calendar year during the term of this MSA, GM may expose to
competitive bidding MSA Services so long as the aggregate Bid Revenue
associated with such MSA Services does not exceed the applicable
percentage set forth below of the aggregate annual revenue paid to EDS
by GM for MSA Services performed pursuant to this MSA and Service
Agreements hereunder during the prior calendar year:
Calendar Year Percentage
------------- ----------
1998 5.75%
1999 6.125%
2000 6.375%
2001 2.6%
2002 2.5%
2003 2.5%
2004 2.4%
2005-06 2.2%
With respect to any competitive bid that satisfies the limitations on
competitive bidding set forth in this sub-Section 5.2(a) and subject
only to the aggregate limitations on resourcing set forth in sub-
Section 5.3(e) hereof, GM may accept any bid submitted in response to
that competitive bid regardless of whether or not the amount of the
accepted bid is greater or less than the Bid Revenue applicable to
that competitive bid.
(b) Commencement. The competitive bidding of MSA Services allowed during
any calendar year pursuant to this Section 5.2 may commence ninety
(90) days prior to
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the first of that year, but no resourcing to third parties which
results from such competitive bidding may be effective until the first
of that year.
(c) Excluded Services. In no event may GM expose to competitive bidding,
or resource, the following MSA Services:
(1) Any UPR Catalog items which are subject to a specific long-term
contract (such as (i) the information processing resources listed
on Attachment A, as the same may be modified from time to time,
to the Agreement for Global Information Processing Resource
Pricing, entered into as of ___________, between GM Parent and
EDS Parent, and (ii) the communications products and services
listed on Attachment A, as the same may be modified from time to
time, to the Agreement for U. S. Communications Product and
Service Pricing, entered into as of _______________, between GM
Parent and EDS Parent), for so long as such specific contract
continues in force.
(2) Any other MSA Services which are subject to a specific pricing
agreement entered into after February 1, 1996, so long as the
pricing term applicable to such MSA Services continues in force.
However, the exclusion set forth in this sub-Section 5.2(c)(2)
will not apply to the MSA Services being provided pursuant to (i)
the Service Agreement signed on __________, 1996, between EDS and
Allison Transmission, (ii) the Service Agreement signed on
__________, 1996, between EDS and GM of Canada, and (iii) the
Service Agreement signed on __________, 1996, between EDS and GM
de Mexico.
The above provisions notwithstanding, but subject to the other
limitations set forth in this Article V, during the final ninety (90)
days of any such contract or pricing agreement referred to in this
sub-Section 5.2(c), GM may commence
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competitive bidding of the MSA Services which are subject to that
contract or pricing agreement, but no resourcing to third parties
which results from such competitive bidding may be effective until the
expiration of that contract or pricing agreement.
5.3 General Limitations and Requirements. The competitive bidding, and
resourcing to third parties, of MSA Services by GM pursuant to Sections 5.1
and 5.2 hereof shall be subject to the following limitations and
requirements:
(a) Consultation. Prior to the commencement of any competitive bidding
pursuant to this Article V, GM shall consult with EDS regarding the
appropriateness and potential consequences of exposing any particular
MSA Services to competitive bidding and will give due regard to the
impact that such competitive bidding and any resulting resourcing may
have upon EDS. In this regard, EDS shall be obligated consistent with
sub-Section 5.3(h) hereof to promptly inform GM of any potential
impairment of EDS' ability to perform MSA Services as a result of such
resourcing to the extent EDS is then aware or reasonably should be
aware of such potential impairment. The final decision to proceed with
such competitive bidding and any resulting resourcing, however, shall
at all times be retained by GM.
(b) Estimate of Bid Revenue. Prior to the commencement of any competitive
bid that GM may conduct pursuant to this Article V, GM will develop a
good faith, reasonable estimate of the Bid Revenue associated with the
MSA Services that will be subject to that competitive bid, based upon
the amounts previously paid to EDS for those or similar MSA Services
provided under comparable circumstances, the EDS rates for applicable
resources then in effect, and other similar criteria. If GM so
requests, EDS will assist GM in developing the Bid Revenue estimate
and, in any event, GM will inform EDS of GM's proposed estimate of the
Bid Revenue prior to the commencement of the competitive bid.
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Promptly after being informed of the proposed estimate, EDS will
inform GM as to whether or not EDS is in agreement with the proposed
estimate and, if not, the basis for EDS' disagreement. If EDS is not
in agreement with the proposed estimate and GM so requests, EDS and GM
will work together in good faith to resolve the differences.
(c) Commencement of Competitive Bid. Upon finalization of GM's good
faith, reasonable estimate of the Bid Revenue associated with the MSA
Services that GM proposes to subject to a competitive bid pursuant to
this Article V and notwithstanding any disagreement by EDS with that
estimate, GM may proceed with the competitive bid for such MSA
Services if the amount of such GM final estimate of the Bid Revenue
for those MSA Services, when aggregated with the amounts of Bid
Revenue associated with all other competitive bids previously
commenced by GM during the applicable period, is less than the
applicable initial or annual bidding limitation set forth in Section
5.1 or 5.2 hereof.
(d) Right to Bid. No MSA Services shall be resourced to third parties
without the prior competitive bidding of such services in accordance
with this Article V. EDS shall have the right to bid on any MSA
Services exposed to competitive bidding pursuant to this Article V,
and its bid shall be fairly evaluated by GM along with all other bids
submitted by any third parties. In this regard, however, the exclusive
right to select the successful bidder shall at all times be retained
by GM.
(e) Aggregate Limitations. Following any competitive bidding of any MSA
Services allowed by this Article V, GM may source such MSA Services to
the successful bidder, whether EDS or a third party; provided,
however, that the amount of MSA Services which may be resourced to
third parties by GM shall be subject to the following aggregate
limitations:
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(1) Through calendar year 2000, in no single calendar year shall the
aggregate amount paid to third parties by GM for MSA Services
performed during that calendar year exceed fifteen percent (15%)
of the aggregate amount of revenue paid to EDS by GM for MSA
Services performed during the prior calendar year.
(2) After calendar year 2000, in no single calendar year shall the
aggregate amount paid to third parties by GM for MSA Services
performed during that calendar year exceed twenty-five percent
(25%) of the aggregate amount of revenue paid to EDS by GM for
MSA Services performed during the prior calendar year.
Commencing if and when GM resources any MSA Service to a third party,
GM shall provide to EDS, promptly after the end of each calendar year
during the remaining term of this MSA, a report of the amounts paid by
GM to third parties for MSA Services during that year. In addition,
upon request by EDS Parent, an annual special report shall be obtained
by GM Parent from its independent certified public accounting firm
expressing an opinion as to whether GM, for the then preceding year,
was in compliance with the provisions of this Article V. Unless waived
by GM Parent, EDS Parent shall reimburse GM Parent for the expenses
incurred by GM Parent in obtaining any such special report.
(f) Compliance with Limitations. GM shall not conduct competitive bidding
of any MSA Service, or source any MSA Service as a result of such
competitive bidding, if, at the time such bidding or sourcing would
otherwise occur, it is reasonably to be expected that the effect of
such bidding or sourcing would result in GM's exceeding any annual or
aggregate limitation provided in this Article V. Subject to the
foregoing, GM will not be required to cancel, renegotiate, or
otherwise nullify any contract for MSA Services previously entered
into with a third party in
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the event that any such limitation is reached or exceeded during the
terms of those contracts.
(g) Order of Precedence. The limitations set forth in this Article V
shall supersede any different or inconsistent rights which GM may have
pursuant to any Service Agreement, whether in effect as of or entered
into after the Effective Date, to conduct competitive bidding of, or
resource, any MSA Services, and GM Parent agrees that neither it nor
any of its Contracting Parties worldwide will enforce any provision of
any Service Agreement in a manner that would result in GM being in
violation of this Article V.
(h) Performance Excused. If, as a result of GM's resourcing of any MSA
Service, EDS is prevented or materially impaired from performing any
other MSA Services as a direct result of the performance or non-
performance of the third party providing the resourced MSA Service,
EDS will not be liable or otherwise held responsible for any failure
in the performance of those other MSA Services for so long as and to
the extent that EDS' performance is thus prevented or materially
impaired, provided that EDS gives GM prompt notice that such situation
is likely to occur as soon as EDS becomes aware or reasonably should
have become aware of that potential. In any such event, EDS shall,
upon GM's request, utilize its reasonable best efforts, in cooperation
with GM and the applicable third party, to develop and implement
suitable work around plans and any other actions that may be necessary
to eliminate the prevention or impairment of EDS' performance of the
MSA Services as expeditiously as reasonably possible. GM shall pay EDS
for additional work associated with EDS' implementation of any such
work around or related actions in accordance with the cost-plus
pricing methodology set forth in Section A7.3 of Exhibit A hereto or
as may be otherwise mutually agreed. In all such cases, EDS shall be
obligated to utilize its reasonable best efforts to perform the MSA
Services for which it is retaining responsibility regardless of the
performance or non-performance of the
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third party providing the resourced MSA Service. For purposes of this
sub-Section 5.3(h), EDS will be deemed "materially impaired" from
performing any MSA Services if EDS is not able to perform such MSA
Services without expending significant additional effort or expense.
(i) Plant Floor Exclusion. If GM terminates the Plant Floor Systems
Services Agreement, entered into as of _____________, 1996, between GM
and EDS on or before the end of the Probationary Period (as defined in
that agreement) as a result of a Material Failure (as defined in that
agreement) by EDS, then GM may competitively bid and resource any
plant floor services provided thereunder, other than any such plant
floor services that, prior to the Effective Date, were mutually agreed
by the parties to be within the scope of services described in Section
1.3 of the Master Agreement, and such competitive bidding and
resourcing shall not count against either the annual or the aggregate
limitations on competitive bidding and resourcing set forth elsewhere
in this Article V.
(j) Assistance and Cooperation. EDS will fully cooperate as necessary to
facilitate GM's exercise of the market testing rights under this
Article V, including, without limitation, by providing to GM and
designated third party vendors relevant information regarding the MSA
Services being exposed to market testing. The above provision
notwithstanding, EDS shall not be required to (i) provide any
information relating to EDS' costs, or (ii) disclose any other bona
fide EDS proprietary or trade secret information unless such other
proprietary or trade secret information is required to understand GM's
requirements and specifications and the recipient of such information
has provided EDS with a confidentiality agreement regarding such
information that is mutually acceptable to EDS and GM.
(k) Transition Services. In the event that GM awards or resources any MSA
Services to a third party pursuant to this Article V, then EDS shall
provide reasonable
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transition services to GM and such third party in accordance with the
provisions of Section A9.5 of Exhibit A hereto.
(l) Cancellation Charges. In the event that, pursuant to this Article V,
GM awards or sources, either to EDS or to a third party, any MSA
Services pursuant to a competitive bid that (i) results in the
cancellation of any MSA Services then being provided by EDS pursuant
to a Project Service Agreement (as defined below) executed on or
before February 1, 1996, or (ii) requires the disposition of any
capital asset or the cancellation of any long-term lease acquired or
entered into prior to February 1, 1996, then, in each such case, GM
will pay to EDS any wind-down expenses and cancellation charges,
determined in accordance with Section A9.4 of Exhibit A hereto,
incurred by EDS in connection with the sourcing of such MSA Services.
Except as provided in this sub-Section 5.3(l), EDS will not be
entitled to wind-down expenses or cancellation charges pursuant to
such Section A9.4 with respect to the bidding or sourcing of MSA
Services pursuant to this Article V. For purposes of this sub-Section
5.3(l), the term "Project Service Agreement" shall mean a RISS, SDA,
scope of work, or other Service Agreement for a specified set of MSA
Services, but specifically excluding any GM Major Sector or similar
"umbrella" type Service Agreement except to the extent such Service
Agreement is utilized to authorize performance of a specified MSA
Service without the creation of another Service Agreement.
ARTICLE VI. GENERAL PROVISIONS
-------------------------------
6.1 Termination of MSA. This MSA may be terminated as follows:
(a) In the event either EDS Parent or GM Parent defaults in the
performance of any of its duties or obligations that are material in
the context of the overall relationship between GM and EDS (except for
a default in payments to EDS) and fails to cure such default within
forty-five (45) days after being given written notice specifying
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the default, or, with respect to those defaults which cannot
reasonably be cured within forty-five (45) days, if the defaulting
party fails to provide, promptly after being given written notice
specifying the default, a specific written action plan for curing the
default as expeditiously as reasonably possible, including a specified
schedule for the action plan and a mutually agreed upon end date by
which the action plan is to be completed and the default cured, and to
proceed utilizing its reasonable best efforts to cure the default in
accordance with and on the schedule specified in the action plan, then
the party not in default may, by giving written notice thereof to the
defaulting party, terminate this MSA as of a date specified in such
notice of termination. Additionally, in the event that the defaulting
party fails to cure the default by the mutually agreed upon end date
as set forth in the action plan, the party not in default may, by
giving written notice thereof to the defaulting party, immediately
terminate this MSA.
(b) In the event GM defaults in the payment when due of any amount due to
EDS that is material in the context of the overall relationship
between GM and EDS and fails to cure such default within ten (10) days
after being given written notice specifying the default, then the EDS
Corporate Contract Manager may, by giving written notice thereof to
GM, terminate this MSA as of a date specified in such notice of
termination. Notwithstanding the foregoing, the EDS Corporate
Contract Manager shall not be entitled to terminate this MSA for
failure to pay any amount that is reasonably and in good faith
disputed by GM if, within the ten (10) day period specified above, GM
pays such disputed amount into an escrow account established at a
mutually selected financial institution for that purpose. Upon
resolution of the dispute, any portion of the disputed amount that is
determined to be payable to EDS, together with interest earned
thereon, will be promptly paid to EDS from the escrow account and any
remaining amount in the escrow account will be paid to GM.
(c) In the event that either party is unable to pay its debts generally as
they come due or is declared insolvent or bankrupt, is the subject of
any proceedings relating to
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its liquidation, insolvency or for the appointment of a receiver or
similar officer for it, makes an assignment for the benefit of all or
substantially all of its creditors, or enters into an agreement for
the composition, extension, or readjustment of all or substantially
all of its obligations, then the other party hereto may, by giving
written notice thereof to such party, terminate this MSA as of a date
specified in such notice of termination.
(d) In the event that a Change of Control (as defined in Exhibit F hereto)
occurs, then GM Parent may terminate this MSA or any applicable
Service Agreement in accordance with and subject to the provisions of
Exhibit F hereto.
6.2 Insurance. EDS shall maintain, during the term hereof, all insurance
and/or bonds required by law or mutually agreed to be reasonably required
to protect GM's interests, including but not limited to: (1) Workers
Compensation insurance as prescribed by the law of the jurisdiction(s) in
which the applicable MSA Services are to be performed; (2) Employer's and
Occupational Disease Liability insurances with limits of at least Five
Million Dollars ($5,000,000) per occurrence; and (3) Comprehensive General
Liability insurance (including products liability, personal injury,
property damage or loss, and broad form contractual liability insurance or
its equivalent with limits of Twenty-Five Million Dollars ($25,000,000)
and, if the use of automobiles is required, Comprehensive Automobile
Liability insurance with combined single limits of at least Ten Million
Dollars ($10,000,000) for bodily injury, including death, and for property
damage. EDS insurance policies shall be issued by reputable insurance
company(ies) authorized to do business where the applicable MSA Services
are to be performed. The above policies shall be primary in coverage to any
other insurance or self insurance arrangements which may be available to
GM. EDS shall be prepared, prior to the start of the applicable MSA
Services to furnish, if requested by GM, certificates or adequate proof of
the foregoing insurance, which insurance shall name GM Parent as an
additional insured. Certificates furnished by EDS shall contain a clause
stating that GM is to be notified in writing at least thirty (30) days
prior to termination of, or any material change in, the policy. The
purchase of
42
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insurance coverage and furnishing of certificates pursuant to this Section
6.2 shall neither modify nor be in satisfaction of EDS' liability under
this MSA or any Service Agreement.
6.3 Foreign Subsidiaries. GM Parent and EDS Parent have recommended and shall
continue to recommend to their respective foreign subsidiaries (including
second and lower tier subsidiaries and foreign branches of U.S.
subsidiaries, including second and lower tier subsidiaries) that they enter
into locally appropriate agreements for the provision of MSA Services in
accordance with the principles set forth in the provisions of this MSA. GM
Parent and EDS Parent each acknowledge and understand that their respective
foreign subsidiaries are not parties to this MSA and will not be legally
bound by the provisions of this MSA unless and until they agree to be so
bound. However, during any period and to the extent that a locally
appropriate Service Agreement for any such MSA Services is not then
currently in effect, GM Parent and EDS Parent shall each remain obligated
to the other for the performance of the respective obligations of GM and
EDS stated herein.
6.4 Compliance with Advance Agreement. EDS and GM will continue to adhere to
the practices in effect as of the Effective Date that have been agreed upon
and put in place to carry out the provisions of the Advance Agreement,
concerning EDS profit and unallowable costs included in GM Central Office
allocations to the U.S. Government, that has been negotiated and agreed
upon by GM Parent, EDS Parent, and the United States Defense Department;
provided, however, that the parties' obligation to adhere to these
practices will continue only for so long as and to the extent that EDS'
charges to the GM Central Office are not accepted by the Defense Department
as market-based prices, fully allowable for U.S. Government contract
financial accounting purposes. In addition, for so long as the parties
continue to adhere to the Advance Agreement as provided in the preceding
sentence, EDS shall give GM an annual credit against EDS' charges to the GM
Central Office in the amount of $115,000 per year. GM Parent and EDS Parent
each agree to use all reasonable efforts to cause the Defense Department to
accept EDS' charges to the GM Central Office as market-based prices as soon
as feasible after the Effective Date.
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6.5 Amendment or Modification. This MSA may be amended or modified upon mutual
agreement of GM Parent and EDS Parent; provided, however, such amendment or
modification shall only be effective if made in writing by the Corporate
Contract Managers or other authorized representatives of GM Parent and EDS
Parent.
6.6 Incorporation of Exhibit A. The provisions of Exhibit A hereto, except for
and expressly excluding Section A9.3 thereof, are hereby incorporated into
and made a part of this MSA for all purposes. Notwithstanding anything to
the contrary in Exhibit A hereto, for purposes of these provisions as
incorporated into this MSA (i) the Effective Date shall mean the Effective
Date of this MSA, (ii) the Contracting Parties shall mean GM Parent and EDS
Parent, and (iii) the Major Sector Contract Managers and the Unit Project
Managers of the Contracting Parties shall mean the GM and EDS Corporate
Contract Managers.
6.7 Prior Master Agreement. This MSA amends, restates and supersedes in its
entirety the Master Agreement by and between GM and EDS and, effective as
of the Effective Date, the Master Agreement is hereby terminated and
replaced in all respects. However, any Service Agreement in effect as of
the Effective Date will survive execution of this MSA, but GM Parent and
EDS Parent shall, subject to Section 1.5 hereof, cause their respective
Contracting Parties thereto to incorporate into that Service Agreement the
provisions of Exhibit A to this MSA in lieu of the corresponding provisions
of Exhibit A to the Master Agreement (with appropriate adjustments or
exclusions necessary to accommodate differences between this MSA and the
Master Agreement, subject to the provisions of Section A1.2 of Exhibit A
hereto) as promptly as reasonably practicable. Without limiting the
generality of the foregoing, GM Parent and EDS Parent shall, subject to
Section 1.5 hereof, cause their respective Contracting Parties, in
connection with their incorporating into any such Service Agreement the
provisions of Exhibit A to this MSA, to make the following adjustments and
exclusions to those provisions as incorporated into the Service Agreement:
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(a) GM Space. If the Contracting Parties did not expressly exclude
Section A3.2(b) of Exhibit A to the Master Agreement from the Service
Agreement, then the Service Agreement shall be amended to include such
Section A3.2(b) as it may have been modified in the Service Agreement.
(b) Time of Payment. If the payment terms applicable to the Service
Agreement have been modified, either pursuant to Section 2.6 hereof or
otherwise, so that such provisions are different from the provisions
of Section A8.2 of Exhibit A to the Master Agreement, then the Service
Agreement shall retain such modified payment terms in lieu of the
payment terms provided in Section A8.2 of Exhibit A to this MSA. In no
event, however, shall the payment terms applicable to any Service
Agreement be less favorable to the GM Contracting Party thereto than
the applicable payment terms described in Section 2.6 hereof.
GM Parent and EDS Parent each agree that, unless otherwise expressly agreed
by the Contracting Parties thereto in accordance with the provisions of
Section A1.2 of Exhibit A hereto, no Service Agreement in effect as of the
Effective Date will be enforced in a manner that is inconsistent with the
provisions of this Section 6.7.
6.8 Governing Law. This MSA shall be governed by the laws of the State of
Michigan without regard to the principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have executed this MSA effective as of the Effective Date first
above written.
GENERAL MOTORS CORPORATION ELECTRONIC DATA SYSTEMS CORPORATION
By: By:
----------------------- -----------------------
Date: Date:
--------------------- ---------------------
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EXHIBIT A
STANDARD TERMS AND CONDITIONS
RECOMMENDED FOR INCORPORATION INTO SERVICE AGREEMENTS
-----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE A-I. DEFINITIONS AND INTERPRETATION
Section A1.1 Definitions........................................... A-1
Section A1.2 Interpretation........................................ A-5
ARTICLE A-II. CONTRACT ADMINISTRATION AND REVIEW
Section A2.1 Management and Administration......................... A-6
Section A2.2 Performance Review.................................... A-7
ARTICLE A-III. GM ASSETS AND SPACE
Section A3.1 GM Assets............................................. A-7
Section A3.2 GM Space.............................................. A-8
ARTICLE A-IV. SOFTWARE AND INTELLECTUAL PROPERTY
Section A4.1 Ownership of Software................................. A-8
Section A4.2 Software Rights and Licenses.......................... A-10
Section A4.3 Changes and Upgrades to Software...................... A-15
Section A4.4 Third Party Software Developers....................... A-16
Section A4.5 Intellectual Property................................. A-16
ARTICLE A-V. DATA PROTECTION AND AUDIT RIGHTS
Section A5.1 GM Data............................................... A-17
Section A5.2 Safeguarding of GM Data............................... A-18
Section A5.3 Nondisclosure......................................... A-18
Section A5.4 Data Center Security.................................. A-19
Section A5.5 Audit Rights.......................................... A-19
ARTICLE A-VI. EMPLOYEES
Section A6.1 EDS' Employees........................................ A-20
Section A6.2 Notice to EDS' Employees.............................. A-20
Section A6.3 Premise and Work Rules................................ A-21
Section A6.4 Right of Access....................................... A-21
Section A6.5 Key EDS Employees for Critical Projects............... A-21
ARTICLE A-VII. EDS COMPENSATION
Section A7.1 Uniform Published Rates............................... A-22
Section A7.2 Fixed Price Methodology............................... A-24
Section A7.3 Cost-Plus Pricing..................................... A-26
Section A7.4 Pricing Detail........................................ A-30
Section A7.5 Tax Matters........................................... A-31
A-i
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ARTICLE A-VIII. BILLING AND PAYMENT PROCEDURES
Section A8.1 Billing Procedures.................................... A-33
Section A8.2 Time of Payment....................................... A-34
ARTICLE A-IX. DISPUTES AND TERMINATION
Section A9.1 Negotiation of Disputes............................... A-36
Section A9.2 Resolution of Disputes................................ A-36
Section A9.3 Termination........................................... A-37
Section A9.4 Cancellation of Services and Cancellation Charges..... A-38
Section A9.5 Termination Assistance and Transition................. A-41
ARTICLE A-X. WARRANTIES
Section A10.1 Software Warranty..................................... A-44
Section A10.2 Hardware Warranty..................................... A-44
Section A10.3 Pass-Through Warranties............................... A-44
Section A10.4 Survival of Warranties................................ A-45
Section A10.5 Disclaimer of Warranties.............................. A-45
ARTICLE A-XI. INDEMNITIES AND LIABILITY
Section A11.1 Cross Indemnity....................................... A-45
Section A11.2 Proprietary Rights Indemnity.......................... A-46
Section A11.3 Hardware Damage Indemnity............................. A-46
Section A11.4 Software License Indemnity............................ A-47
Section A11.5 Limitation of Liability............................... A-47
ARTICLE A-XII. SPECIAL PROVISIONS RELATING TO MSA SERVICES
Section A12.1 GM's IT Strategy and Architecture..................... A-48
Section A12.2 Competitiveness....................................... A-48
Section A12.3 Market Testing and Resourcing......................... A-49
Section A12.4 Co-Negotiation........................................ A-49
Section A12.5 Use of Independent Auditors........................... A-49
ARTICLE A-XIII. MISCELLANEOUS
Section A13.1 Binding Nature and Assignment......................... A-50
Section A13.2 Notices............................................... A-50
Section A13.3 Counterparts.......................................... A-51
Section A13.4 Headings.............................................. A-51
Section A13.5 Approvals and Similar Actions......................... A-51
Section A13.6 Force Majeure......................................... A-51
Section A13.7 Severability.......................................... A-52
Section A13.8 Waiver................................................ A-52
Section A13.9 Relationship of Parties............................... A-52
Section A13.10 Services for Others................................... A-53
Section A13.11 Hiring of Employees................................... A-53
Section A13.12 Compliance With Laws.................................. A-53
Section A13.13 Media Releases........................................ A-53
Section A13.14 Survival.............................................. A-54
Section A13.15 Entire Agreement...................................... A-54
Section A13.16 Amendment or Modification............................. A-54
Section A13.17 Good Faith and Fair Dealing........................... A-54
A-ii
<PAGE>
EXHIBIT A
STANDARD TERMS AND CONDITIONS
RECOMMENDED FOR INCORPORATION INTO SERVICE AGREEMENTS
-----------------------------------------------------
ARTICLE A-I. DEFINITIONS AND INTERPRETATION
-------------------------------------------
A1.1 Definitions. The following terms shall have the meanings set forth below
wherever they are used in the provisions of this Exhibit A:
(a) The term "Agreement" shall mean the agreement into which the
provisions of this Exhibit A are incorporated.
(b) The term "Contracting Party" shall mean (i) with respect to the MSA,
GM Parent or EDS Parent, and (ii) with respect to any Service
Agreement, the GM User Organization receiving MSA Services pursuant to
the Service Agreement or the EDS Service Organization providing such
MSA Services.
(c) The term "Corporate Contract Manager" shall mean the individual
designated by GM Parent or EDS Parent, respectively, pursuant to sub-
Section 3.3(a) of the MSA.
(d) The term "EDS" shall mean, collectively, EDS Parent and the entities
and subsidiaries owned by EDS Parent. For purposes of this
definition, an entity or subsidiary will be deemed to be "owned by EDS
Parent" if EDS Parent, either directly or indirectly, (i) is the
beneficial owner of more than 50% of the equity of that entity or
subsidiary, or (ii) is the beneficial owner of more than 35% of the
equity of, and has management control of, that entity or subsidiary.
(e) The term "EDS Cost" shall mean the costs of EDS, calculated pursuant
to sub-Section A7.3(b) hereof, in providing to GM the applicable MSA
Services.
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(f) The term "EDS Major Sector" shall mean an EDS Service Organization
designated by EDS from time to time to coordinate the provision of MSA
Services by EDS to the GM User Organizations within a GM Major Sector.
(g) The term "EDS Parent" shall mean Electronic Data Systems Corporation,
a Delaware corporation.
(h) The term "EDS Service Organization" shall mean any functional entity,
division, subsidiary, department or group within EDS, including an EDS
Major Sector, which has been or shall be formed to provide MSA
Services to GM User Organizations.
(i) The term "Effective Date" shall mean the date as of which the term of
the Agreement commences or the provisions of the Agreement otherwise
become effective.
(j) The term "GM" shall mean, collectively, GM Parent and the entities and
subsidiaries owned by GM Parent. For purposes of this definition, an
entity or subsidiary will be deemed to be "owned by GM Parent" if GM
Parent, either directly or indirectly, is the beneficial owner of:
(1) More than 65% of the equity of, and has management control of,
that entity or subsidiary and, as of August 1, 1995, EDS was
providing services under the Master Agreement pursuant to a
Service Agreement in support of the business operations of that
entity or subsidiary.
(2) 80% or more of the equity of that entity or subsidiary if, as of
August 1, 1995, EDS was not providing services under the Master
Agreement pursuant to a Service Agreement in support of the
business operations of that entity or subsidiary.
A-2
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(k) The term "GM Assets" shall mean all GM fixed and related assets, other
than Software and facilities, used in the performance of the MSA
Services and transferred to the management and control of EDS as of
January 1, 1985 or, by mutual agreement, at anytime thereafter.
(l) The term "GM Central Office" shall mean the corporate headquarters of
GM Parent.
(m) The term "GM Major Sector" shall mean a GM User Organization
designated by GM from time to time to coordinate the receipt of MSA
Services from EDS by numerous GM User Organizations. As of the
Effective Date of the MSA, the GM Major Sectors are listed in Exhibit
B to the MSA.
(n) The term "GM Parent" shall mean General Motors Corporation, a Delaware
corporation.
(o) The term "GM User Organization" shall mean any functional entity,
division, subsidiary, department or group within GM, including a GM
Major Sector, which has or shall have requirements for MSA Services
applicable to that functional entity, division, subsidiary, department
or group that the MSA provides are to be obtained from EDS.
(p) The term "Hardware" shall mean computers and related equipment,
including, but not limited to, central processing units and other
processors, controllers, modems, communications and telecommunications
equipment (voice, data and video), cables, storage devices, printers,
terminals, other peripherals and input and output devices, and other
tangible mechanical and electronic equipment intended for the
processing, input, output, storage, manipulation, communication,
transmission and retrieval of information and data.
A-3
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(q) The term "Invoice" shall mean an invoice prepared by EDS for GM
pursuant to the terms of the Agreement.
(r) The term "IT" shall mean information technology consisting of computer
and information processing and communications.
(s) The term "Major Sector Contract Manager" shall mean the person
designated by either the GM Major Sector having responsibility for the
GM Contracting Party or the EDS Major Sector having responsibility for
the EDS Contracting Party, as applicable, pursuant to sub-Section
3.3(b) of the MSA.
(t) The term "Master Agreement" shall mean the Master Agreement, effective
as of September 1, 1985, made and entered into by and between GM
Parent and EDS Parent, as amended by the Addendum thereto dated May
29, 1987.
(u) The term "MSA" shall mean the Master Service Agreement, effective as
of _____________, 1996, made and entered into by and between GM Parent
and EDS Parent.
(v) The term "MSA Services" shall mean those services described in Section
I of Exhibit C to the MSA.
(w) The term "Service Agreement" shall mean any agreement, as provided for
in Section 2.1 of the MSA, that is entered into between a GM User
Organization and an EDS Service Organization for the provision of MSA
Services to that GM User Organization, whether entered into before or
after the Effective Date of the MSA.
(x) The term "Site" or "Sites" shall mean the space within GM facilities
or entire GM facilities utilized in the performance of MSA Services.
A-4
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(y) The term "Software " shall mean the source code and object code
versions of any applications programs, operating system software,
computer software languages, utilities and other computer programs,
and documentation and supporting materials relating thereto, in
whatever form or media, including, but not limited to, the tangible
media upon which such applications programs, operating system
software, computer software languages, utilities and other computer
programs, and documentation and supporting materials relating thereto
are recorded or printed, together with all corrections, improvements,
updates and releases thereof.
(z) The term "Unit Project Manager" shall mean the person designated by
either Contracting Party pursuant to sub-Section 3.3(c) of the MSA.
Other terms used in this Exhibit A are defined in the context in which they
are used and, unless otherwise specified herein, shall have the meanings
there indicated wherever they are used in this Exhibit A.
A1.2 Interpretation. Unless expressly modified or excluded therefrom, the
provisions of this Exhibit A shall be deemed incorporated into the
Agreement and shall supersede and prevail over any conflicting or
inconsistent provisions of the Agreement, unless expressly provided
otherwise under the Agreement by:
(a) Mutual agreement of the Corporate Contract Managers with respect to
the provisions of Sections A1.1, A1.2, and A8.2 and Articles A-IX and
A-XII.
(b) Mutual agreement of the Major Sector Contract Managers with respect to
the provisions of Articles A-IV, A-V, A-X, A-XI, and A-XIII.
(c) Mutual agreement of the Unit Project Managers with respect to the
remaining provisions of this Exhibit A.
A-5
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The GM Contracting Party and the EDS Contracting Party with respect to the
Agreement shall be responsible for the performance of the obligations of GM
and EDS, respectively, under the Agreement.
ARTICLE A-II. CONTRACT ADMINISTRATION AND REVIEW
------------------------------------------------
A2.1 Management and Administration. The Unit Project Manager for each
Contracting Party, as designated pursuant to sub-Section 3.3(c) of the MSA,
under the supervision of the applicable Major Sector Contract Manager,
shall:
(a) Be responsible for the implementation, management and enforcement of
the Agreement on behalf of the Contracting Party.
(b) Supervise performance of that Contracting Party's obligations under
the Agreement.
(c) Have principal responsibility to resolve disputes between the GM and
EDS Contracting Parties.
(d) Ensure that the policies and procedures established with respect to
the Agreement are consistent with the policies and procedures of
general applicability established by the applicable Corporate Contract
Manager or Major Sector Contract Manager.
Each Major Sector Contract Manager or Unit Project Manager may delegate any
of his or her authority to a designated representative by notifying the
other Major Sector Contract Manager or Unit Project Manager of the
designated representative to whom such authority is delegated and the
extent of the authority delegated, which notice shall be confirmed in
writing if requested by the other Major Sector Contract Manager or Unit
Project Manager. Each Contracting Party shall be entitled to rely upon
instructions received from the Major Sector Contract Manager or Unit
Project Manager for the other Contracting Party with respect to all matters
relating to the Agreement and upon instructions received from any
A-6
<PAGE>
designated representative of the Major Sector Contract Manager or Unit
Project Manager for the other Contracting Party with respect to the MSA
Services and areas for which such designated representative is responsible
and each Major Sector Contract Manager or Unit Project Manager and
designated representative thereof shall make himself or herself reasonably
available for such purpose.
A2.2 Performance Review. The GM and EDS Major Sector Contract Managers and Unit
Project Managers for the Contracting Parties shall meet as often as shall
reasonably be requested by either Contracting Party to review the
performance of the EDS and GM Contracting Parties under the Agreement.
Written minutes of such meetings may be kept.
ARTICLE A-III. GM ASSETS AND SPACE
----------------------------------
A3.1 GM Assets. Commencing on the Effective Date, during the term of the
Agreement, GM shall provide the GM Assets used in the performance of the
MSA Services to EDS for EDS' use as provided herein.
(a) All GM Assets owned, leased or otherwise held by GM during the term of
this Agreement shall at all times remain the property of GM.
(b) EDS will have access to and use of the GM Assets and such ability to
manage the GM Assets as may be necessary or appropriate to enable EDS
to properly perform its obligations pursuant to the Agreement. Unless
otherwise mutually agreed, on a monthly basis, EDS will (i) pay on
behalf of GM to any third party, pursuant to the terms of any
agreements therefor, or (ii) reimburse GM for, the actual costs,
including depreciation, incurred by GM in connection with such GM
Assets.
(c) As and when such GM Assets are no longer required for the MSA
Services, EDS will arrange for the sale or disposal of such GM Assets
on such terms as EDS determines to be advantageous using the same
efforts as EDS uses with respect to
A-7
<PAGE>
its own similar assets and will advise GM of those terms. Upon GM's
approval, EDS will sell or dispose of such GM Assets on the terms
approved by GM and will forward to GM all proceeds of such sale or
disposal. In the event GM does not approve of the proposed terms of
sale, EDS shall return such GM Assets to GM.
A3.2 GM Space. Commencing on the Effective Date:
(a) EDS will have access to and use of the space at all Sites utilized in
the performance of MSA Services; and EDS shall have such right of
access to the GM facilities in which such Sites are located as is
appropriate to its responsibilities hereunder upon compliance with all
GM security and safety policies of general applicability in effect at
such facilities.
(b) Unless otherwise mutually agreed, such space and related facilities,
utilities and services will be provided by GM at no cost to EDS and
will be consistent with that provided at the Sites for employees of
EDS performing MSA Services as of the Effective Date or as otherwise
reasonably required by EDS. EDS shall comply with the terms of GM's
lease for such space to the extent that such terms are made known to
the EDS Contracting Party and are applicable to the EDS Contracting
Party's use of such space and shall indemnify GM from and against all
claims, losses or damages arising out of EDS noncompliance with such
terms.
ARTICLE A-IV. SOFTWARE AND INTELLECTUAL PROPERTY
------------------------------------------------
A4.1 Ownership of Software. GM and EDS agree that ownership of Software shall
be as follows:
(a) "GM Software" shall mean all Software owned, developed, leased,
licensed, or acquired by GM and used by EDS in providing MSA Services
to GM under the Agreement, but not including any Developed Software,
EDS Restricted Software,
A-8
<PAGE>
Software Development Tools, or Third Party Software. As between GM and
EDS, the GM Software shall be owned by and be the property of GM.
(b) "Developed Software" shall mean all Software developed by EDS, and EDS
agents or subcontractors, pursuant to the Agreement, including all
Software modifications and Software derivatives thereto, but not
including any Software that the parties have agreed or may agree will
be used to service other EDS customers in a service bureau environment
or on a multiple customer product or platform basis. The Developed
Software shall be owned by and be the property of GM. EDS hereby
assigns to GM the copyright in the Developed Software and agrees to
execute such documents as may be reasonably necessary to effect this
assignment.
(c) "EDS Restricted Software" shall mean all Software transferred to EDS
by GM pursuant to the Master Agreement and all Software developed or
acquired by EDS for GM under the Master Agreement. As between GM and
EDS, the EDS Restricted Software shall be owned by and be the property
of EDS.
(d) "Software Development Tools" shall mean all software development tools
utilized by EDS in creating Developed Software and not otherwise
embodied in such Developed Software. As between GM and EDS, the
Software Development Tools shall be owned by and be the property of
EDS.
(e) "EDS Software" shall mean all Software (i) owned by EDS as of the
effective date of the MSA or which EDS acquires ownership of after the
effective date of the MSA and which is used in connection with the MSA
Services performed under the Agreement, and/or (ii) developed by or on
behalf of EDS after the effective date of the MSA for use in
connection with the MSA Services performed under the Agreement, but
not including, in either case, any Developed Software,
A-9
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EDS Restricted Software, Software Development Tools, or Third Party
Software. The EDS Software shall be owned by and be the property of
EDS.
(f) "Third Party Software" shall mean all Software owned by a third party
that is licensed or leased from the third party by EDS, either in its
own name or in the name of GM, which is or will be used in the
performance of or in connection with the MSA Services performed under
the Agreement. All Third Party Software acquired primarily for use by
EDS in providing MSA Services to GM under the Agreement shall be
acquired in the name of GM, with EDS having access to and the right to
use such Software to the extent necessary to perform the MSA Services
pursuant to the Agreement.
A4.2 Software Rights and Licenses. GM and EDS agree to license Software as
follows:
(a) GM Software.
(1) GM grants to EDS a world-wide, non-exclusive, non-transferable,
fully paid, royalty-free license, with right to sublicense to the
extent permitted under third party license agreements, to use GM
Software for the limited purpose of providing MSA Services
pursuant to the Agreement. The license granted to EDS herein
includes the right to modify the licensed GM Software and to
develop software derivatives of or interfacing with the licensed
GM Software for the limited purpose as set forth herein.
(2) In the event GM ceases to obtain all or a portion of the MSA
Services from EDS including upon the expiration or termination of
the Agreement, for any reason, the related license to the GM
Software granted under sub-Section A4.2(a)(1) hereof to EDS, and
any sublicense to such GM Software granted by EDS to any third
party, shall terminate to the extent such GM Software is used for
such ceased MSA Services, and EDS shall
A-10
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(i) deliver cost-free to GM a current copy of such GM Software in
the form in use as of the cessation of such MSA Services, and
(ii) unless such GM Software is the subject of a further license
granted under sub-Section A4.2(a)(1) hereof, promptly destroy or
erase all other copies of such GM Software in its possession,
except for copies retained by EDS for archival purposes only.
(b) Developed Software.
(1) GM grants to EDS a world-wide, non-exclusive, non-transferable,
fully paid, royalty-free license, with right to sublicense, to
use Developed Software for the limited purpose of providing MSA
Services pursuant to the Agreement. The license granted to EDS
herein includes the right to modify the licensed Developed
Software and to develop software derivatives of or interfacing
with the licensed Developed Software for the limited purpose as
set forth herein.
(2) In the event GM ceases to obtain all or a portion of the MSA
Services from EDS, including upon the expiration or termination
of the Agreement, for any reason, the related license to any
Developed Software granted under sub-Section A4.2(b)(1) hereof to
EDS, and any sublicense to such Developed Software granted by EDS
to any third party, shall terminate to the extent such Developed
Software is used for such ceased MSA Services, and EDS shall (i)
deliver cost-free to GM a current copy of such Developed Software
in the form in use as of the cessation of MSA Services, and (ii)
unless such Developed Software is the subject of a further
license granted under sub-Section A4.2(b)(1) or A4.2(b)(3)
hereof, promptly destroy or erase all other copies of such
Developed Software in its possession, except for copies retained
by EDS for archival purposes only.
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(3) In response to a request from EDS to license specified Developed
Software to use such Developed Software for the benefit of a
third party or to otherwise commercially exploit such Developed
Software, the parties shall in good faith determine restrictions,
if any, required to maintain the confidentiality of GM's
proprietary information [Confidential information has been
omitted.] including restrictions on delay of distribution of the
specified Developed Software [Confidential information has been
omitted.] GM shall license the specified Developed Software
subject to the determined restrictions [Confidential information
has been omitted.]
(c) EDS Restricted Software.
(1) EDS grants to GM a world-wide, non-exclusive, non-transferable,
fully paid, royalty-free, perpetual license, with right to
sublicense, solely for GM business activities, to use, modify,
enhance, develop software derivatives and interfaces, reproduce,
and distribute all EDS Restricted Software used in connection
with the MSA Services performed under the Agreement.
(2) EDS shall not use EDS Restricted Software for the benefit of a
third party, or sell or sublicense such Software to a third party
(other than to provide MSA Services to GM), without (i) the
parties first agreeing to restrictions, if any, required to
maintain the confidentiality of GM's proprietary information
[Confidential information has been omitted.] and (ii)
[Confidential information has been omitted.]
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[Confidential information has been omitted.] Notwithstanding the
foregoing, EDS may continue to exercise such rights in the EDS
Restricted Software following the effective date of the MSA to
the extent previously agreed to between GM and EDS.
(d) EDS Software. In the event GM shall at any time be properly entitled,
in accordance with the provisions of the MSA, to cease obtaining any
MSA Services from EDS and to commence performing such MSA Services for
itself or to obtain such MSA Services from a third party service
provider and shall elect to do so, then, if GM so requests in writing,
GM shall have, effective as of that time, a perpetual, irrevocable
(except in the event of a breach of the license herein), world-wide,
non-transferable, non-exclusive, fully paid, royalty-free license to
use, operate, maintain, copy, modify, create derivative works for use
of GM, and sublicense (as expressly provided in sub-Section A4.2(d)(4)
hereof) the application programs, documentation, and any other
materials that the Contracting Parties determine is necessary, of any
EDS Software then being used by EDS in providing the MSA Services to
GM and as to which EDS is entitled to grant such a license (such
application programs, documentation, and other materials being
hereinafter referred to as the "Licensed Software"), subject to the
following terms and conditions:
(1) Except with the prior written consent of EDS or to the extent
required by natural disaster or similar emergency, the Licensed
Software shall not be operated, directly or indirectly (i) by
persons other than bona fide employees of GM or an authorized
third party, or (ii) on equipment that is not under the control
of GM or an authorized third party. For purposes of this sub-
Section A4.2(d)(1), an "authorized third party" shall mean (x) a
third party provider of data processing services or other
supplier of services to GM to the extent such supplier requires
access to the Licensed Software in connection with the services
being provided to GM, or (y) any
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other third party (including dealers authorized to sell and
service GM vehicles) to the extent such third party requires
access to the Licensed Software in connection with the internal
business purposes of GM; provided, however, that any such
authorized third party shall have entered into an agreement with
EDS to comply with the provisions of this sub-Section A4.2(d) and
to not use the Licensed Software to compete in any manner, direct
or indirect, with EDS.
(2) Except with the prior written consent of EDS, the Licensed
Software shall be utilized only to support GM's business
activities.
(3) GM shall keep the Licensed Software confidential, shall not at
any time allow the Licensed Software, or any of the various
components thereof or any modifications thereto, to be disclosed
to third parties, sold, assigned, leased or commercially
exploited or marketed in any way, with or without charge, by GM
or its employees or agents and, except to the extent required for
normal operation of the Licensed Software as permitted herein,
shall not permit the Licensed Software to be copied or
reproduced, in whole or in part, by any person, firm or
corporation, at any time.
(4) GM may sublicense Licensed Software only to entities acquiring
all or any part of the business of GM. In the event such a
sublicense is granted, GM shall notify EDS and provide EDS with a
copy of any such sublicense. The sublicense shall limit use of
the Licensed Software to use in the business acquired, shall be
under terms no less restrictive than those set forth in this sub-
Section A4.2(d) and shall provide that EDS is an intended third
party beneficiary thereof.
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With the granting of the license to GM hereunder, EDS shall promptly
provide GM with a copy of the Licensed Software in the form being used
to provide MSA Services at the time such license becomes effective.
(e) Third Party Software. In the event GM ceases to obtain all or a
portion of the MSA Services from EDS in any situation where GM is
entitled to commence performing such MSA Services for itself or to
obtain such MSA Services from a third party service provider, then,
with respect to any Third Party Software then being used by EDS in
providing such MSA Services to GM, other than any such Third Party
Software acquired in GM's name, EDS shall either (i) grant GM a non-
exclusive, non-transferable, sublicense with right to sublicense for
GM business activities to use, modify, and enhance such Third Party
Software to the extent permitted by any applicable third party
agreements and subject to the provisions of sub-Section A9.5(e) of
this Exhibit A, or (ii) assist GM in obtaining from the applicable
third party a non-exclusive, non-transferable license with right to
sublicense for GM business activities to use, modify, and enhance such
Third Party Software. Notwithstanding the foregoing, in a situation
where GM is ceasing to obtain all or a portion of the MSA Services
from EDS as a result of resourcing such MSA Services to a third party
pursuant to Article V of the MSA, EDS shall not be required to grant
GM a sublicense to any Third Party Software then being used by EDS in
providing such MSA Services if and to the extent that such Third Party
Software is commercially available to such third party. With the
granting by EDS of a sublicense to GM hereunder, EDS shall promptly
provide GM with a copy of such Third Party Software in the form being
used to provide MSA Services at the time such sublicense becomes
effective.
A4.3 Changes and Upgrades to Software. Except as may be approved by GM, EDS
shall not make any changes or modifications to any Software then being used
by EDS in providing MSA Services to GM that would adversely materially
alter the functionality of the Software or any associated Hardware or
materially degrade the performance of the
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Software or any associated Hardware, except as may be necessary on a
temporary basis to maintain the continuity of the MSA Services being
provided under the Agreements.
A4.4 Third Party Software Developers. EDS shall fully cooperate with GM's third
party Software developers and upon GM's request, provide such third party
Software developers with all pertinent interface requirements for
applicable EDS Software, [Confidential information has been omitted.] and,
to the extent permitted by the applicable license agreements, Third Party
Software. EDS shall not be required to provide such interface requirements
[Confidential information has been omitted.] to a third party Software
developer unless EDS and the third party Software developer first enter
into a confidentiality agreement with respect to such interface
requirements. GM shall not request disclosure of such interface
requirements [Confidential information has been omitted.] to any third
party, except as required for normal operation of any licensed EDS Software
for GM business activities.
A4.5 Intellectual Property. GM and EDS agree that intellectual property shall
be treated as follows:
(a) "Intellectual Property" or "IP" shall mean inventions, designs, mask
works, and works of authorship, as those terms are understood under
United States law, conceived or fixed in tangible form by EDS pursuant
to work done under the Agreement. IP shall not include general skill
and knowledge of an EDS employee resulting from that employee's work
under the Agreement.
(b) EDS shall own all IP that relates to computer system implementation,
data processing and data communications ("EDS IP"). All other IP not
comprising EDS IP, including all IP that relates to core business
operations of GM and the GM Major Sectors (collectively, "GM IP"),
shall be owned by GM. EDS IP shall not include copyright in any
Developed Software.
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(c) GM and EDS shall each disclose promptly to the other sufficient
information to enable the other, at its cost, to protect its IP and,
in connection therewith, shall execute such documents or take such
other actions as may be reasonably required to enable the other to
file applications, to obtain patents and to otherwise perfect its IP
rights granted hereunder.
(d) GM and EDS shall each grant to the other a license, with no right to
sublicense, to make, have made, use, have used, sell and have sold
under the granting party's IP for the other's internal business
activities. To the extent EDS desires to use this license for the
benefit of a third party or to otherwise commercially exploit the
rights granted, [Confidential information has been omitted.]
ARTICLE A-V. DATA PROTECTION AND AUDIT RIGHTS
---------------------------------------------
A5.1 GM Data. GM Contracting Party data shall be and remain GM's property and,
upon the expiration or termination of the Agreement for any reason or, with
respect to any particular data, on such earlier date that the same shall be
no longer required by the EDS Contracting Party in order to render MSA
Services under the Agreement, all copies of such data shall, upon prior
notice to the GM Contracting Party, be either, at the election of the GM
Contracting Party, (i) deleted from the data files maintained by the EDS
Contracting Party or (ii) returned to the GM Contracting Party by the EDS
Contracting Party. GM Contracting Party data shall not be utilized by the
EDS Contracting Party for any purpose other than that of rendering services
to the GM Contracting Party nor shall GM Contracting Party data or any part
thereof be disclosed, sold, assigned, leased or otherwise disposed of to
third parties by the EDS Contracting Party or commercially exploited by or
on behalf of the EDS Contracting Party, its employees or agents. The EDS
Contracting Party agrees that GM Contracting Party data is the valuable
property of GM and that violation in any
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material respect of any provision of this Section A5.1 could cause GM
irreparable injury for which it would not have an adequate remedy at law.
A5.2 Safeguarding of GM Data. The EDS Contracting Party will establish and
maintain safeguards against the destruction, loss or alteration of GM
Contracting Party data in the possession of the EDS Contracting Party,
which safeguards shall be, unless otherwise mutually agreed upon between
the Contracting Parties, no less rigorous than those which were in effect,
or which EDS was contractually obligated to have in effect, as of the
Effective Date. In the event that additional safeguards for GM Contracting
Party data are reasonably requested by the GM Contracting Party (e.g., in
the event GM sells or otherwise divests a part of the business of the GM
Contracting Party) and upon mutual agreement as to reasonable charges
therefor, the EDS Contracting Party shall provide such additional
safeguards and the GM Contracting Party shall pay the EDS Contracting Party
such reasonable charges therefor as are mutually agreed to. The EDS
Contracting Party shall promptly notify the GM Contracting Party of any
information the EDS Contracting Party obtains as to any unauthorized
possession, use or disclosure of any GM Contracting Party data in the
possession of the EDS Contracting Party and will cooperate with the GM
Contracting Party in preventing any further unauthorized possession, use or
disclosure of such GM Contracting Party data and in instituting appropriate
legal proceedings relating to such unauthorized possession, use or
disclosure of GM Contracting Party data. The GM Contracting Party shall
have the right to establish backup security for data and to keep backup
data and data files in its possession if it so chooses; provided, however,
that the EDS Contracting Party will have the access to such backup data and
data files as is reasonably required by the EDS Contracting Party, subject
to the GM Contracting Party security restrictions, if any.
A5.3 Nondisclosure. The EDS Contracting Party and the GM Contracting Party each
acknowledge that it shall have access to information, technology, know how,
procedures, processes or other information ("Information") which the other
deems confidential, the disclosure of which could result in irreparable
harm to the other. The EDS Contracting
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Party and the GM Contracting Party each hereby agrees that all Information
communicated to it, whether before or after the Effective Date, shall be
and was received in strict confidence, shall be used only in connection
with the performance of the MSA Services requested hereunder by the GM
Contracting Party, and that no such Information shall be disclosed by it
except with the express written consent of the Major Sector Contract
Manager of the other. In addition, the EDS Contracting Party and the GM
Contracting Party shall each comply with all applicable data protection and
similar laws and regulations. This provision shall survive termination of
the Agreement for any reason.
A5.4 Data Center Security. The EDS Contracting Party will perform security
procedures at any data center or information processing center where MSA
Services are performed by the EDS Contracting Party for the GM Contracting
Party, which security procedures shall be, unless otherwise mutually agreed
upon between the Contracting Parties, no less rigorous than those which
were in effect, or which EDS was contractually obligated to have in effect,
as of the Effective Date. In the event that additional security procedures
are reasonably requested by the GM Contracting Party (e.g., in the event GM
sells or otherwise divests of a part of the business of the GM Contracting
Party) and upon mutual agreement as to reasonable charges therefor, the EDS
Contracting Party shall perform such additional security procedures and the
GM Contracting Party shall pay the EDS Contracting Party such reasonable
charges therefor as are mutually agreed to. Except as otherwise provided
in the Agreement, the GM Contracting Party personnel shall not operate the
equipment and systems to be utilized by the EDS Contracting Party under the
Agreement and shall not enter any room where any such equipment and systems
may be located or assist the EDS Contracting Party in any manner therein
without the prior consent of the EDS Contracting Party, which will not be
unreasonably withheld.
A5.5 Audit Rights. The EDS Contracting Party will provide such auditors or
inspectors as the GM Contracting Party may from time to time designate in
writing with reasonable access to any data center or information processing
center from which the EDS Contracting Party is performing MSA Services
under the Agreement for the limited purpose of performing
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audits or inspections of the GM Contracting Party and will provide to such
auditors or inspectors any assistance that they may reasonably require. The
GM Contracting Party shall also have the right to audit the documentation,
security and integrity of GM Contracting Party data being maintained by the
EDS Contracting Party hereunder at such times as will not unreasonably
interfere with the EDS Contracting Party's ability to perform its
obligations hereunder. In addition, whenever a government audit of any GM
User Organization is required, EDS will allow the government to audit EDS'
books and records as required to verify EDS charges to that GM User
Organization and shall cooperate to the extent necessary to support the
government's audit. If EDS is required to provide any services, other than
of a routine nature, in connection with any such audit or inspection, then
GM shall pay EDS for the resources utilized in providing such services at
the standard EDS rates generally applicable to GM or at such other rates as
the parties may negotiate and agree upon at that time.
ARTICLE A-VI. EMPLOYEES
-----------------------
A6.1 EDS' Employees. The staff provided by EDS to perform the MSA Services
shall be suitably trained and have the skill sets necessary to perform the
MSA Services. All persons utilized by EDS in performing the MSA Services
shall be considered solely EDS' employees or agents and EDS shall be
responsible for compliance with all laws, rules, and regulations involving,
but not limited to, employment of labor, hours of labor, working
conditions, payment of wages, and payment of taxes, such as unemployment,
social security and other payroll taxes, including applicable contributions
from such persons when required by law and GM shall have no responsibility
in relation thereto. With respect to such personnel, EDS shall have sole
responsibility for supervision, daily direction and control of the work by
its employees.
A6.2 Notice to EDS' Employees. To the extent applicable to the performance of
their duties, the EDS Contracting Party shall notify its employees of, and
require its employees to comply
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with, the nondisclosure, marketing restrictions, security obligations and
other similar requirements of EDS set forth in the Agreement.
A6.3 Premise and Work Rules. Both EDS Contracting Party and GM Contracting
Party employees, subcontractors and agents while on the premises of the
other, shall comply with all rules, regulations, and labor agreements
regarding personnel and professional conduct that are generally applicable
to personnel at that location, including, where required by U.S. Government
regulations, submission of satisfactory clearance from the U.S. Department
of Defense and other federal authorities concerned.
A6.4 Right of Access. Both the EDS Contracting Party and the GM Contracting
Party shall permit reasonable access, upon prior notice, to the other's
facilities in connection with MSA Services performed hereunder. No charge
shall be made for such access.
A6.5 Key EDS Employees for Critical Projects. With respect to each project
being supported by the EDS Contracting Party pursuant to the Agreement that
the GM and EDS Major Sector Contract Managers jointly identify as a
critical project with respect to which the continuity of key personnel is
especially important for the success of the project (a "Critical Project"),
the Contracting Parties agree as follows:
(a) The Unit Project Managers may jointly identify those EDS employees
(the "Key Employees") providing dedicated support for that Critical
Project that are key to the completion of that Critical Project. No
more than 10% of the total number of EDS employees providing dedicated
support for that Critical Project may be designated as Key Employees
except by mutual agreement of the Contracting Parties. The above
provision notwithstanding, the number of Key Employees on any Critical
Project shall not be less than one (1).
(b) For a period of [Confidential information has been omitted.] or the
duration of the applicable Critical Project, whichever is shorter, EDS
will not reassign any Key Employee for that Critical
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Project except with the GM Contracting Party's consent, which will not
be unreasonably withheld, unless the employee voluntarily resigns from
EDS' employment, is dismissed from EDS' employment for cause, fails to
properly perform his or her duties in the reasonable judgment of EDS,
or is unable to work as a result of death or disability.
(c) In the event any Key Employee is reassigned or otherwise removed from
a Critical Project before his or her service for that Critical Project
is completed, EDS shall promptly assign an appropriate replacement who
shall thereafter be designated as a Key Employee. Additionally, upon
mutual agreement of the Unit Project Managers, in appropriate
situations, in order to ensure a smooth transition between such Key
Employees, the parties shall jointly agree upon an appropriate overlap
period where both the Key Employee being reassigned or removed and the
replacement Key Employee are assigned to the Critical Project. In
this regard, the Unit Project Managers shall mutually agree upon the
financial considerations, if any, associated with the aforementioned
overlap period in a manner consistent with the underlying agreement
for the Critical Project.
(d) For a period of [Confidential information has been omitted.] following
completion of a Key Employee's participation in a Critical Project,
EDS will [Confidential information has been omitted.]
ARTICLE A-VII. EDS COMPENSATION
-------------------------------
A7.1 Uniform Published Rates. With respect to any MSA Services for which EDS is
to be compensated on the basis of Uniform Published Rates (as defined
below), including UPR Items (as defined below) for which the Agreement does
not specify an alternative method of compensation (except with respect to
personnel UPR Items as provided in sub-Section
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A7.1(b)(2) hereof), GM will compensate EDS for the resources utilized or
managed by EDS in the performance of those MSA Services as set forth below.
(a) The provisions of this Section A7.1 are applicable to "off-the-shelf"
commercially available items to be acquired in significant quantities
("UPR Items"), such as [Confidential information has been omitted.]
and other similar goods and services, (i) for which then-current
prices and rates, including lease rates for use where appropriate,
(the "Uniform Published Rates") have been proposed by EDS and approved
by GM Parent, and (ii) which the parties mutually agree to list,
together with the applicable Uniform Published Rates, in a catalog
(the "UPR Catalog") published by GM Parent. GM Parent and EDS Parent
will mutually agree upon a competitive assessment process which will
assist GM Parent and EDS Parent in mutually agreeing upon the Uniform
Published Rates. Except to the extent otherwise mutually agreed by GM
Parent and EDS Parent, the Uniform Published Rates shall be
established for and remain in effect during each calendar year,
subject to market condition changes which render such rates non-
competitive. Except to the extent otherwise mutually agreed by GM
Parent and EDS Parent, a Catalog of Uniform Published Rates may be
established in each country outside the United States by mutual
agreement of the local Contracting Parties.
(b) The Uniform Published Rates will be utilized according to the
following provisions:
(1) Except to the extent that the Contracting Parties may otherwise
mutually agree, the GM Contracting Party will compensate EDS for
all non-
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personnel UPR Items at the then-current Uniform Published Rates
for such UPR Items.
(2) To the extent that the Contracting Parties mutually agree, for
projects which are of a short-term, limited scope nature (e.g.,
studies or project start-up MSA Services where the scope of
services to be performed is unknown or difficult to specify) and
when personnel resources in connection with such projects are to
be provided on a time and materials basis, the GM Contracting
Party will compensate the EDS Contracting Party for such
personnel resources as UPR Items at the then-current Uniform
Published Rates for such UPR Items.
In addition to the foregoing, (i) the GM Contracting Party will
reimburse EDS for the actual cost of sales, use and similar taxes, any
specific travel, freight to the GM destination, and similar out-of-
pocket expenses incurred by EDS as a direct result of providing the
UPR Items to the GM Contracting Party (at the express request or with
the prior approval of the GM Contracting Party) in connection with the
UPR Items for which EDS is compensated pursuant to this Section A7.1,
and (ii) the GM Contracting Party will pay EDS for any installation,
maintenance, or training services required by the GM Contracting Party
and related to such UPR Items at the rates therefor set forth in the
UPR Catalog or, to the extent that such rates are not set forth in the
UPR Catalog, at rates to be negotiated and agreed upon by the
Contracting Parties.
A7.2 Fixed Price Methodology. The fixed price methodology may be used in
instances where the scope of work and deliverables can be well-defined and
the pricing and terms are mutually agreed by the Contracting Parties.
Included in the definition of fixed price methodology are fixed unit or
transaction-based pricing. Examples of instances in which the fixed price
methodology may be used include systems maintenance and operations, systems
integration projects performed on a turnkey basis, unit prices for GMAC
loan
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applications, transaction pricing for transactions processed against
employee benefit eligibility files, and fixed pricing for new systems
development based on a defined scope of work. With respect to any MSA
Services for which EDS is to be compensated pursuant to a fixed price
methodology, the following provisions shall be applicable:
(a) GM shall pay, or reimburse EDS for, the reasonable out-of-pocket
expenses, including, but not limited to, travel and travel-related
expenses, incurred by EDS in connection with the performance of the
Agreement at the express request or with the prior approval of the GM
Contracting Party.
(b) In the event that the GM Contracting Party relocates any of its
business premises being provided MSA Services by EDS under the
Agreement or establishes any additional business premises which shall
require MSA Services, GM shall reimburse EDS for any expenses
reasonably incurred by EDS as a result thereof.
(c) GM shall pay the reasonable charges of EDS for any reruns in excess of
the level reasonably expected that are necessitated by incorrect or
incomplete data or erroneous instructions supplied to EDS by the GM
Contracting Party and for correction of programming, operator and
other processing errors caused by the GM Contracting Party, its
employees or agents. EDS shall perform, at no cost to GM, any reruns
resulting from the acts or omissions of EDS, its employees or agents.
(d) If, during the term of the Agreement, the Index (as defined below) at
any anniversary of the Effective Date (the "Current Index") is higher
than the Index one year prior thereto (the "Base Index"), then,
effective as of such anniversary, all monetary amounts then payable to
EDS pursuant to the Agreement, as previously adjusted pursuant to this
sub-Section A7.2(d), shall be increased thereafter by [Confidential
information has been omitted.] Current Index [Confidential information
has been omitted.] Base Index. For purposes of this sub-Section
A7.2(d), (i) with respect to amounts payable to EDS in the United
States, the term "Index" shall mean the
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Consumer Price Index for All Urban Consumers, U.S. City Average, for
All Items (1982-84=100), as published by the Bureau of Labor
Statistics of the Department of Labor, and (ii) with respect to
amounts payable to EDS in any other country, the term "Index" shall
mean a comparable index reflecting changes in the cost of living in
that country published by a mutually agreeable source and the
adjustments contemplated by this sub-Section A7.2(d) shall be made on
such more frequent basis as may be appropriate for that country. In
the event that the publisher of the Index stops publishing the Index
or substantially changes the content or format thereof, the
Contracting Parties shall substitute therefor another comparable
measure published by a mutually agreeable source; provided, however,
that if such change is merely to redefine the base year for the Index,
the parties shall continue to use the Index but shall, if necessary,
convert either the Base Index or the Current Index to the same basis
as the other by multiplying such Index by the appropriate conversion
factor.
(e) There shall be added to any charges under the Agreement, or separately
billed to GM, and GM shall pay to EDS, amounts equal to any taxes,
however designated or levied, based upon such charges, or upon the
Agreement or the MSA Services, Software or other materials provided
under the Agreement, or their use, including state and local sales,
use, privilege, value added, telecommunications or excise taxes, and
any taxes or amounts in lieu thereof paid or payable by EDS in respect
of the foregoing, exclusive, however, of franchise taxes and taxes
based on income of EDS and any fines, interest or penalties due as a
result of EDS' failure to pay any such taxes in a timely manner.
A7.3 Cost-Plus Pricing. Except as otherwise provided in Exhibit D to the MSA
regarding Competitiveness Events (as defined in Section 2.3 of the MSA), in
the event that the Contracting Parties are unable to reach mutual agreement
on the price or other terms of any fixed price negotiation and the
Contracting Parties mutually agree or in other circumstances where the
Contracting Parties mutually agree to utilize such cost-plus
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pricing, EDS will be compensated on the basis of the cost-plus pricing
methodology as provided in this Section A7.3. In accordance with sub-
Section 2.1(a)(3) of the MSA, although there may be some uncertainty in the
extent of the MSA Services to be provided on a cost-plus basis under the
Agreement, the Contracting Parties will use all reasonable efforts to
develop a description of the MSA Services to be provided on a cost-plus
basis under the Agreement and the schedule for completion of those MSA
Services. With respect to any MSA Services for which EDS is to be
compensated on the basis of the cost-plus pricing methodology specified in
this Section A7.3 (excluding UPR Items for which EDS is to be compensated
at the Uniform Published Rates pursuant to Section A7.1 hereof and MSA
Services for which EDS is to be compensated on the basis of a fixed price
methodology pursuant to Section A7.2 hereof), the following provisions will
be applicable:
(a) The GM Contracting Party shall pay EDS monthly according to the terms
of the Agreement for the EDS Cost of such MSA Services and resources
provided by EDS, plus a markup on the EDS Cost of [Confidential
information has been omitted.] thereof.
(b) The EDS Cost for any MSA Services provided to the GM Contracting Party
will include all verifiable costs that are directly related to the MSA
Services or that are portions of EDS overhead expenses which are
properly allocable to the MSA Services, as specified in sub-Section
A7.3(b)(11) hereof. EDS Cost will not include markups for profit by
any EDS internal business or support unit. With respect to the items
listed below, EDS Cost will be determined as follows:
(1) With respect to EDS personnel, EDS Cost shall mean all
reasonable, direct salary, wages or other compensation payable
and all costs of fringe benefits directly attributable to such
EDS personnel. With respect to any such EDS personnel who spend
less than substantially all of their time on GM Contracting Party
matters, such amounts payable shall be determined
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on a prorata basis for the amount of time spent directly on GM
Contracting Party matters.
(2) With respect to GM Assets, EDS Cost shall mean all reasonable,
direct expenses incurred by EDS with respect to GM Assets,
whether paid to GM or any third party.
(3) With respect to all other fixed and related assets (except as
described in sub-Section A7.3(b)(8) hereof), EDS Cost shall mean
all reasonable amounts payable and expenses incurred by EDS with
respect to such assets, including depreciation computed on the
straight-line basis used by EDS for its accrual basis books and
interest expenses for debt relating to capital expenditures for
such assets.
(4) With respect to the Sites, EDS Cost shall mean all amounts
payable by EDS with respect to EDS' use of such space, whether
paid to GM or any third party.
(5) With respect to all other space (except as described in sub-
Section A7.3(b)(8) hereof), EDS Cost shall mean all reasonable
amounts payable and expenses incurred by EDS in connection with
such space, including depreciation computed on the straight-line
basis used by EDS for its accrual basis books and interest
expenses for debt relating to capital expenditures for such
space.
(6) With respect to all telecommunication (including voice, data and
video) capabilities (except as described in sub-Section
A7.3(b)(8) hereof), EDS Cost shall mean all reasonable, direct
costs and expenses incurred by EDS in connection with such
capabilities.
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(7) With respect to all subcontracted services directly attributable
to the GM Contracting Party, EDS Cost shall mean all reasonable
amounts payable and expenses incurred by EDS in connection with
such subcontracted services.
(8) With respect to resources utilized by EDS to provide services to
the GM Contracting Party and other EDS customers on a shared
basis (including without limitation such of those resources as
may be utilized at an EDS Information Processing Center), EDS
Cost shall mean all reasonable amounts determined in accordance
with EDS' then-current cost allocation methodology, utilizing the
resource management system or systems then utilized by EDS. Upon
reasonable request by the GM Corporate Contract Manager, EDS will
review the then-current cost allocation methodology with the GM
Corporate Contract Manager.
(9) With respect to all other expenses incurred by EDS allocable to
the GM Contracting Party, including all EDS-supplied expendables,
all start-up expenses such as staffing and corporate
developmental standardization, all foreign service related
expenses such as foreign service premiums and expatriate bonuses
and allowances, and all travel, travel-related and relocation
expenses, EDS Cost shall mean all reasonable amounts payable and
expenses incurred by EDS in connection with such other expenses.
(10) With respect to taxes, EDS Cost will include all applicable taxes
attributable to the MSA Services and/or associated property
provided by EDS to the GM Contracting Party or the resources
utilized therefor, including property, sales, use, privilege,
excise, value added, franchise, gross receipts and similar taxes;
but excluding any income or profits taxes imposed upon EDS by any
taxing authority; provided, however, that there will be no markup
with respect to any sales or use tax collected by EDS on
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behalf of a state or local taxing authority. Sales, use, excise
and similar taxes collected by EDS with respect to MSA Services
and/or associated property provided by EDS to GM will be
separately displayed in accordance with, and in the aggregate
categories described in, sub-Section A8.1(d) hereof.
(11) With respect to overhead expenses, EDS Cost will include that
portion of EDS overhead expenses as is properly allocable to the
GM Contracting Party pursuant to the methodology used
consistently throughout EDS, i.e., all expenses that cannot be
reasonably charged to specific profit centers are allocated to
all EDS profit centers on the basis of the ratio of the direct
expenses charged to a particular profit center to the total
direct expenses charged to all EDS profit centers; [Confidential
information has been omitted.] Upon reasonable request by the GM
Corporate Contract Manager, EDS will review the then-current
overhead expense allocation methodology with the GM Corporate
Contract Manager.
(c) In order to provide verification of amounts charged to GM by EDS under
this Section A7.3, (i) for MSA Services for which EDS is to be
compensated pursuant to this Section A7.3, in support of each Invoice
therefor, the EDS Contracting Party will provide to the GM Contracting
Party a reasonable breakdown of EDS Cost on an ongoing basis in
accordance with the standard formats and procedures agreed upon
between the GM Central Office (or the applicable GM Major Sector) and
EDS, and (ii) the charges will be subject to audit according to
Section 3.5 of the MSA.
A7.4 Pricing Detail. In connection with any MSA Services to be performed by the
EDS Contracting Party pursuant to the Agreement, the EDS Contracting Party
will provide to
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the GM Contracting Party a reasonable level of pricing detail and input to
the price structure preferred, technology content detail, and support
services detail, in each case as outlined in Section 3.6 of the MSA, in
order to assist the GM Contracting Party in making informed purchase
decisions. EDS will not be required to disclose its costs of doing business
to the GM Contracting Party, except as otherwise expressly provided in the
Agreement. The GM Contracting Party shall keep confidential the prices it
is charged by EDS, as well as any EDS cost information supplied on a
confidential basis to the GM Contracting Party by EDS.
A7.5 Tax Matters. With respect to the Contracting Parties' respective
obligations relating to the collection and payment of sales, use, value
added and similar taxes imposed by applicable taxing authorities, as well
as other taxes payable by the GM Contracting Party pursuant to the
Agreement, the Contracting Parties agree as follows:
(a) Each Contracting Party shall provide and make available to the other
any applicable resale certificates, information regarding out-of-state
sales or use of equipment, materials or services, and other exemption
certificates or information reasonably requested by the other
Contracting Party.
(b) The Contracting Parties agree to utilize reasonable efforts to
structure the provision and receipt of MSA Services, as the case may
be, in such a fashion as to minimize, to the extent legally
permissible, any sales, use, value added, withholding, and similar
taxes payable by the GM Contracting Party.
(c) In the event that the EDS Contracting Party is entitled to claim a
foreign tax credit benefit with regard to withholding taxes associated
with cross border payments under this Agreement, the Contracting
Parties agree that the GM Contracting Party shall not be charged or
otherwise billed for such taxes.
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(d) The Contracting Parties shall reasonably cooperate with each other in
connection with the other Contracting Party's efforts to minimize its
liability for sales, use, value added and similar taxes, to the extent
legally permissible, and to support the other Contracting Party upon
audit by applicable taxing authorities in the following manner:
(1) The EDS Tax Department will, at least annually, and more
frequently if reasonably requested by GM, provide the GM Tax
Staff with a taxability matrix which depicts the taxability
positions taken with respect to the collection of Taxes (as
defined in sub-Section A8.1(d) of this Exhibit A). The parties
will work together to ensure that the taxability positions are
jointly discussed. Further, EDS agrees to allow the GM Tax
Staff, [Confidential information has been omitted.] if reasonably
requested by GM, and at GM's expense, to [Confidential
information has been omitted.] relating to Taxes collected by EDS
from GM under the Agreement.
(2) In the event EDS has previously collected Taxes from GM and
remitted such Taxes to the applicable taxing authority, and such
Taxes pertain to the items described in sub-Section [Confidential
information has been omitted.] of this Exhibit A, EDS shall
disclose to GM, if reasonably requested by GM, the type of Taxes,
the applicable taxing authority, and the amount of such Taxes.
(3) In the event that a taxing authority within the United States
does not agree to audit the charges payable in connection with
the Agreement for sales and use tax purposes as part of EDS'
sales and use tax audits and proposes to assess sales and use
taxes directly against GM on the aggregate charges described in
sub-Section [Confidential information has been omitted.] of this
Exhibit A, EDS shall work directly with the taxing authority to
address audit concerns as they pertain to the charges or sales
and use taxes payable in connection with the Agreement. In the
event that the taxing authority requires any
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documentation to be submitted directly by GM, EDS agrees to
cooperate with GM in providing the necessary documentation.
ARTICLE A-VIII. BILLING AND PAYMENT PROCEDURES
----------------------------------------------
A8.1 Billing Procedures. EDS will submit Invoices to GM for the amounts payable
to EDS pursuant to the Agreement in accordance with the following
provisions:
(a) On a monthly basis, EDS will submit to the GM Contracting Party an
Invoice or Invoices, in accordance with mutually agreeable procedures,
for the amounts payable to EDS pursuant to the Agreement for such
month. Each Invoice shall be based upon a standard format and
procedure to be developed and agreed upon by the GM Central Office (or
the applicable GM User Organization or GM Major Sector) and EDS.
(b) EDS shall provide with each Invoice such documentation and verifying
materials in such detail as required by procedures agreed upon by the
GM Contracting Party and EDS to allow the GM Contracting Party to
verify the amounts reflected on each such Invoice.
(c) In the event all or any portion of an Invoice is disputed by the GM
Contracting Party, GM shall promptly notify EDS within ten (10) GM
business days after receipt of the Invoice; provided, however, that
the undisputed portion of any such Invoice shall remain due and
payable in accordance with the provisions of Section A8.2 hereof.
(d) With respect to any sales, use or similar taxes imposed by and
collected on behalf of any state or local taxing authorities within
the United States or any United States Federal telecommunications
excise taxes (collectively, "Taxes"), EDS shall segregate the charges
on each Invoice into aggregate charges for each of the
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following categories: (i) services provided to the GM Contracting
Party for which Taxes are collected; (ii) services provided to the GM
Contracting Party for which Taxes are not collected; [Confidential
information has been omitted.]
(e) If the applicable GM Contracting Party and EDS Contracting Party are
unable to resolve a dispute arising in connection with any Invoice
within a reasonable period of time, then upon the written request of
the applicable GM Unit Project Manager, the GM Central Office may, at
its expense, audit the books and records of EDS to the extent
necessary to verify the applicability and accuracy of EDS' charges to
the GM Contracting Party pursuant to the Agreement. The GM Central
Office shall report to the GM and EDS Contracting Parties any variance
from the amounts reflected on the disputed Invoice that is discovered
by the GM Central Office audit. If EDS disputes the existence or
scope of any such variance, then EDS may, at its expense, engage an
independent public accounting firm reasonably acceptable to GM to
audit the applicable EDS books and records and either verify the
accuracy and validity of the disputed EDS charges or confirm the
existence and scope of any variance. Unless the parties otherwise
agree to the resolution of the dispute, the findings of such
accounting firm shall be binding upon the parties. If a variance from
what has been invoiced to the GM Contracting Party shall be
discovered, then the GM Contracting Party shall be entitled to a
credit, or shall pay to EDS, as appropriate, the amount of such
variance.
A8.2 Time of Payment. Except as otherwise mutually agreed by the Corporate
Contract Managers, amounts payable under the Agreement shall be due and
payable as follows:
(a) On or before the first (1st) day of each month or such other day as
may be mutually agreed by the Contracting Parties, the EDS Contracting
Party will submit to the GM Contracting Party an Invoice for the
amounts reasonably
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estimated by the EDS Contracting Party to be payable to the EDS
Contracting Party pursuant to the Agreement for MSA Services received
from the EDS Contracting Party in the immediately preceding month,
together with any credits or additional amounts necessary to reconcile
the estimated amounts invoiced for previous months with the actual
amounts payable for such previous months. Each such Invoice will be
due and payable by the twentieth (20th) day of the month following the
month in which the MSA Services were provided.
(b) On or before the first (1st) day of each month or such other day as
may be mutually agreed by the Contracting Parties, the GM Contracting
Party will submit to the EDS Contracting Party an invoice for the
amounts reasonably estimated by the GM Contracting Party to be payable
to the GM Contracting Party pursuant to the Agreement for services
received from the GM Contracting Party under the Agreement in the
immediately preceding month, together with any credits or additional
amounts necessary to reconcile the estimated amounts invoiced for
previous months with the actual amounts payable for such previous
months. Each such invoice will be due and payable by the twentieth
(20th) day of the month following the month in which such services
were provided.
(c) Any payments due to either Contracting Party from the other
Contracting Party for which the amount cannot be reasonably estimated
or for which a time of payment has not otherwise been specified will
be invoiced in arrears and will be due and payable on the twentieth
(20th) day of the month if received by the fifteenth (15th) day of the
preceding month.
(d) Any amount payable under the Agreement that is not paid when due shall
bear interest thereafter until paid at a rate per annum equal to the
base rate established from time to time by Citibank, N.A., or a
comparable financial institution mutually selected by GM and EDS, but
in no event to exceed the maximum rate of interest allowed by
applicable law.
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ARTICLE A-IX. DISPUTES AND TERMINATION
--------------------------------------
A9.1 Negotiation of Disputes. In the event of any dispute or disagreement
between the Contracting Parties to the Agreement with respect to the
interpretation of any provision of the Agreement or the performance of the
EDS Contracting Party or the GM Contracting Party under the Agreement, upon
the written request of either Contracting Party, the applicable GM and EDS
Unit Project Managers, or a designated representative of either of them,
will meet for the purpose of resolving such dispute or negotiating an
adjustment or modification to such provision of the Agreement. The GM and
EDS Unit Project Managers or designated representatives shall meet as often
as the Contracting Parties reasonably deem necessary in order to furnish to
the other all information with respect to the matter in issue which the
Contracting Parties believe to be appropriate and germane in connection
with its resolution. The GM and EDS Unit Project Managers or designated
representatives will discuss the problem and negotiate in good faith
without the necessity of any formal proceeding relating thereto. During
the course of such negotiation, all reasonable requests made by one
Contracting Party to the other for information will be honored in order
that each of the Contracting Parties may be fully advised in the premises.
The specific format for such discussion will be left to the discretion of
the GM and EDS Unit Project Managers or designated representatives but may
include the preparation of agreed upon statements of fact or written
statements of position furnished to the other Contracting Party. In the
event the Unit Project Managers or their designated representatives are
unable to amicably resolve the dispute within ten (10) days, the formal
proceedings for the resolution of such dispute in accordance with Section
A9.2 hereof shall be commenced.
A9.2 Resolution of Disputes. Any dispute relating to the Agreement which cannot
be resolved by the respective GM and EDS Unit Project Managers or their
designated representatives pursuant to Section A9.1 hereof shall be
referred to the GM and EDS Major Sector Contract Managers or their
designated representatives for resolution. Any such dispute which cannot
be resolved by the respective GM and EDS Major Sector Contract Managers or
their
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designated representatives within twenty (20) days shall be referred to the
GM and EDS Corporate Contract Managers for resolution. Without prejudice to
the Contracting Parties' ability to mutually agree upon mediation,
arbitration, or any other alternative dispute resolution process with
respect to the dispute, no litigation or other formal proceeding for the
resolution of such dispute may be commenced until either Corporate Contract
Manager concludes in good faith that amicable resolution of the dispute
through continued negotiation does not appear likely.
A9.3 Termination. The Agreement may be terminated as follows:
(a) In the event either Contracting Party to the Agreement defaults in the
performance of any of its material duties or obligations (except for a
default in payments to EDS) and fails to cure such default within
forty-five (45) days after being given written notice specifying the
default, or, with respect to those defaults which cannot reasonably be
cured within forty-five (45) days, if the defaulting party fails to
provide, promptly after being given written notice specifying the
default, a specific written action plan for curing the default as
expeditiously as reasonably possible, including a specified schedule
for the action plan and a mutually agreed upon end date by which the
action plan is to be completed and the default cured, and to proceed
utilizing its reasonable best efforts to cure the default in
accordance with and on the schedule specified in the action plan, then
the party not in default may, by giving written notice thereof to the
defaulting Contracting Party, terminate the Agreement as of a date
specified in such notice of termination. Additionally, in the event
that the defaulting party fails to cure the default by the mutually
agreed upon end date as set forth in the action plan, the party not in
default may, by giving written notice thereof to the defaulting party,
immediately terminate the Agreement.
(b) In the event the GM Contracting Party defaults in the payment when due
of any amount due to the EDS Contracting Party under the Agreement and
fails to cure such default within ten (10) days after being given
written notice specifying the
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default, then the EDS Major Sector Contract Manager may, by giving
written notice thereof to the GM Contracting Party, terminate the
Agreement as of a date specified in such notice of termination.
Notwithstanding the foregoing, the EDS Major Sector Contract Manager
shall not be entitled to terminate the Agreement for failure to pay
any amount that is reasonably and in good faith disputed by the GM
Contracting Party if, within the ten (10) day period specified above,
the GM Contracting Party pays such disputed amount into an escrow
account established at a mutually selected financial institution for
that purpose. Upon resolution of the dispute, any portion of the
disputed amount that is determined to be payable to EDS, together with
interest earned thereon, will be promptly paid to EDS from the escrow
account and any remaining amount in the escrow account will be paid to
GM.
(c) Unless the Corporate Contract Managers otherwise agree in writing, if
the MSA expires or is terminated for any reason, then the Agreement
shall, without the necessity of any separate notice, terminate as of
the same date upon which the MSA expires or is terminated.
A9.4 Cancellation of Services and Cancellation Charges.
(a) Cancellation. In addition to any other rights to terminate or reduce
MSA Services that it may have pursuant to the Agreement, the GM
Contracting Party may at its option cancel any MSA Services no longer
required by the GM Contracting Party, in whole or in part, at any time
and for any reason, upon at least thirty (30) days prior written
notice to EDS.
(b) Entitlement to Cancellation Charges. EDS shall be entitled to
cancellation charges only in the following circumstances:
(1) Cancellation pursuant to sub-Section A9.4(a) hereof.
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(2) GM's termination of the MSA or the Agreement pursuant to the
provisions of sub-Section 6.1(d) of the MSA subject to the
provisions of Exhibit F to the MSA.
(3) GM's exercise of its market testing rights pursuant to Article V
of the MSA subject to the provisions of sub-Section 5.3(1) of the
MSA.
(c) Computation of Cancellation Charges. The GM Contracting Party and EDS
will mutually agree on a wind-down period which will in all cases be
of sufficient duration to reasonably effect an orderly wind-down of
the MSA Services. During the wind-down period, the GM Contracting
Party and EDS shall cooperate with and assist each other in
effectuating an orderly wind-down of work affected by the cancellation
or termination, and the GM Contracting Party shall compensate EDS, in
accordance with Section A7.3 hereof or as otherwise mutually agreed,
for all services provided during such wind-down period that are not
otherwise covered by the Agreement. After the wind-down period, the
GM Contracting Party shall pay to EDS the following amounts, without
duplication:
(1) The agreed price for all MSA Services which have been completed
in accordance with the Agreement and have not previously been
paid for.
(2) [Confidential information has been omitted.] (i) are reasonable
in amount and are properly allocable or apportionable under
generally accepted accounting principles to the cancelled MSA
Services, (ii) have not already been directly paid for by GM, and
(iii) cannot be reduced by (x) transferring such work or
materials to GM or GM's designee upon GM's request, or (y) if GM
does not so request, use of such work or materials elsewhere
within EDS.
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(3) [Confidential information has been omitted.] associated with the
wind-down of MSA Services, including but not limited to systems
development expenses and personnel expenses. Personnel expenses
shall be limited to relocation expenses (actually incurred), and
severance pay [Confidential information has been omitted.] EDS
will act in good faith using all reasonable efforts to mitigate
such relocation expenses and severance pay. Further, such
expenses may only be paid for personnel who (i) are directly
affected by the cancellation, and (ii) with respect to a
cancellation resulting from a termination of the Agreement or
from a transfer of MSA Services to a third party as a result of a
resourcing pursuant to Article V of the MSA, [Confidential
information has been omitted.]
(4) EDS' losses on the disposition of capital assets or cancellation
of long-term lease commitments and the like, which are not
otherwise transferred to GM pursuant to Section A9.5 hereof, will
be handled in accordance with the principles set forth in Exhibit
G to the MSA.
At the request of the GM Contracting Party and upon receipt of
necessary information from the GM Contracting Party, EDS will provide
a good faith estimate of EDS' expenses as described above as promptly
as practically possible. EDS will act reasonably and in good faith in
attempting to avoid or minimize any such cancellation charges,
including by, upon GM's request, transferring assets to, [Confidential
information has been omitted.] GM or its designee or, if GM does not
so request, redeploying such assets [Confidential information has been
omitted.] within EDS. EDS shall credit to the GM Contracting Party the
reasonable value or cost (whichever is higher) of goods or materials
used or sold by EDS with the GM Contracting Party's written consent
and the cost of any damaged or destroyed goods or materials.
Additionally, in order to facilitate a full and complete business case
review by GM of situations involving the replacement of assets,
including, but not limited to, equipment and technology
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upgrades, EDS shall utilize its reasonable best efforts to promptly
bring to the attention of the GM Contracting Party a good faith
estimate of any and all cancellation charges which might be incurred
with regard to the disposition of existing capital assets and/or the
cancellation of long-term leases as a result of such replacement of
assets.
No later than the date therefor mutually agreed upon by the applicable
Contracting Parties in connection with each such cancellation of MSA
Services, EDS shall submit a comprehensive cancellation claim to GM,
with sufficient supporting data to permit GM to verify the same, and
shall thereafter promptly furnish such supplemental and supporting
information as GM shall request. GM or its agents shall have the
right to audit and examine such books, records, facilities, work,
material, inventories, and other items relating to any cancellation
claim of EDS to the extent necessary to verify the cancellation claim.
A9.5 Termination Assistance and Transition. In the event the GM Contracting
Party ceases to obtain all or a portion of the MSA Services from EDS in a
situation in which the GM Contracting Party is entitled to provide the MSA
Services itself, such as upon the expiration or termination of the
Agreement, or in which the GM Contracting Party is entitled to obtain the
MSA Services from a third party, including upon the expiration or
termination of the Agreement or in accordance with Article V of the MSA,
then EDS will, upon the GM Contracting Party's request, continue to provide
the MSA Services which were provided by EDS prior thereto and any new
services requested by the GM Contracting Party that may be required to
facilitate the transfer of the affected MSA Services to the GM Contracting
Party or a third party service provider, as applicable, including providing
to GM or third party personnel training in the performance of the affected
MSA Services (collectively, the "Transition Services") in accordance with
the following:
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(a) At no additional cost, EDS shall provide to GM and any designated
third party service provider (i) in writing, to the extent available,
applicable requirements, standards and policies relating to the
affected MSA Services, and (ii) necessary access to the systems and
sites from which the affected MSA Services were provided.
(b) If requested by the GM Contracting Party, EDS will assist the GM
Contracting Party in developing a plan which shall specify the tasks
to be performed by the parties in connection with the Transition
Services and the schedule for the performance of such tasks.
(c) EDS will provide the Transition Services for a period of up to
[Confidential information has been omitted.] as may be reasonably
required by the GM Contracting Party for the orderly transition of the
affected MSA Services (the "Transition Period"), at the rates
[Confidential information has been omitted.] or otherwise agreed upon
by the Contracting Parties, except to the extent that resources
included in the fees otherwise being paid by the GM Contracting Party
to EDS can be used to provide the Transition Services. If the MSA
Services are being terminated as a result of the GM Contracting
Party's default, non-payment, or insolvency, EDS will be entitled to
reasonable assurances that GM will pay all amounts due and payable to
EDS, including payments for Transition Services.
(d) Following the Transition Period, EDS shall (i) answer questions from
the GM Contracting Party regarding the MSA Services on an "as needed"
basis at EDS' then standard commercial billing rates, and (ii) deliver
to the GM Contracting Party any remaining GM-owned reports and
documentation still in the EDS Contracting Party's possession.
(e) Upon request from the GM Contracting Party, EDS will, to the extent
permitted by third party contracts:
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(1) Make available any Hardware owned or leased by EDS and dedicated
to the performance of the affected MSA Services by allowing the
GM Contracting Party or its designee to (i) purchase
[Confidential information has been omitted.] any such Hardware
owned by EDS, and (ii) assume the lease of any such Hardware
leased by EDS.
(2) Transfer or assign, upon the GM Contracting Party's request, any
third party contracts applicable to the affected MSA Services for
maintenance, disaster recovery services or other necessary third
party services being used by EDS and dedicated to the performance
of the affected MSA Services, to the GM Contracting Party or its
designee, on terms and conditions acceptable to all applicable
parties.
(3) License to the GM Contracting Party, or assist the GM Contracting
Party in obtaining a license to, Software then being used by EDS
in providing the EDS services in accordance with the provisions
of sub-Sections A4.2(d) and A4.2(e) hereof.
GM shall be responsible for the payment of any transfer fee or non-
recurring charge imposed by the applicable third parties, but EDS
shall use its reasonable best efforts (without being required to incur
any additional expenses) to eliminate or minimize the amount of any
such fee or charge, both at the time that it enters into any such
lease, license or third party contract and at the time of the transfer
to the GM Contracting Party or its designee.
(f) Notwithstanding the provisions of Section [Confidential information
has been omitted.] hereof, upon request from the GM Contracting Party,
EDS will allow the GM Contracting Party or its designee [Confidential
information has been omitted.]
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ARTICLE A-X. WARRANTIES
-----------------------
A10.1 Software Warranty. EDS warrants that it has the right to grant to the GM
Contracting Party any license to use the EDS Software provided hereunder.
EDS further warrants that the EDS Software, EDS Restricted Software, and
Software Development Tools utilized in the provision of the MSA Services,
including any modifications to the Software by EDS or any third party on
behalf of EDS, will not infringe the copyright or patent or
misappropriate the trade secrets or other proprietary rights of a third
party and that when installed the Software will conform with all
applicable written specifications therefor mutually agreed upon by the
EDS and GM Contracting Parties and set forth in or incorporated by
reference into the Agreement.
A10.2 Hardware Warranty. With respect to all Hardware sold to the GM
Contracting Party pursuant to the Agreement, EDS warrants that it can and
shall deliver good and marketable title, free from any claim or
encumbrance except as otherwise mutually agreed. With respect to all
Hardware leased to the GM Contracting Party pursuant to the Agreement,
EDS warrants that it has the authority to enter into a lease of the
Hardware. With respect to all such Hardware sold or leased to the GM
Contracting Party pursuant to the Agreement, EDS warrants that upon
delivery, all such Hardware will conform with the written specifications
mutually agreed upon by the EDS and GM Contracting Parties and set forth
in or incorporated by reference into the Agreement.
A10.3 Pass-Through Warranties. With respect to all Hardware and Software sold,
leased or licensed, as applicable, to the GM Contracting Party pursuant
to the Agreement, EDS shall assign to the GM Contracting Party joint
rights, including rights to recoveries, it obtains under warranties or
indemnifications given by its subcontractors, vendors, suppliers or
agents in connection with the Hardware and Software provided under the
Agreement to the extent such rights are assignable. EDS shall, at the GM
Contracting Party's request and expense, enforce any such warranties that
are not assignable. EDS shall notify the GM
A-44
<PAGE>
Contracting Party of each warranty given by its subcontractors, vendors,
suppliers or agents applicable to such Hardware and Software and shall
deliver to the GM Contracting Party any documents issued by the warrantor
evidencing such warranty.
A10.4 Survival of Warranties. The warranties set forth in this Article A-X
shall survive acceptance of and payment for the applicable MSA Services,
Software, or Hardware.
A10.5 Disclaimer of Warranties. WITHOUT IN ANY WAY DEROGATING ANY OF THE
EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE A-X, EDS MAKES NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
ALL OF WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE A-XI. INDEMNITIES AND LIABILITY
---------------------------------------
A11.1 Cross Indemnity. The EDS and GM Contracting Parties each shall
indemnify, defend and hold harmless the other, its directors, officers
and employees, from any and all claims, actions, damages, liabilities,
costs and expenses, including reasonable attorneys' fees and expenses,
for:
(a) The death or personal injury of third parties, including but not
limited to invitees or employees of the indemnitor, arising out of,
or in any way resulting from, the negligent or willful acts or
omissions of the indemnitor or any of its agents, employees or
representatives.
(b) The damage, loss or destruction of real or tangible personal
property of the other party or third parties, including but not
limited to invitees or employees of the indemnitor, arising out of,
or in any way resulting from, the negligent or willful acts or
omissions of the indemnitor or its agents, employees or
representatives.
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A11.2 Proprietary Rights Indemnity. The EDS and GM Contracting Parties each
shall indemnify the other against any claim that any MSA Services,
Hardware, Software, or information provided by the indemnitor or its
agents and utilized in the provision of MSA Services constitutes an
infringement of a third party's patent, copyright, or trademark, or
constitutes an unlawful disclosure, use, or misappropriation of a third
party's confidential information, all in accordance with and subject to
the following:
(a) The indemnitor will bear the expense of defending such claim and pay
any damages and attorney's fees finally awarded by a court of
competent jurisdiction, provided that the indemnitee gives the
indemnitor prompt notice of the existence of the claim, reasonable
assistance in defending such claim, and full opportunity to control
the response thereto and the defense thereof, including any
agreement relating to the settlement thereof. The indemnitor shall
not be responsible for any settlement or compromise of a claim made
without its consent.
(b) The indemnitor shall have no responsibility under this Section A11.2
for (i) any claims of infringement [Confidential information has
been omitted.] or (ii) any infringement [Confidential information
has been omitted.]
(c) If any Software provided by the indemnitor becomes or in the
indemnitor's opinion is likely to become, the subject of a claim of
infringement, the indemnitor will, at its option, either (i) attempt
to procure for the indemnitee the right to continue using the
Software, or (ii) replace or modify the Software to make its use
hereunder non-infringing.
A11.3 Hardware Damage Indemnity. The GM Contracting Party shall indemnify and
reimburse EDS for any damages, liabilities, costs and expenses incurred
by EDS as a result of the
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Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
damage, destruction or loss of any EDS Hardware which, in accordance with
the provisions of the Agreement, is in the care or custody of, or is
located in premises controlled by, the GM Contracting Party; provided,
however, that the foregoing provisions of this Section A11.3 shall not
apply to normal wear and tear or to damage caused by EDS or its
employees, agents, or representatives.
A11.4 Software License Indemnity. With respect to any Software licensed or
otherwise obtained from a third party by EDS to be used by or for the GM
Contracting Party, GM shall comply with the terms of EDS' agreement with
the third party for such Software to the extent that such terms are made
known to the GM Contracting Party and are applicable to the use of such
Software by or for the GM Contracting Party and shall indemnify EDS from
and against all claims, losses or damages arising out of GM noncompliance
with such terms.
A11.5 Limitation of Liability. The parties' liability under the Agreement
shall be subject to the following:
(a) In addition to the limitation under sub-Section A11.5(b), any
liabilities of [Confidential information has been omitted.] EDS
arising out of or relating to its performance under the Agreement,
whether based on an action or claim in contract, equity, negligence,
tort or otherwise, for all events, acts or omissions shall not
exceed in the aggregate an amount equal to two times the average of
the monthly fees paid by the GM Contracting Party to EDS under the
Agreement during the six (6) months immediately preceding the latest
such event, act or omission. Additionally, the measure of damages
for any such liability of EDS shall not include any amounts for
damages which could have been avoided had GM complied with whatever
procedures are reasonable under the circumstances to verify the data
furnished by EDS before utilization thereof.
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Confidential treatment has been requested by EDS for the indicated portions of
this page.
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(b) Neither GM nor EDS shall be liable for, nor will the measure of
damages include, any indirect, incidental, special, consequential or
punitive damages arising out of or relating to its performance under
the Agreement.
(c) [Confidential information has been omitted.]
In connection with the conduct of any litigation with third parties
relating to any liability of one Contracting Party to the other or to
such third parties, each Contracting Party shall have all rights
(including the right to accept or reject settlement offers and to
participate in such litigation) which are appropriate to its potential
responsibilities or liabilities.
ARTICLE A-XII. SPECIAL PROVISIONS RELATING TO MSA SERVICES
----------------------------------------------------------
A12.1 GM's IT Strategy and Architecture. Unless otherwise mutually agreed by
the Corporate Contract Managers, the Agreement shall be subject to, and
the EDS Contracting Party will comply with, GM's IT strategy and
architecture requirements published in accordance with the provisions of
Section 3.2 of the MSA.
A12.2 Competitiveness. Unless otherwise mutually agreed by the Corporate
Contract Managers, the Agreement shall be subject to the provisions of
Section 2.3 of the MSA regarding Competitiveness.
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Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
A12.3 Market Testing and Resourcing. Unless otherwise mutually agreed by the
Corporate Contract Managers, the Agreement shall be subject to the
provisions of Article V of the MSA regarding Market Testing and
Resourcing. All such market testing and resourcing activities pursuant to
Article V of the MSA shall be coordinated through the GM Corporate
Contract Manager.
A12.4 Co-Negotiation. Unless otherwise mutually agreed by the Corporate
Contract Managers, the Agreement shall be subject to the provisions of
Section 3.7 of the MSA regarding Co-negotiation. All such co-negotiation
activities pursuant to Section 3.7 of the MSA shall be coordinated
through the GM Corporate Contract Manager.
A12.5 Use of Independent Auditors. Unless otherwise mutually agreed by the
Corporate Contract Managers, in any situation in which the GM Contracting
Party has the right to review, inspect or audit the books, records or
other information or materials of the EDS Contracting Party pursuant to
Section 3.5 of the MSA, Section A7.3, A8.1, or A9.4 of this Exhibit A,
Exhibit D to the MSA, Exhibit G to the MSA, or, unless otherwise mutually
agreed by the Contracting Parties, any similar provision of the Agreement
not set forth in the MSA or the Exhibits to the MSA, such audits will be
performed by the GM Audit Staff or GM's public accounting firm unless the
EDS Corporate Contract Manager reasonably and in good faith believes that
disclosure of any information requested by GM or by its public accounting
firm will result in the disclosure of confidential or proprietary
information of EDS. In such event, the Contracting Parties shall mutually
agree upon an alternative independent "big six" public accounting firm
which will be engaged by the GM Contracting Party to perform such
services, but which shall report its findings to both Contracting
Parties. In this regard, such independent public accounting firm shall
disclose only such information as may be necessary to verify and validate
those findings and, to the extent reasonably possible, will do so in a
way that will not disclose any confidential or proprietary information of
EDS. The cost of such independent public accounting firm will be borne
equally by both the GM Contracting Party and the EDS Contracting Party.
Additionally, the parties mutually agree that,
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unless otherwise mutually agreed by the Corporate Contract Managers, the
scope and breadth of the audit rights contemplated in Section 3.5 of the
MSA, and Sections A7.3, A8.1 and A9.4 of this Exhibit A, and Exhibit G to
the MSA shall be consistent with the specific description of audit rights
in sub-Section D3.3(b) of Exhibit D to the MSA. The public accounting
firm and each of the auditors performing the audit will execute a
reasonable confidentiality agreement acceptable to GM and EDS in form and
content.
ARTICLE A-XIII. MISCELLANEOUS
-----------------------------
A13.1 Binding Nature and Assignment. The Agreement shall be binding on the
Contracting Parties and their respective successors and assigns, but
neither Contracting Party may, or shall have the power to, assign the
Agreement without the prior written consent of the Major Sector Contract
Manager of the other, which consent shall not be unreasonably withheld.
A13.2 Notices. Wherever under the Agreement one Contracting Party is required
or permitted to give notice to the other, such notice shall be deemed
given when delivered in hand or when mailed by a reliable national mail
service, registered or certified mail, return receipt requested, postage
prepaid, and addressed as follows:
in the case of the EDS Contracting Party, to the EDS Unit Project
Manager, with copies to the EDS Major Sector Contract Manager, to the EDS
Corporate Contract Manager, and to:
Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Attention: President
in the case of the GM Contracting Party, to the GM Unit Project Manager,
with copies to the GM Major Sector Contract Manager, to the GM Corporate
Contract Manager and to:
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General Motors Corporation
3044 West Grand Boulevard
Detroit, Michigan 48202
Attention: President
Either Contracting Party may from time to time change its address for
notification purposes by giving the other prior written notice of the new
address and the date upon which it will become effective.
A13.3 Counterparts. The Agreement may be executed in one or more counterparts,
all of which taken together shall constitute one single agreement between
the Contracting Parties.
A13.4 Headings. The Article and Section headings and the Table of Contents, if
any, used in the Agreement are for reference and convenience and shall
not enter into the interpretation of the Agreement.
A13.5 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action by either Contracting Party is required by any
provision of the Agreement, such action shall not be unreasonably delayed
or withheld.
A13.6 Force Majeure. Each Contracting Party shall be excused from performance
under the Agreement for any period and to the extent that it is prevented
from performing any services pursuant to the Agreement, in whole or in
part, as a result of delays caused by the other Contracting Party (where
such other Contracting Party is notified in writing of the impact of such
delays) or an act of God, war, civil disturbance, court order, labor
dispute, or other cause beyond its reasonable control, including failures
or fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment, and such nonperformance shall not be a
default under the Agreement.
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A13.7 Severability. If any provision of the Agreement is declared or found to
be illegal, unenforceable or void, then both Contracting Parties shall be
relieved of all obligations arising under such provision, but only to the
extent that such provision is illegal, unenforceable or void, it being
the intent and agreement of the Contracting Parties that the Agreement
shall be deemed amended by modifying such provision to the extent
necessary to make it legal and enforceable while preserving its intent
or, if that is not possible, by substituting therefor another provision
that is legal and enforceable and achieves the same objective. If such
illegal, unenforceable or void provision does not relate to the payments
to be made under the Agreement and if the remainder of the Agreement
shall not be affected by such declaration or finding and is capable of
substantial performance, then each provision not so affected shall be
enforced to the extent permitted by law.
A13.8 Waiver. No delay or omission by either Contracting Party to exercise any
right or power under the Agreement shall impair such right or power or be
construed to be a waiver thereof. A waiver by either of the Contracting
Parties of any of the covenants to be performed by the other or any
breach thereof shall not be construed to be a waiver of any succeeding
breach thereof or of any other covenant contained in the Agreement. All
remedies provided for in the Agreement shall be cumulative and in
addition to and not in lieu of any other remedies available to either
party at law, in equity or otherwise.
A13.9 Relationship of Parties. EDS, in furnishing services to GM under the
Agreement, is acting only as an independent contractor. EDS does not
undertake by the Agreement or otherwise to perform any obligation of GM,
whether regulatory or contractual. EDS has the sole right and obligation
to supervise, manage, contract, direct, procure, perform or cause to be
performed, all work to be performed by EDS under the Agreement unless
otherwise provided in the Agreement. Except as may be otherwise
specifically agreed, EDS shall be solely responsible for all work done by
its subcontractors and agents.
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A13.10 Services for Others. GM understands and agrees that EDS may perform
data processing for others at any data center or information processing
center that EDS may utilize for the processing of GM's data.
A13.11 Hiring of Employees. The EDS and GM Contracting Parties each agree
that, during the term of the Agreement and for three (3) years
thereafter, it shall not, except with the prior consent of the other,
offer employment to or employ any person employed then or within the
preceding twelve months by the other.
A13.12 Compliance With Laws. Each of the Contracting Parties shall comply with
all laws, rules and regulations in all jurisdictions applicable to the
Agreement, including but not limited to those governing the export or
import of computer equipment, software or technical data. To the extent
that the Agreement is applicable to MSA Services provided to the GM
Contracting Party in connection with United States Government
procurements, now or in the future, EDS agrees to (i) provide such
information as is necessary to enable the GM Contracting Party to comply
with the terms of such procurements, any contracts resulting therefrom,
and applicable laws and regulations, and (ii) comply with all applicable
laws and regulations.
A13.13 Media Releases. All media releases, public announcements and public
disclosures by either Contracting Party or its employees or agents
relating to the Agreement or the subject matter of the Agreement,
including without limitation promotional or marketing material, but not
including any announcement intended solely for internal distribution at
such Contracting Party or any disclosure required by legal, accounting or
regulatory requirements beyond the reasonable control of such Contracting
Party, shall be coordinated with and approved by the other Contracting
Party prior to the release thereof, which approval shall not be
unreasonably withheld.
A13.14 Survival. Each Contracting Party's obligations under Articles A-IV, A-V,
A-X and A-XI and Sections A7.5, A9.1, A9.2, A9.4, A9.5, A13.11, A13.13
and A13.14 hereof shall survive the termination or expiration of the
Agreement.
A13.15 Entire Agreement. The Agreement, including any schedules or exhibits
referred to in the Agreement and attached to the Agreement, each of which
is incorporated into the Agreement for all purposes, constitutes the
entire agreement between the Contracting Parties with respect to the
subject matter of the Agreement and there are no representations,
understandings or agreements relative to the Agreement which are not
fully expressed in, or incorporated by reference into, the Agreement. No
change, waiver, or discharge of the Agreement shall be valid unless in
writing and signed by an authorized representative of the Contracting
Party against which such change, waiver, or discharge is sought to be
enforced.
A13.16 Amendment or Modification. The Agreement may be amended or modified
upon mutual agreement of the Contracting Parties; provided, however, such
amendment or modification shall only be effective if made in writing by
the Major Sector Contract Managers or other authorized representatives of
the Contracting Parties.
A13.17 Good Faith and Fair Dealing. The Contracting Parties shall abide by a
standard of good faith and fair dealing in all aspects of their business
relationship and dealings with each other, including with respect to the
performance of their respective obligations and the exercise of their
respective rights under the Agreement.
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EXHIBIT B
GM MAJOR SECTORS AS OF THE EFFECTIVE DATE
-----------------------------------------
<PAGE>
EXHIBIT B
GM MAJOR SECTORS AS OF THE EFFECTIVE DATE
-----------------------------------------
Allison Transmission Division
Delphi Automotive Systems (North America)
Delphi Automotive Systems Operations Outside of North America
GM Locomotive Group
Delco Electronics Corporation (Worldwide)
General Motors Acceptance Corporation (U.S. and Canada)
GMAC Operations Outside of U.S. and Canada
General Motors International Operations, including:
GM Europe
GM's Latin American Operations
GM's Asian Pacific Operations
Motors Insurance Corporation
North American Operations, including:
GM's Central Office Staffs
GM of Canada
GM de Mexico
Saturn Corporation
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EXHIBIT C
MSA SERVICES AND MSA SCOPE DOCUMENTS
------------------------------------
<PAGE>
EXHIBIT C
MSA SERVICES AND MSA SCOPE DOCUMENTS
------------------------------------
GM Parent and EDS Parent have agreed upon the description of MSA Services
contained in Section I of this Exhibit C and have agreed to develop MSA Scope
Documents as discussed in Section II of this Exhibit C.
I. MSA Services. It is the intention of the parties that EDS will be the
principal supplier of current and future IT goods and services (including
functional replacements), in accordance with GM's stated IT strategies,
directions, architecture, and standards. The MSA Services set forth in this
Section I are described by functional service categories so that changes in
GM's business or in technology which replace existing processes or
technologies within the scope of the MSA Services, but serve the same or
comparable functions, will be within the scope of MSA Services. It is the
mutual goal of GM and EDS to make information a strategic advantage to GM
and provide, to the extent reasonably practicable, a consistent global IT
infrastructure and common global application software.
For the purposes of this Exhibit C, "participation" means that GM shall
consult with EDS with respect to the applicable services, but shall not
preclude GM from (i) performing such services internally, or (ii) obtaining
such services from other external sources without EDS involvement.
A. Inclusions. Consistent with Section 3.2 of the MSA and except as
provided in Section I.B below, functional IT service categories within
the scope of MSA Services are as follows:
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1. Infrastructure.
(a) Scope. Except with respect to Plant Floor Services which
are covered in Section I.A.5 below, the scope of the
computing and communications infrastructure
("Infrastructure") is as follows:
(1) Mainframe, super-computing, midrange and distributed
computing hardware and system software.
(2) Voice, data and video communications services and
networks. However, the parties mutually agree that the
videoconferencing products and services included in the
above shall be limited to (i) those for which terms and
pricing are specified in the Videoconferencing Terms
and Pricing document, dated March 29, 1996, mutually
developed by GM and EDS, and (ii) those being provided
to GM by EDS as of the Effective Date to the extent
that, prior to the Effective Date, they were mutually
treated by the parties as within the scope of Section
1.3 of the Master Agreement.
(3) End-user hardware (e.g., telephones, desktop PC's, Unix
workstations, 3270/5080 terminals) connected to or
using the computing or communications environment
described in sub-Sections I.A.1(a)(1) and I.A.1(a)(2)
hereof.
(4) Replacements of any of the foregoing which serve the
same or comparable functions as the foregoing.
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(b) Services. EDS shall be responsible for meeting GM's
requirements, in accordance with GM's stated IT strategies,
directions, architecture and standards, for the following
services applicable to the Infrastructure functions
described in sub-Section I.A.1(a) above:
(1) Participation in the investigation of and planning for
architecture and related Infrastructure technologies
supporting GM's IT strategies and directions.
(2) Development, implementation, and maintenance of
Infrastructure architecture and standards for all
computing and communications environments used by EDS
to provide services to both GM and EDS' other customers
("Shared Infrastructure").
(3) Participation in the development and maintenance of
Infrastructure architecture and standards relating to
all computing and communications environments desired
by GM which are not shared by EDS' other customers
("Dedicated Infrastructure").
(4) Infrastructure capability, capacity and configuration
management for Shared Infrastructure.
(5) Participation in Infrastructure capability and
configuration and performance of Infrastructure
capacity management for Dedicated Infrastructure.
(6) Infrastructure integration, installation, and
operations.
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(7) Infrastructure performance monitoring and improvements
(without limiting GM's right to monitor performance as
mutually agreed by the parties).
2. Application Software.
(a) Scope. Except with respect to Plant Floor Services which
are covered in Section I.A.5 below, EDS is responsible
pursuant to sub-Section I.A.2(b) below for meeting GM's
requirements for the development of application software and
implementation of commercial off-the-shelf application
software (with the "make or buy" decision being made by GM
with input from EDS) to support the following GM business
functions and processes (or their successors) and their
related sub-functions and processes:
(1) Business Planning.
(2) Financial.
(3) Human Resource Management.
(4) Sales, Service, Marketing and Aftersales.
(5) Engineering.
(6) Purchasing.
(7) Production Control and Logistics.
(8) Production/Manufacturing.
(9) Materials Management (e.g., ISP, GPS), excluding
material handling conveyances.
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(10) Corporate Affairs and Legal.
(b) Services. EDS shall be responsible for meeting GM's
requirements, in accordance with GM's stated IT strategies,
directions, architecture and standards, for the following
services in connection with application software used to
support the business functions and processes set forth in
sub-Section I.A.2(a) above:
(1) Participation in the investigation of new application
software and application software technologies
supporting GM's IT strategies and directions.
(2) Participation in the development and maintenance of
application architecture and standards.
(3) Maintenance, change control, and enhancement of current
and future application software.
(4) Development and implementation of software interfaces.
(5) Integration and operational support of current and
future application software.
(6) Troubleshooting and problem resolution.
(7) Output distribution (e.g., on-line, print, plot,
microfiche).
(8) Performance tuning and run-time improvements.
(9) Development (with the "make or buy" decision being made
by GM with input from EDS) and implementation of new
and replacement application software.
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(10) Help-desk support.
(11) Timesharing services.
3. Data Management.
(a) Scope. Except with respect to Plant Floor Services which
are covered in Section I.A.5 below, EDS will be responsible
for meeting GM's requirements for the management of data
used by or for applications software used to support the
various GM business functions described in sub-Section
I.A.2(a) above.
(b) Services. EDS shall be responsible for meeting GM's
requirements, in accordance with GM's stated IT strategies,
directions, architecture and standards, for the following
data management services to support the business functions
and processes set forth in sub-Section I.A.2(a) above:
(1) Participation in the development and maintenance of GM
data standards.
(2) Participation in the development and maintenance of
data architecture and technical standards.
(3) Implementation and maintenance of databases shared
within GM and data warehouses.
(4) Participation in the investigation of and planning for
new data/information technologies.
4. IT-Related Services. Except with respect to Plant Floor Services
which are covered in Section I.A.5 below, EDS shall be
responsible for meeting
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GM's requirements, in accordance with GM's stated IT strategies,
directions, architecture and standards, for the following cross-
functional services applicable to the business functions and
processes set forth in sub-Sections I.A.1(a), I.A.2(a), and
I.A.3(a) above:
(a) Reports on: performance status, invoice detail, scope of
work detail and other descriptions related to MSA Services.
(b) Investigation, acquisition, required development,
maintenance and use of IT-related methodologies and tools as
requested by GM.
(c) Implementation of IT security controls.
(d) Compliance management with respect to EDS' delivery of MSA
Services in accordance with GM's stated IT strategies,
direction, architecture and standards.
(e) Participation in planning for business continuity services.
(f) Planning for IT disaster recovery services jointly with GM.
(g) Delivery of IT disaster recovery and IT-related business
continuity services.
(h) Participation as requested by GM in IT planning, technology
assessment and other data management activities.
(i) NAO COe training for the term of the current NAO COe
agreement, dated November 30, 1993.
(j) Training in the use of EDS software and/or technologies
custom-developed by EDS for GM.
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(k) Backup and quality control (without limiting GM's right to
assess the quality of delivered MSA Services).
5. Plant Floor Services. EDS shall be responsible for plant floor
services to the extent set forth in sub-Section 1.3(e) of the MSA
("Plant Floor Services").
B. Exclusions. In addition to the provisions of Section 1.3 of the MSA,
MSA Services shall not include the following:
1. Any (i) plant floor services (except to the extent set forth in
sub-Section 1.3(e) of the MSA), including plant floor services
for Saturn Corporation, and (ii) Machine Control(s) as defined in
the Plant Floor Systems Services Agreement, entered into as of
________, 1996, between GM and EDS.
The services that are out of scope under the Memorandum of
Agreement on Information Technology Services at Saturn between
Saturn MFS and EDS dated April 22, 1994 (the "Saturn MOA") are
excluded from the MSA Services for the term of the Saturn MOA,
including extensions and renewals thereof, but excluding any
expansion of scope of services with respect thereto.
2. Hardware, software and "firmware" embedded into GM Products,
including embedded controls technology incorporated into vehicles
or vehicle components (e.g., Engine Control Modules).
3. IT requirements of GM suppliers and dealers.
4. Training, other than (i) NAO COe training for the term of the
current NAO COe agreement, dated November 30, 1993, and (ii)
training in the use of EDS software and/or technologies custom-
developed by EDS for GM.
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5. Consumable desktop and office supplies (e.g., paper, print
cartridges, diskettes).
6. Engineering test equipment and direct embedded test controls
technology, including computer-aided direct embedded test
controls technology.
7. Personnel services for data entry.
8. Standalone non-data processing equipment (e.g., copiers, fax
machines and audio visual equipment).
9. GM business publications.
10. Non-data processing personnel services.
11. Acquisition of commercially available business data.
12. Consulting services.
13. Determination of GM's business requirements for IT.
14. Customer Assistance Centers.
15. Roadside Assistance Centers.
16. Cellular Phones.
17. Pagers.
18. Videobroadcasting and videoconferencing (except to the extent
set forth in sub-Section I.A.1(a)(2) of this Exhibit C).
19. Payment Processing Centers.
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20. Expense Report Processing.
21. Strategic Planning.
22. Items which are not (i) Infrastructure, or (ii) replacements of
Infrastructure that serve the same or comparable functions as
Infrastructure.
23. IT services for consortiums in which GM is a participant.
24. Determination of GM's IT Architecture, Strategy and Direction.
25. Additional exclusions applicable to GM Overseas User
Organizations only:
(a) Voice communications (including telephones).
(b) Satellite communications for dealers and suppliers.
(c) IT services that (i) were being performed as of August 1,
1995, by a third party under contract with GM, or internally
by GM, but only if and to the extent that the scope of such
services is not increased beyond that being performed by
such third party or internally by GM as of August 1, 1995,
or (ii) the Contracting Parties mutually agree in writing
and document in an applicable Service Agreement will not be
provided by EDS, in the case of each of (i) and (ii), for
the duration of that third party contract or internal
arrangement or that Service Agreement, including extensions
or renewals thereof, but excluding any expansion of the
scope of services with respect thereto and excluding any
contract with a new or different third party with respect to
such third party or internal GM services.
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Any services obtained by a GM User Organization from a third party, or
provided internally by GM, under the exclusions set forth in this
Section I.B shall not count against the annual or aggregate
limitations on competitive bidding and resourcing contained in Article
V of the MSA.
II. MSA Scope Documents. The parties have agreed upon, and will continue to
mutually agree upon, documents (each, an "MSA Scope Document") consisting
of a description of (i) specific IT services that are then being performed
by EDS for a particular GM Major Sector (or, if applicable, a group of GM
Major Sectors or GM Overseas User Organizations) that are MSA Services,
(ii) related services that are not MSA Services, and (iii) the roles and
responsibilities of the parties relating thereto.
The MSA Scope Documents are intended to assist in defining the specific
detail content of a particular MSA Service. However, the general
description of MSA Services contained in Section I of this Exhibit C will
control any interpretation of whether a particular service is or is not an
MSA Service, regardless of whether or not that service is then included in
any applicable MSA Scope Document. There are numerous MSA Scope Documents
which have been or will be prepared:
. The North American Scope Document, dated __________, 1996,
describes the specific MSA Services being delivered by EDS within
the NAO, GMAC, and Delphi GM Major Sectors in North America as of
the effective date of the MSA. It will soon be updated to include
the other GM Major Sectors in North America as well.
. With respect to the GM Overseas User Organizations, the parties
will mutually agree upon MSA Scope Documents describing the
specific MSA Services then being delivered by EDS within each
applicable GM Major Sector, country, or unit, as mutually agreed.
These MSA Scope Documents (the "GM Overseas User Organization
Scope Documents") will be prepared in
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the same format as the North American Scope Document. However, in
each case, the MSA Services will be determined on the basis of
the description of MSA Services set forth in Section I of this
Exhibit C.
The MSA Scope Documents are intended to define, to the extent feasible, the
roles and responsibilities of the parties with respect to the MSA Services
described therein. The specific MSA Services to be provided by EDS pursuant
to a Service Agreement are subject to the agreement of the Contracting
Parties thereto and will be documented specifically for that Service
Agreement as described in Section 2.1 of the MSA.
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EXHIBIT D
PROCEDURES FOR NEGOTIATING SERVICE
AGREEMENTS AND RESOLVING IMPASSES
---------------------------------
<PAGE>
EXHIBIT D
PROCEDURES FOR NEGOTIATING SERVICE
AGREEMENTS AND RESOLVING IMPASSES
---------------------------------
ARTICLE D-I. DEFINITIONS
-------------------------
D1.1 Definitions. In addition to the terms otherwise defined in the MSA, the
following terms shall have the meanings set forth below whenever they are
used in the provisions of this Exhibit D:
(a) The term "Competitiveness Event" shall mean the negotiation or
renegotiation by a GM User Organization and an EDS Service
Organization of (i) a new or replacement Service Agreement, (ii) the
terms and conditions applicable to a new or replacement MSA Service
that is proposed to be provided under a then-current Service
Agreement, or (iii) the pricing of any MSA Services when and to the
extent that the negotiation or renegotiation of such pricing is
contractually provided for in a then-current Service Agreement.
(b) The term "Major Sector Negotiator" shall mean, for the negotiation of
any Major Sector Service Agreement, the person(s) designated by the
applicable GM Major Sector Contract Manager or the applicable EDS
Major Sector Contract Manager, respectively, pursuant to Section D2.2
of this Exhibit D, who will have primary responsibility for the
negotiation of the terms and conditions of that Major Sector Service
Agreement.
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(c) The term "Major Sector Service Agreement" shall mean the primary
Service Agreement between a GM Major Sector and the corresponding EDS
Major Sector.
(d) The term "Modified Cost-Plus Pricing Methodology" shall mean the cost-
plus pricing methodology set forth in Section D3.3 of this Exhibit D.
(e) The term "Modified EDS Cost" for any MSA Services shall mean the costs
incurred by EDS in providing those MSA Services determined in
accordance with sub-Sections D3.3(c) and D3.3(d) of this Exhibit D.
(f) The term "Modified Markup Percentage" shall mean, for any MSA Services
provided by EDS to any GM User Organization pursuant to the Modified
Cost-Plus Pricing Methodology, the percentage computed in accordance
with the calculation methodology set forth in a mutually agreed policy
letter for that purpose, signed prior to the Effective Date by the GM
and EDS Corporate Contract Managers.
(g) The term "Negotiating Party" shall mean, for any Competitiveness
Event, the GM User Organization and the EDS Service Organization that
are participants in the negotiations with respect to that
Competitiveness Event.
(h) The term "Negotiator" shall mean, for any Competitiveness Event, the
person designated by the applicable Unit Project Manager or Major
Sector Contract Manager of the GM User Organization or the applicable
EDS Service Organization, respectively, pursuant to Section D2.2 of
this
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Exhibit D, who will have primary responsibility for the negotiation of
an agreement with respect to that Competitiveness Event.
(i) The term "Standing Neutral Mediator" shall mean the person jointly
selected from time to time pursuant to Section D3.1 of this Exhibit D.
(j) The term "Target Commencement Date" shall mean (i) for a new Service
Agreement which replaces an existing Service Agreement, the expiration
date of the existing Service Agreement, (ii) for a new Service
Agreement which does not replace an existing Service Agreement, the
anticipated effective date of the new Service Agreement, and (iii) for
any other Competitiveness Event, the date upon which agreement with
respect to that Competitiveness Event is reasonably required by GM.
Other terms used in this Exhibit D are defined in the context in which they
are used and, unless otherwise specified herein, shall have the meanings
there indicated whenever they are used in this Exhibit D.
ARTICLE D-II. NEGOTIATION PROCEDURES AND DEFAULT MECHANISMS
------------------------------------------------------------
D2.1 Good Faith and Fair Dealing. GM Parent and EDS Parent agree that all
negotiations between GM and EDS with respect to any Competitiveness Event
shall be governed by the fundamental principle of good faith and fair
dealing as set forth in Section 1.6 of the MSA. The responsibility for
concluding the negotiations relating to any Competitiveness Event shall be
first and foremost the duty of the GM and EDS Negotiators for that
Competitiveness Event. The Negotiators shall meet as often as they
reasonably deem necessary in order to resolve all issues necessary to agree
upon the price, terms and conditions relating to the Competitiveness Event.
Upon the approval of the GM and EDS Corporate Contract Managers or their
designated representatives, the Negotiators may use the services of the
Standing Neutral Mediator to assist them in their negotiations.
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D2.2 Designation of Negotiators. In connection with the occurrence or
anticipated occurrence of a Competitiveness Event, the Unit Project Manager
or Major Sector Contract Manager, as applicable, for each applicable
Negotiating Party shall designate a Negotiator for that Competitiveness
Event in a timely manner and, in any event, within a reasonable period of
time after receiving a written request for such designation. If the
Competitiveness Event is the negotiation of a Major Sector Service
Agreement, the Negotiators designated by the Negotiating Parties shall be
the Major Sector Negotiators for that Competitiveness Event.
D2.3 Major Sector Negotiation Procedures. The following procedures shall apply
with respect to the negotiation of a Major Sector Service Agreement:
(a) Negotiation Schedule. As soon as practical and reasonable, but no
later than one year prior to the Target Commencement Date for the
Major Sector Service Agreement, the EDS and GM Major Sector
Negotiators for the negotiation of that Major Sector Service Agreement
shall meet and agree upon a schedule that will be reduced to writing
and sent to the GM and EDS Corporate Contract Managers. Unless the
Major Sector Negotiators agree otherwise, the negotiation schedule
shall include the following items:
(1) The designation of GM and EDS staff who will participate in the
negotiations.
(2) The date when the GM Major Sector will provide a written
description of the MSA Services that it requires.
(3) The date when the EDS Major Sector will provide a written
proposal for providing those MSA Services.
(4) A schedule for subsequent meetings to conclude negotiations.
(5) The deadline for the conclusion of negotiations by the Major
Sector Negotiators, which shall not be later than sixty (60) days
prior to the Target Commencement Date for the Major Sector
Service Agreement. The negotiation schedule may also include
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interim deadlines for conclusion of negotiations on specific
items in the Major Sector Service Agreement.
(b) Reference to Corporate Contract Managers. In the event that the Major
Sector Negotiators reasonably conclude that further negotiations by
them will not result in resolution of all disputed issues, then the
Major Sector Negotiators shall promptly notify the Corporate Contract
Managers. At that time, but, in any event, no later than sixty (60)
days prior to the Target Commencement Date for the Major Sector
Service Agreement, the Corporate Contract Managers shall assume
responsibility for the negotiations of the Major Sector Service
Agreement. The Corporate Contract Managers may request the assistance
and advice of other senior executives, including members of the group
referred to in Section 3.1 of the MSA. In addition, the Corporate
Contract Managers may at any time seek the assistance of the Standing
Neutral Mediator to help them pursue negotiations and shall be
obligated to seek such assistance (i) if they have been unable to
resolve all disputed issues within thirty-seven (37) days prior to the
Target Commencement Date for the Major Sector Service Agreement, and
(ii) before any disputed issues may be referred to the Chief Executive
Officers as described in sub-Section D2.3(c) of this Exhibit D.
(c) Reference to Chief Executive Officers. At any time after the
Corporate Contract Managers have assumed responsibility for the
negotiations of the Major Sector Service Agreement, either Corporate
Contract Manager may request that the Standing Neutral Mediator
declare an impasse. If the Standing Neutral Mediator confirms that
the Corporate Contract Managers have exhausted all reasonable efforts
at negotiation and that further negotiation by the Corporate Contract
Managers is not likely to result in resolution of all disputed issues,
then the Standing Neutral Mediator shall declare an impasse by giving
written notice thereof to both of the Corporate Contract Managers.
At that time, but in any event no later than thirty (30) days prior to
the Target Commencement Date for the Major Sector Service Agreement,
the Chief Executive Officers of EDS Parent and GM Parent shall
personally assume responsibility for the negotiations
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of the Major Sector Service Agreement. The Chief Executive Officers
may at any time seek the assistance of the Standing Neutral Mediator.
(d) Default Mechanism. If the Negotiating Parties are unable to reach
agreement upon a Major Sector Service Agreement prior to the Target
Commencement Date therefor, then:
(1) With respect to any MSA Services that EDS is then providing for
the applicable GM Major Sector, EDS shall in good faith continue
to provide the same MSA Services, on the same terms and
conditions (other than pricing), as then being provided by EDS
unless and until the GM Major Sector, at its option and upon
reasonable notice to EDS, directs EDS in writing to reasonably
modify or discontinue such MSA Services in accordance with the
provisions of Section A9.4 of Exhibit A to the MSA.
(2) With respect to any MSA Services reasonably requested by the GM
Major Sector that EDS is not then providing for the GM Major
Sector, the GM Major Sector may, at its option and upon
reasonable notice to EDS, direct EDS in writing to commence
providing such MSA Services.
In either such event, unless and until the Negotiating Parties reach
agreement upon the Major Sector Service Agreement, (i) any such MSA
Services shall be considered provided pursuant to the MSA, (ii) for
purposes of Exhibit A to the MSA, the GM Major Sector and the EDS
Major Sector shall be considered Contracting Parties and the business
relationship between them shall be considered the Agreement, and (iii)
EDS shall be compensated (x) for all UPR Items, at the then-current
Uniform Published Rates for such UPR Items, (y) for all system
development services and application services customarily performed
on a cost-plus basis by EDS for GM, in accordance with the cost-plus
pricing methodology set forth in Section A7.3 of Exhibit A to the MSA,
and (z) for all other resources and services, in accordance with the
Modified Cost-Plus Pricing Methodology. Notwithstanding the
foregoing, with the approval of the Corporate Contract Managers, the
Negotiating Parties may
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mutually agree upon a different compensation arrangement, such as
escrowing disputed compensation or devising an interim compensation
arrangement, pending the successful negotiation of the Major Sector
Service Agreement. The Chief Executive Officers of GM Parent and EDS
Parent or their designees shall continue to negotiate in good faith to
reach agreement upon the Major Sector Service Agreement.
D2.4 UPR Negotiation Procedures. The following procedures shall apply with
respect to the negotiation of Uniform Published Rates for UPR Items that GM
Parent and EDS Parent have mutually agreed to list in the UPR Catalog:
(a) Negotiation. Whenever, in accordance with the provisions of Section
A7.1 of Exhibit A to the MSA, GM Parent and EDS Parent initiate
negotiation of the Uniform Published Rates for UPR Items, GM Parent
and EDS Parent shall each designate a Negotiator and those Negotiators
shall proceed expeditiously to successfully conclude the negotiations.
(b) Default Mechanism. If either Negotiator reasonably concludes that
further negotiations will not likely result in resolution of all
disputed issues, then he or she may request that the applicable
Corporate Contract Manager refer the disputed issues to arbitration as
provided in Section D3.2 of this Exhibit D.
D2.5 Procedures for System Development, Application and Other Services. The
following procedures shall apply with respect to any Competitiveness Event
relating to system development services and application services
customarily performed on a cost-plus basis by EDS for GM:
(a) Negotiation. The Negotiators for that Competitiveness Event may
mutually agree upon a formal or informal negotiation schedule and may,
with the prior approval of the Corporate Contract Managers, seek the
assistance of the Standing Neutral Mediator pursuant to Section D3.1
of this Exhibit D.
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(b) Default Mechanism. If the Negotiating Parties are unable to reach
agreement with respect to the Competitiveness Event prior to the
Target Commencement Date, then:
(1) With respect to any MSA Services that EDS is then providing for
the applicable GM User Organization, EDS shall in good faith
continue to provide the same MSA Services, on the same terms and
conditions (other than pricing), as then being provided by EDS
unless and until the GM User Organization, at its option and upon
reasonable notice to EDS, directs EDS in writing to reasonably
modify or discontinue such MSA Services in accordance with the
provisions of Section A9.4 of Exhibit A to the MSA.
(2) With respect to any MSA Services reasonably requested by the GM
User Organization that EDS is not then providing for the GM User
Organization, the GM User Organization may, at its option and
upon reasonable notice to EDS, direct EDS in writing to commence
providing such MSA Services.
In either such event, unless and until the Negotiating Parties reach
agreement with respect to the Competitiveness Event, (i) any such MSA
Services shall be considered provided pursuant to the MSA, (ii) for
purposes of Exhibit A to the MSA, the GM User Organization and the EDS
Service Organization shall be considered Contracting Parties and the
business relationship between them shall be considered the Agreement,
and (iii) EDS shall be compensated (x) for all UPR Items, at the then-
current Uniform Published Rates for such UPR Items, and (y) for all
other resources and services, in accordance with the cost-plus pricing
methodology set forth in Section A7.3 of Exhibit A to the MSA.
D2.6 Procedures for Other Negotiations. The following procedures shall apply
with respect to any Competitiveness Event not covered by the procedures set
forth in Section D2.3, D2.4 or D2.5 of this Exhibit D:
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<PAGE>
(a) Negotiation. The Negotiators for that Competitiveness Event may
mutually agree upon a formal or informal negotiation schedule and may,
with the prior approval of the Corporate Contract Managers, seek the
assistance of the Standing Neutral Mediator pursuant to Section D3.1
of this Exhibit D. In the event that the Negotiators reasonably
conclude that further negotiations by them will not result in
resolution of all disputed issues, then the Negotiators shall promptly
notify the applicable Major Sector Contract Managers. At that time,
the Major Sector Contract Managers shall assume responsibility for the
negotiations relating to the Competitiveness Event. The Major Sector
Contract Managers may, with the prior approval of the Corporate
Contract Managers, seek the assistance of the Standing Neutral
Mediator pursuant to Section 3.1 of this Exhibit D. At any time after
the Major Sector Contract Managers have assumed responsibility for the
negotiations relating to the Competitiveness Event, either Major
Sector Contract Manager may, but shall not be obligated to, refer the
matter to the Corporate Contract Managers, in which event the
Corporate Contract Managers shall assume responsibility for the
negotiations relating to the Competitiveness Event. The Corporate
Contract Managers may at any time seek the assistance of the Standing
Neutral Mediator pursuant to Section D3.1 of this Exhibit D.
(b) Default Mechanism. If the Negotiating Parties are unable to reach
agreement with respect to the Competitiveness Event prior to the
Target Commencement Date therefor, then:
(1) With respect to any MSA Services that EDS is then providing for
the applicable GM User Organization, EDS shall in good faith
continue to provide the same MSA Services, on the same terms and
conditions (other than pricing), as then being provided by EDS
unless and until the GM User Organization, at its option and upon
reasonable notice to EDS, directs EDS in writing to reasonably
modify or discontinue such MSA Services in accordance with the
provisions of Section A9.4 of Exhibit A to the MSA.
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<PAGE>
(2) With respect to any MSA Services reasonably requested by the GM
User Organization that EDS is not then providing for the GM User
Organization, the GM User Organization may, at its option and
upon reasonable notice to EDS, direct EDS in writing to commence
providing such MSA Services.
In either such event, unless and until the Negotiating Parties reach
agreement with respect to such Competitiveness Event, (i) any such MSA
Services shall be considered provided pursuant to the MSA, (ii) for
purposes of Exhibit A to the MSA, the GM User Organization and the EDS
Service Organization shall be considered Contracting Parties and the
business relationship between them shall be considered the Agreement, and
(iii) EDS shall be compensated (x) for all UPR Items, at the then-current
Uniform Published Rates for such UPR Items, (y) for all system development
services and application services customarily performed on a cost-plus
basis by EDS for GM, in accordance with the cost-plus pricing methodology
set forth in Section A7.3 of Exhibit A to the MSA, and (z) for all other
resources and services, in accordance with the Modified Cost-Plus Pricing
Methodology. Notwithstanding the foregoing, with the approval of the
Corporate Contract Managers, the Negotiating Parties may mutually agree
upon a different compensation arrangement, such as escrowing disputed
compensation or devising an interim compensation arrangement, pending the
successful negotiation of an agreement with respect to such Competitiveness
Event. The Major Sector Contract Managers or, if applicable, the Corporate
Contract Managers shall continue to negotiate in good faith to reach
agreement with respect to such Competitiveness Event.
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ARTICLE D-III. DISPUTE RESOLUTION PROCEDURES
---------------------------------------------
D3.1 Standing Neutral Mediator. The Standing Neutral Mediator will be a neutral
third party jointly selected by GM Parent and EDS Parent whose duties will
be to assist the Negotiating Parties in the resolution of disputes with
regard to the negotiations relating to Competitiveness Events. The purpose
of the mediation will be to arrive at a mutually acceptable resolution of
the negotiations voluntarily, cooperatively and informally. The Standing
Neutral Mediator will not have adjudicatory power over any dispute. The
Negotiating Parties shall cooperate fully with the Standing Neutral
Mediator to the full extent reasonably necessary to resolve the
negotiations.
(a) Selection of the Standing Neutral Mediator. Within thirty (30) days
after the Effective Date, or within thirty (30) days after a prior
Standing Neutral Mediator's services have been terminated pursuant to
sub-Section D3.1(e) of this Exhibit D, GM Parent and EDS Parent shall
jointly select a person to serve as the Standing Neutral Mediator
until his or her services are terminated pursuant to sub-Section
D3.1(e) of this Exhibit D.
(b) Mediation Process. Following a request from either the Corporate
Contract Managers or the Chief Executive Officers of GM Parent and EDS
Parent, the services of the Standing Neutral Mediator may be utilized
in any particular negotiation of a Competitiveness Event or any
particular dispute arising in any such negotiation. After
consultation with the Negotiating Parties, the Standing Neutral
Mediator may request that each Negotiating Party submit written
materials and/or a confidential statement setting forth key facts and
arguments in support of its position and suggesting proposed
resolutions. The information contained in the confidential statements
shall not be shared with the other Negotiating Party by the Standing
Neutral Mediator without the permission of the submitting Negotiating
Party. The Standing Neutral Mediator may conduct preliminary,
private, confidential meetings with the Negotiators for the
Negotiating Parties. Thereafter, the Standing Neutral Mediator may
conduct a joint mediation session at which the Negotiator for each of
the Negotiating Parties may be expected to briefly present that
Negotiating Party's positions on the disputed issues and respond to
the other
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Negotiating Party's positions. After the summary presentations, the
Standing Neutral Mediator may meet separately and together with the
Negotiators for the Negotiating Parties to assist them in resolving
disputed issues. If the disputed issues have not been settled after
the joint mediation session, the Standing Neutral Mediator may
continue individual discussions by telephone or in person. The
Negotiators for the Negotiating Parties will make themselves
reasonably available for further discussions and/or meetings after the
joint mediation session. At all times during the mediation, the
Negotiating Parties are free to engage in ex parte communications with
the Standing Neutral Mediator. Upon the mutual consent of the
Negotiating Parties and in consultation with the Standing Neutral
Mediator, the process described in this sub-Section D3.1(b) may be
modified to meet the requirements of a particular negotiation.
(c) Confidentiality. All communications, statements made by the
Negotiating Parties, documents or other information disclosed by the
Negotiating Parties, statements made by or notes of the Standing
Neutral Mediator, and impressions, opinions or recommendations of the
Standing Neutral Mediator in connection with the mediation are
confidential, privileged, non-discoverable, inadmissible and without
prejudice in any litigation, arbitration, or subsequent proceeding;
provided, however, that (i) evidence otherwise admissible shall not be
rendered inadmissible because of its use in the mediation, and (ii)
the Negotiating Parties may agree to disclose communications and
documents (other than those of the Standing Neutral Mediator) to each
other or to non-participants in the mediation. Upon request, the
Standing Neutral Mediator shall sign a confidentiality agreement that
is satisfactory to the Negotiating Parties.
(d) Disqualification of Standing Neutral Mediator. The Standing Neutral
Mediator and any person who assists him or her shall not be a
necessary party in any arbitral or judicial proceeding relating to the
mediation or to the subject matter of the negotiation. The Standing
Neutral Mediator and any person who assists him or her may not be
called as a witness or as an expert in any pending or subsequent
litigation or arbitration involving the Negotiating Parties and
relating to the negotiation. Moreover, the Standing Neutral Mediator
and any person who assists him or her shall be
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disqualified as a witness or as an expert in any pending or subsequent
litigation or arbitration relating to the negotiation.
(e) Term. The Standing Neutral Mediator shall serve at the pleasure of GM
Parent and EDS Parent. At any time, the services of the Standing
Neutral Mediator may be terminated by (i) either Corporate Contract
Manager providing written notice thereof to the other Corporate
Contract Manager and the Standing Neutral Mediator, or (ii) the
resignation of the Standing Neutral Mediator.
(f) Compensation. EDS Parent and GM Parent shall jointly agree upon and
share equally the compensation and expenses for the Standing Neutral
Mediator.
D3.2 Arbitration. Any dispute in connection with Uniform Published Rates for
UPR Items which has not been resolved by negotiation as provided in sub-
Section D2.4 of this Exhibit D shall be settled by arbitration pursuant to
this Section D3.2. Except as otherwise provided herein, the arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. (S)(S) 1-
16. EDS Parent and GM Parent agree to abide by the decision of the
arbitrators. In the event the arbitrators' decision is not voluntarily
honored, GM Parent and EDS Parent agree that the arbitrators' decision may
be enforced in any court having jurisdiction. The arbitrators are not
empowered to award damages, and EDS and GM hereby irrevocably waive any
right to recover such damages with respect to any dispute resolved by
arbitration.
(a) Commencement of Arbitration. Either Corporate Contract Manager may,
by giving the other Corporate Contract Manager written notice thereof,
refer a dispute with regard to the Uniform Published Rate for a UPR
Item to arbitration pursuant to this Section D3.2, but only after (i)
at least forty-five (45) days have elapsed since negotiations
regarding the Uniform Published Rate for that UPR Item commenced, and
(ii) the Standing Neutral Mediator has assisted the applicable
Negotiators in negotiating such Uniform Published Rate and has
confirmed that the Negotiators are not likely to resolve the dispute
through further negotiations. Within seven (7) days after a dispute
has been referred to arbitration pursuant to
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this Section D3.2, each Negotiating Party shall provide the other a
Notice of Arbitration that shall include:
(1) The names of the individuals representing the Negotiating Party
in the arbitration proceeding.
(2) A statement of the general nature of the dispute.
(3) The remedy sought.
(4) The name and address of the arbitrator appointed by the
Negotiating Party.
(b) Selection of Arbitrators. Unless the Negotiating Parties agree
otherwise, the Arbitration Tribunal shall consist of an arbitrator
appointed by each Negotiating Party and a "non-party" arbitrator, who
shall chair the Arbitration Tribunal. As soon as possible after the
exchange of the Notices of Arbitration and, in any event, within seven
(7) days thereafter, the arbitrators appointed by the Negotiating
Parties shall select the "non-party" arbitrator.
(c) Place of Arbitration. The place of arbitration shall be Detroit,
Michigan, unless the Negotiating Parties agree otherwise.
(d) Conduct of Arbitral Proceedings. The arbitration proceedings shall be
conducted in an expeditious manner. Each Negotiating Party shall
submit a written statement setting forth the facts and arguments in
support of its position to the Arbitration Tribunal within seven (7)
days after the exchange of the Notices of Arbitration. Within seven
(7) days thereafter, the Arbitration Tribunal shall hold a hearing at
which time each Negotiating Party shall make an oral presentation in
support of its position. The Arbitration Tribunal shall render a
decision within fourteen (14) days after the conclusion of all oral
testimony.
(e) No Ex Parte Contact. No Negotiating Party or anyone acting on its
behalf shall have any ex parte communication with the non-party
arbitrator with
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respect to any matter of substance relating to the proceeding. A
Negotiating Party and the arbitrator it appointed, however, may confer
with regard to any matter.
(f) Decision. Unless the Negotiating Parties agree otherwise, the
Arbitration Tribunal shall issue a final written decision. No
statement of reasons shall be required. The decision shall be made
and signed by at least a majority of the arbitrators. Executed copies
of the decision shall be delivered by the Arbitration Tribunal to the
Negotiating Parties. Within seven (7) days after receipt of the
decision, either Negotiating Party, with notice to the other
Negotiating Party, may request that the Arbitration Tribunal correct
any errors in computation, clerical or typographical errors, or errors
of a similar nature. If no requests for corrections have been made
or, in any event, within ten (10) days after issuing its decision, the
Arbitration Tribunal shall certify its decision as final.
(g) Confidentiality. The Negotiating Parties and the arbitrators shall
treat the proceedings, any oral or written information provided to the
Arbitration Tribunal, and the decision of the Arbitration Tribunal, as
confidential, except in connection with a judicial challenge to, or
enforcement of, the arbitrators' decision, and unless otherwise
required by law.
(h) Costs. Each Negotiating Party shall bear its own costs in connection
with any arbitration proceedings pursuant to this Section D3.2. The
Negotiating Parties shall share equally the compensation and expenses
of the Arbitration Tribunal.
D3.3 Modified Cost-Plus Pricing Methodology. With respect to any MSA Services
provided by EDS to any GM User Organization for which Section D2.3 or D2.6
of this Exhibit D provides that EDS is to be compensated in accordance with
the Modified Cost-Plus Pricing Methodology set forth in this Section D3.3,
EDS will charge the applicable GM User Organization, and the applicable GM
User Organization will pay EDS for those MSA Services, according to the
following:
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(a) Payment Terms. The GM User Organization shall pay EDS monthly,
according to the terms of Section A8.2 of Exhibit A of the MSA, the
Modified EDS Cost for such MSA Services, plus a markup on the Modified
EDS Cost equal to (i) the then-current Modified Markup Percentage for
such MSA Services, multiplied by (ii) such Modified EDS Cost.
(b) Inspection and Audit. Upon the reasonable request of the GM Corporate
Contract Manager, GM will have the right to examine and audit relevant
EDS records supporting payments and other provisions related to the
Modified EDS Cost for the MSA Services provided pursuant to this
Section D3.3, all in accordance with the following.
(1) The term "records" means accounting records, written policies and
procedures, general ledger records, records supporting payments
to and credits from suppliers, vouchers, statements of cost and
records necessary to evaluate and verify direct and indirect
costs (including overhead and other allocations), EDS purchasing
records, and any other records reasonably requested by GM's
public accountant, as they may apply to costs and settlements
associated with this Section D3.3, whether the records are in
written form, in the form of computer data and files, or any
other form required for audit.
(2) GM will use its public accounting firm for the audit unless EDS
reasonably and in good faith believes that disclosure of any
information requested by GM, or by GM's public accounting firm,
will result in the disclosure of confidential or proprietary
information of EDS. In such event, GM and EDS will agree to an
alternative independent "big six" public accounting firm which
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will be engaged by GM to perform such services, but will report
its findings to both GM and EDS. In this regard, such
independent public accounting firm shall disclose only such
information as may be necessary to verify and validate those
findings and, to the extent reasonably possible, will do so in a
way that will not disclose any confidential or proprietary
information of EDS. The cost of such independent public
accounting firm will be borne equally by both GM and EDS. The
public accounting firm and each of the auditors performing the
audit will execute a reasonable confidentiality agreement
acceptable to GM and EDS in form and content.
(3) EDS shall make these records available at its offices at all
reasonable times for examination, audit, or reproduction. The
independent auditor shall have access to EDS facilities, shall be
allowed to interview all current employees, and EDS will not
prohibit GM's public accountant from interviewing former EDS
employees, to discuss matters pertinent to this Section D3.3.
The independent auditor shall have access to all necessary
records, and shall be provided adequate and appropriate work
space, in order to conduct audits in compliance with this
provision.
(4) Any payment to EDS may be (i) reduced by amounts, including
interest at rates determined by the Secretary of the Treasury
pursuant to Public Law 92-41 (85 stat. 97), found to be
unallowable or not properly allocated to GM, or (ii) adjusted for
prior overpayments and underpayments by GM. GM will have the
right, in accordance with sub-Section D3.3(b)(2) of this Exhibit
D, to audit relevant EDS records at the end of each calendar
year and for a period of three years after payment of any amount
pursuant to this Section D3.3.
D-17
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(c) Accounting Practices. The Modified EDS Cost for any MSA Services
provided to the applicable GM User Organization pursuant to this
Section D3.3 will be computed according to the following:
(1) EDS shall follow consistently the accounting practices described
below in accumulating and reporting costs.
(2) All costs incurred for the same purposes, in like circumstances,
are either direct costs only or indirect costs only with respect
to final cost objectives. No final cost objective shall have
allocated to it as an indirect cost any cost, if other costs
incurred for the same purpose, in like circumstances, have been
included as a direct cost of that or any other final cost
objective. Further, no final cost objective shall have allocated
to it as a direct cost any cost, if other costs incurred for the
same purpose, in like circumstances, have been included in any
indirect cost pool to be allocated to that or any other final
cost objective. For purposes of this Section D3.3:
(A) Direct cost means any cost which is identified specifically
with a particular final cost objective. Direct costs are
not limited to items which are incorporated in the end
product.
(B) Indirect cost means any cost not directly identified with a
single final cost objective, but identified with two or more
final cost objectives or with at least one intermediate cost
objective.
(C) Cost objective means a function, organizational subdivision,
contract or other work unit for which cost data
D-18
<PAGE>
are desired and for which provision is made to accumulate
and measure the cost of processes, products, jobs,
capitalized projects, etc.
(3) With respect to overhead expenses, Modified EDS Cost will include
that portion of EDS overhead expenses as is properly allocable to
the applicable GM User Organization pursuant to the methodology
used consistently throughout EDS, i.e., all expenses that cannot
be reasonably charged to specific profit centers are allocated to
all EDS profit centers on the basis of the ratio of the direct
expenses charged to a particular profit center to the total
direct expenses charged to all EDS profit centers. Changes in
specific allocation methodologies may be periodically made by EDS
provided that such methodologies are applied consistently and
uniformly as they relate to all EDS customers.
(4) Home office expense shall be allocated on the basis of the
beneficial and causal relationship between supporting and
receiving activities. Home office expense means the expense of
an office responsible for directing or managing two or more, but
not necessarily all, segments of an organization. EDS may have
several intermediate home offices which report to a common home
office.
Home office expenses shall be allocated directly to the maximum
extent practical. Expenses not directly allocated, if
significant in amount and relation to total home office expense,
shall be grouped in logical and homogeneous expense pools and
allocated on a causal and beneficial relationship.
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<PAGE>
Residual home office expense, that cost which is not allocated
directly or not allocated on a causal and beneficial
relationship, shall be allocated to EDS' profit centers on the
basis of the ratio of the direct expenses charged to a particular
profit center to the total direct expenses charged to all EDS
profit centers. Changes in specific allocation methodologies may
be periodically made by EDS provided that such methodologies are
applied consistently and uniformly as they relate to all EDS
customers.
(5) EDS business unit general and administrative (G&A) expenses shall
be allocated to business unit final cost objectives based on
their beneficial or causal relationship. These expenses
represent the cost of the management and administration of the
business unit as a whole. Business unit G&A costs shall be
grouped in a separate indirect cost pool which shall be allocated
to final cost objectives by means of a cost input base
representing the total activity of the business unit.
(6) EDS shall have, and consistently apply, written statements of
accounting policies and practices for accumulating the costs of
material and for allocating costs of material to cost objectives.
The cost of material used solely in performing indirect functions
may be allocated to an indirect cost pool. Costs of a category
of materials shall be accounted for in material inventory
records.
(7) EDS shall have a written statement of accounting policies and
practices for classifying costs as direct or indirect which shall
be consistently applied. Indirect costs shall be accumulated in
indirect cost pools which are homogeneous. Pooled costs shall be
allocated to cost objectives in reasonable proportion to the
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beneficial or causal relationship of the pooled costs to cost
objectives.
(8) Research and development (R&D) and bid and proposal (B&P) costs
shall be allocated to cost objectives based on the beneficial or
causal relationship between such costs and cost objectives. The
R&D and B&P costs of a home office shall be allocated to segments
on the basis of the beneficial or causal relationship between the
R&D and B&P costs and the segments reporting to that home office.
The R&D and B&P costs of a business unit shall be allocated to
the final cost objectives of that business unit on the basis of
the beneficial or causal relationship between the R&D and B&P
costs and the final cost objectives. These practices shall be
consistently applied.
[Confidential information has been omitted.]
D-21
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
[Confidential information has been omitted.]
D-22
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
[Confidential information has been omitted.]
D-23
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
[Confidential information has been omitted.]
D-24
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
[Confidential information has been omitted.]
D-25
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
EXHIBIT E
GUIDELINES & METHODOLOGY FOR DETERMINING
ACHIEVEMENT OF IT STRUCTURAL COST REDUCTION TARGETS
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<PAGE>
EXHIBIT E
GUIDELINES & METHODOLOGY FOR DETERMINING
ACHIEVEMENT OF IT STRUCTURAL COST REDUCTION TARGETS
---------------------------------------------------
Annual target adjustments and cost reductions pursuant to this Exhibit E will be
calculated in accordance with the following:
1. The annual target will be adjusted according to the following:
(a) At the beginning of each calendar year, to adjust for IT structural
cost reductions resulting from GM-funded systems development (which
will result in net cost reductions in that calendar year), the annual
target will be reduced by a percentage equal to the percentage yielded
by dividing (i) the previous calendar year's fixed billings for
systems being eliminated during the current calendar year, as a result
of GM-funded systems development, by (ii) the total aggregate fixed
charges for ongoing base level MSA Services ("Baselevel Fixed
Charges") for the prior calendar year.
(b) To provide equity in the event of major changes in the Baselevel Fixed
Charges which may be the result of major changes in GM business (e.g.,
plant closings or new plants and divestitures or acquisitions), the
annual target may be adjusted by mutual agreement of the Corporate
Contract Managers.
2. For calendar year 1996, carry over amounts of savings initially realized in
1996 from 1995 cost reduction efforts pursuant to the Performance Reduction
Requirement provision of the NAO Service Agreement, and similar provisions
of other Service Agreements, will be credited towards the achievement of
the 1996 annual target in an amount equal to $17 million.
E-1
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3. Any reductions in billings under Service Agreements (excluding those cost
reductions listed as exclusions in sub-Section 4.2(e) of the MSA and those
cost reductions listed as exclusions in Section 5 of this Exhibit E) will
be counted toward achievement of the annual target at the "net" amount of
the reduction. The determination of the net amount will be subject to the
following:
(a) The net amount for products, systems or services which are
specifically replaced will be determined by subtracting the annual
billing amount for the equivalent replacement products, systems or
services from the annual billing amount for the replaced products,
systems and services.
(b) Cost reductions occasioned by a specific project shall not be netted
by additional authorized but unrelated MSA spending whether on a
separate RISS, SDA or other like document or on the same document. In
like manner, additional MSA spending occasioned by a specific cost
savings effort shall not be excluded from netting against total
savings by the use of a separate RISS, SDA or like document.
(c) For purposes of the net calculation under this Section 3, any one-time
expenses paid by GM in connection with the applicable products,
systems or services (e.g., installation, purchase or license fees)
will be amortized over a period of four years.
In all cases GM and EDS will make a good faith effort to ensure that the
counting of achievement against the annual target is equitable to both
parties. Additional instructions, examples and clarifications necessary
for the implementation of counting of achievement against the annual target
will be issued by a policy letter to be mutually agreed upon by the
Corporate Contract Managers.
E-2
<PAGE>
4. While increased functionality of products, systems and services will not
count toward achievement of the annual target, GM and EDS recognize there
is substantial value to GM when such functionality increases. Accordingly a
report of major functionality increases will be issued in connection with
any review of progress against the annual target. GM and EDS shall review
such report in conjunction with the assessment of achievement against the
annual target.
5. In addition to the exclusions to the calculation of cost reductions set
forth in sub-Section 4.2(e) of the MSA, the calculation of cost reductions
to be credited toward achievement of the annual targets pursuant to Section
4.2 of the MSA (as such targets may be adjusted pursuant to Section 1 of
this Exhibit E) shall specifically exclude (i) reductions in plant floor
services (as defined in sub-Section 1.3(e) of the MSA), except for
reductions in such services which prior to the Effective Date were
described in a scope of work for services under Section 1.3 of the Master
Agreement, (ii) cost reductions attributable to GM-funded systems
development, and (iii) amounts sourced or resourced to EDS or third parties
pursuant to Article V of the MSA or the cost reductions therefrom. The
above provision notwithstanding, with respect to any IT structural cost
reductions which result from strategies, concepts and/or fully developed
ideas that can verifiably and in good faith be shown to have been
originated by EDS and communicated to GM prior to the commencement of
competitive bidding of the underlying MSA Services, and then subsequently
implemented as part of the sourcing or resourcing of such MSA Services, the
net IT cost reductions therefrom shall be included in the calculation of
cost reductions to be credited toward the achievement of applicable annual
targets.
E-3
<PAGE>
EXHIBIT F
TERMINATION UPON CHANGE OF CONTROL
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<PAGE>
EXHIBIT F
TERMINATION UPON CHANGE OF CONTROL
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1. Termination Upon Change of Control.
(a) In the event that a Change of Control occurs at any time or from time
to time after the Effective Date and, within 90 days thereafter
(subject to extension as provided in sub-Section 1(e) hereof), the
Board of Directors of GM Parent reasonably and in good faith
determines (a "GM Board Determination"):
(1) that control of EDS has been acquired by a competitor of GMC in
the manufacture, distribution or sale of passenger cars or trucks
and that, after taking into account all relevant factors
(including, without limitation, the nature and extent of any
acquiring Person's competition with GMC), there is a reasonable
likelihood of a significant competitive threat to GMC arising
from such Change of Control;
(2) that control of EDS has been acquired by a competitor of GMC and
that, after taking into account all relevant factors (including,
without limitation, the nature and extent of any acquiring
Person's competition with GMC), there is a reasonable likelihood
of a significant competitive threat to one or more significant GM
User Organizations within GMC (the "Affected Organizations")
arising from such Change of Control (provided, however, that a GM
Board Determination shall only be made pursuant to this sub-
Section 1(a)(2) with respect to a competitor of GMC as to which
the Board of Directors of GM Parent determines reasonably and in
good faith that it is not appropriate under the terms of sub-
Section 1(a)(1) hereof to make a GM Board Determination based on
control of EDS having been acquired by such competitor); or
F-1
<PAGE>
(3) that, as a result of such Change of Control, after taking into
account all relevant factors (including, without limitation, the
financial condition of EDS and the business reputation of any
Person acquiring control of EDS), there is (i) substantial
uncertainty as to EDS' continued ability to perform, in all
material respects, its obligations under the MSA, including,
without limitation, EDS' obligations under Section 2.3 of the MSA
to the extent and at such times as such provisions are applicable
in accordance with their terms, and the Service Agreements
entered into in connection therewith, or (ii) any other
significant threat to the business relationship between EDS and
GMC.
GM Parent may, by delivering written notice to EDS Parent ("Contract
Notice") at any time within 30 days after the GM Board Determination
(or at such other time as is provided in sub-Section 1(e) hereof),
elect (A) in the case of a GM Board Determination specified in sub-
Sections 1(a)(1) or 1(a)(3) hereof, to terminate the MSA as of a date
specified in such notice, which date shall not be earlier than the
six-month anniversary of the date of delivery thereof, or (B) in the
case of a GM Board Determination specified in sub-Section 1(a)(2)
hereof, to terminate the Service Agreements to which the Affected
Organizations are parties as of a date specified in such notice and to
exclude the Affected Organizations from the scope of the MSA as of
such date.
If (A) a Contract Notice has been delivered by GM Parent based on a GM
Board Determination pursuant to sub-Section 1(a)(2) hereof, and (B)
the Board of Directors of EDS Parent determines reasonably and in good
faith that the revenues derived by EDS during the most recently
completed calendar year from the Service Agreements to be terminated
as a result of such GM Board Determination equal or exceed 60% of the
annual aggregate revenue paid by GM for MSA Services performed during
such calendar year, then EDS Parent shall have the
F-2
<PAGE>
right to elect to terminate the MSA within 30 days after receipt of
notification of such GM Board Determination by delivering to GM Parent
a written notice stating that it is terminating the MSA as of a date
specified in such notice, which date shall not be earlier than the
six-month anniversary of the date of delivery thereof.
(b) Any Contract Notice sent to EDS Parent pursuant to this Exhibit F
shall (i) identify the applicable Change of Control transaction, (ii)
if applicable, identify the competitor of GMC or of an Affected
Organization with which EDS consummated a Change of Control
transaction specified in sub-Section 1(a)(1) or 1(a)(2) hereof, (iii)
set forth, in reasonable detail, the basis upon which the GM Board
Determination was made, and (iv) include as an attachment a certified
copy of any resolution of the Board of Directors of GM Parent that
evidences the GM Board Determination.
(c) GM Parent agrees that any GM Board Determination shall be made in good
faith, solely on the basis of one or more of the criteria referred to
in sub-Section 1(a) hereof and shall not be made for the purpose of
negotiating any modification or amendment of the MSA or any Service
Agreement that does not relate directly to the basis on which the GM
Board Determination is made.
(d) From time to time after the date hereof (but not more frequently than
once in any twelve-month period), EDS Parent may request in writing
that the Board of Directors of GM Parent consider and determine
whether a GM Board Determination would be made in connection with a
proposed Change of Control transaction and, if a GM Board
Determination would be made, whether such determination would be made
pursuant to sub-Section 1(a)(1), 1(a)(2) or 1(a)(3) hereof (an
"Advance Determination Request"). Any Advance Determination Request
submitted to GM Parent shall be accompanied by:
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(1) A statement that EDS has a bona fide intention of entering into a
Change of Control transaction and a summary, in reasonable
detail, of the material terms of the proposed Change of Control
transaction, including, without limitation, its proposed form and
timing;
(2) an identification of the Person or Persons with which EDS
proposes to consummate such Change of Control transaction (the
"Bidder") and an undertaking by the Bidder to cooperate in
providing information, including access to its senior management
personnel, to GM Parent in connection with its determination of
whether to make a GM Board Determination;
(3) any plans or proposals the Bidder may have, in connection with
such Change of Control transaction, which relate to or would
result in (i) any extraordinary corporate transaction such as a
merger, reorganization or liquidation, involving EDS, (ii) a sale
or transfer of assets of EDS that are material to the performance
of its obligations under the MSA or any Major Sector Service
Agreement, (iii) any change in the board of directors of EDS
Parent, (iv) any material change in the capitalization of EDS,
and (v) any other change in EDS' business or corporate structure
that would be reasonably likely to have a material effect on the
performance of its obligations under the MSA or any Major Sector
Service Agreement; and
(4) a good faith estimate by EDS Parent and the Bidder of the effect,
if any, that the consummation of such Change of Control
transaction would have on EDS' continued ability to perform, in
all material respects, its obligations under the MSA or any Major
Sector Service Agreement, including, without limitation, EDS'
obligations under Section 2.3 of the MSA to the extent and at
such times as such provisions are applicable in
F-4
<PAGE>
accordance with their terms, and the Service Agreements entered
into in connection therewith.
In addition, EDS Parent and the Bidder shall provide such other
documentation and information as GM Parent may reasonably request in
connection with such proposed Change of Control transaction or its
determination of whether to make a GM Board Determination. If
requested by GM, EDS Parent shall afford GM Parent an opportunity,
prior to the making of any GM Board Determination, to meet and discuss
with senior management of EDS Parent any factors relevant to whether a
GM Board Determination should be made in response thereto.
(e) In the event that a Change of Control occurs at any time after the
Effective Date, EDS Parent shall promptly deliver to GM Parent a
written notice (a "Change of Control Notice") stating that a Change of
Control has occurred. If a GM Board Determination has been made with
respect to a Change of Control in response to an Advance Determination
Request, GM Parent may elect to terminate the MSA or one or more
Service Agreements (as the case may be) in accordance with sub-Section
1(a) hereof by delivering a Contract Notice to EDS Parent at any time
during the period between the occurrence of the Change of Control and
the expiration of 30 days after the date of delivery to GM Parent of a
Change of Control Notice with respect thereto, and no additional GM
Board Determination shall be required after the occurrence of such
Change of Control. In determining whether to make a GM Board
Determination after the delivery of a Change of Control Notice, to the
extent that GM Parent has not previously received information in
connection with an Advance Determination Request, GM Parent shall be
entitled to receive from EDS Parent and any Person acquiring control
of EDS, and to rely on, the same information that would be required to
be provided to GM Parent by EDS Parent or a Bidder pursuant to sub-
Section 1(d) hereof, which information shall be provided to GM Parent
as promptly as practicable and in any event within 30 days following
the Change of Control. In the event that
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any such information is provided to GM Parent after occurrence of the
Change of Control, the 90-day period referred to in sub-Section 1(a)
hereof shall automatically be extended to a date 90 days after EDS
Parent and the Person acquiring control of EDS certify to GM Parent
that all such required information has been provided.
(f) If requested by EDS Parent within 30 days after delivery of an Advance
Determination Request or Change of Control Notice (as the case may
be), GM Parent shall afford EDS Parent, prior to the making of any GM
Board Determination, an opportunity to meet and discuss with senior
management of GM Parent and the Board of Directors of GM Parent
regarding such proposed Change of Control transaction, including any
factors relating to the MSA or the determination by GM Parent of
whether to make a GM Board Determination. Within 90 days after receipt
of the Advance Determination Request or Change of Control Notice (as
the case may be) and the information required by sub-Sections 1(d) or
1(e) hereof, GM Parent shall notify EDS Parent in writing whether a GM
Board Determination has been made with respect to the proposed Change
of Control transaction, together with the basis upon which any such
determination was made. If (i) GM Parent notifies EDS Parent that a GM
Board Determination will not be made with respect to such Change of
Control transaction, or (ii) GM Parent fails to notify EDS Parent in
writing within such 90-day period that the Board of Directors of GM
Parent has made a GM Board Determination, then GM Parent may not
subsequently make a GM Board Determination and terminate the MSA or
any Service Agreement on the basis thereof unless EDS Parent or the
Bidder and Person acquiring control of EDS (each, an "Information
Provider") failed to provide GM Parent with all material information
required pursuant to sub-Sections 1(d) or 1(e) hereof. The failure on
the part of any Information Provider to provide, or cause to be
provided, to GM Parent any information required pursuant to sub-
Sections 1(d) or 1(e) hereof shall not itself constitute a sufficient
basis for the making of a GM Board Determination unless specific
F-6
<PAGE>
information that is material to a GM Board Determination is identified
and requested by GM Parent in writing and such information is not
provided to GM Parent within 30 days after receipt by the applicable
Information Provider of a request therefor. GM Parent shall keep
confidential the fact that EDS has submitted to it any Advance
Determination Request, as well as all information provided to it by
any Information Provider pursuant to sub-Sections 1(d) or 1(e) hereof.
(g) If the MSA or any Service Agreement is terminated in accordance with
sub-Section 1(a) hereof, GM will pay to EDS all amounts owed to EDS
for transition services [Confidential information has been omitted.]
In addition, if the MSA or any Service Agreement is terminated as the
result of a GM Board Determination made pursuant to sub-Section
1(a)(2) or 1(a)(3) hereof, GM will also pay to EDS (without
duplication) an amount equal to the product of (i) all wind-down
expenses and cancellation charges [Confidential information has been
omitted.] multiplied by (ii) a percentage equal to:
(1) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(2)
hereof.
(2) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(3)
hereof prior to the fifth anniversary of the Effective Date.
(3) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(3)
hereof on or after the fifth, but prior to the sixth, anniversary
of the Effective Date.
F-7
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
(4) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(3)
hereof on or after the sixth, but prior to the seventh,
anniversary of the Effective Date.
(5) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(3)
hereof on or after the seventh, but prior to the eighth,
anniversary of the Effective Date.
(6) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(3)
hereof on or after the eighth, but prior to the ninth,
anniversary of the Effective Date.
(7) [Confidential information has been omitted.] if the applicable
GM Board Determination is made pursuant to sub-Section 1(a)(3)
hereof on or after the ninth anniversary of the Effective Date.
[Confidential information has been omitted.]
2. Definitions. In addition to the terms otherwise defined in the MSA, the
following terms shall have the meanings set forth below whenever they are
used in the provisions of this Exhibit F:
(a) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "'beneficially own," any securities: (i) that such Person,
directly or indirectly is the "beneficial owner" of (as determined
pursuant to Rule 13d-3 and Rule 13d-5 of the General Rules and
Regulations under the Exchange Act as in effect on the Effective
Date); provided, however, that a Person shall not be deemed the
beneficial owner of any securities because of such Person's right to
vote such
F-8
Confidential treatment has been requested by EDS for the indicated portions of
this page.
<PAGE>
stock if the agreement or arrangement to vote such securities arises
solely from a revocable proxy or consent given in response to a proxy
or consent solicitation made to ten or more Persons pursuant to, and
in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act; or (ii) that such Person, directly
or indirectly, has the right or obligation to acquire (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 or arrangement 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 any securities tendered pursuant to a tender or
exchange offer made by such Person until such tendered securities are
accepted for purchase or exchange.
(b) "Change of Control" means the occurrence (at any time after the
Effective Date) of any of the following events:
(1) Any Person (other than an Exempt Person) shall file (or be
required to file) a Schedule 13D or 14D-1 under the Exchange Act
disclosing that such Person has become the Beneficial Owner of a
number of shares of Common Stock of EDS Parent which represent
50% or more of the aggregate voting power of the outstanding
shares of Common Stock of EDS Parent; or
(2) Any Person (other than an Exempt Person) (i) shall file (or be
required to file) a Schedule 13D or 14D-1 under the Exchange Act
disclosing that such Person has become the Beneficial Owner of a
number of shares of Common Stock of EDS Parent which represent
30% or more of the aggregate voting power of the outstanding
shares of Common Stock of EDS Parent, or (ii) commences a proxy
solicitation with respect to the election or removal of members
of the Board of Directors of EDS Parent
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at any annual or special meeting of EDS Parent security holders,
which solicitation is subject to Rule 14a-11 of the General Rules
and Regulations of the Exchange Act, and within 24 months after
the date of such acquisition of beneficial ownership of Common
Stock of EDS Parent or the date of such solicitation, as the case
may be, individuals who, as of the date of such acquisition or
solicitation, constituted the Board of Directors of EDS Parent
(the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board of Directors of EDS Parent;
provided, however, that any individual becoming a director
subsequent to such date whose election, or recommendation or
nomination for election by the stockholders of EDS Parent, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Directors (acting separately or as part
of any action taken by the Board of Directors of EDS Parent or
any committee thereof) shall be considered as though such
individual were an Incumbent Director, provided that such
individual was not the nominee of the Person that acquires such
beneficial ownership or commences such solicitation, as the case
may be, or otherwise nominated or elected by or at the direction
of such Person as part of any plan or arrangement regarding a
change of control of EDS Parent; or
(3) There shall be consummated any transaction (or series of related
transactions) and, as a result thereof, a number of shares of
Common Stock of EDS Parent (or any Surviving Company resulting
from such transaction) which represent 50% or more of the
aggregate voting power of the outstanding shares of Common Stock
of EDS Parent (or such Surviving Company) shall be Beneficially
Owned, directly or indirectly, by Persons who did not either (i)
own such securities as Common Stock of EDS Parent immediately
prior to the transaction, or (ii) receive such securities in
respect of the conversion or exchange of Common Stock of EDS
Parent in the transaction.
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(c) "Common Stock" means, as to any company, the shares of common stock or
other securities of such company of any class or series the holders of
which are entitled to vote generally in the election of directors of
such company (excluding any class or series the holders of which would
be entitled so to vote upon the occurrence of any contingency, so long
as such contingency has not occurred).
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(e) "Exempt Person" means EDS Parent, any subsidiary of EDS Parent, any
employee benefit plan of EDS Parent or any subsidiary of EDS Parent,
and any Person organized, appointed or established by EDS Parent or
any such subsidiary for or pursuant to the terms of any such plan.
(f) "GMC" means General Motors Corporation and any functional entity,
subsidiary, department, group or affiliate which is then-currently
being provided MSA Services by EDS pursuant to the MSA or an
applicable Service Agreement thereunder.
(g) "Major Sector Service Agreement" means the primary Service Agreement
between a GM Major Sector and the corresponding EDS Major Sector.
(h) "Person" means any individual, firm, corporation, partnership,
association, trust, unincorporated organization or other entity, and
shall include any "group" within the meanings of Section 13(d)(3) of
the Exchange Act or Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the Effective Date.
(i) "Surviving Company" means the following:
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(1) in the case of a merger, consolidation or business combination,
the Person that survives or results from such transaction; or
(2) in the case of a sale, transfer or conveyance of all or
substantially all of the properties and assets of EDS, the Person
to which such properties and assets are sold, transferred or
conveyed.
Other terms used in this Exhibit F are defined in the context in which they
are used and, unless otherwise specified herein, shall have the meanings
indicated wherever they are used in this Exhibit F.
F-12
<PAGE>
EXHIBIT G
CANCELLATION LOSSES ON THE DISPOSITION OF
CAPITAL ASSETS AND LONG-TERM LEASES
-----------------------------------
<PAGE>
EXHIBIT G
CANCELLATION LOSSES ON THE DISPOSITION OF
CAPITAL ASSETS AND LONG-TERM LEASES
-----------------------------------
The GM Contracting Party's obligation to pay EDS' losses (net unrecoverable
costs) for disposal of capital assets and cancellation of long-term leases
(i.e., leases with terms over one (1) year) entered into by EDS in connection
with the MSA Services, in the event of the GM Contracting Party's cancellation
of MSA Services under Section A9.4 of Exhibit A to the MSA (the GM Contracting
Party's "Contingent Payment Obligation" or "CPO"), will be subject to the
following:
1. Contingent Payment Obligation.
(a) Capital Asset and Lease Termination Costs--General. Where the
applicable Service Agreement utilizes a fixed-price or cost-plus
pricing methodology and the applicable asset is not leased to the GM
Contracting Party as described in sub-Section 1(b) of this Exhibit G,
the CPO for these items will be determined, prior to any additional
reduction pursuant to sub-Sections 3(a) and 3(b) of this Exhibit G, as
follows:
(1) Losses on any capital asset shall be EDS' purchase price for the
capital asset, reduced by (i) the amount that the asset has
depreciated, and (ii) its salvage value at the time of
cancellation.
(2) Losses on any long-term lease shall be the lease cancellation
charges for that lease; provided, however, that the parties shall
use all reasonable efforts to mitigate the amount of such
charges.
The amount a capital asset has depreciated according to sub-Section
1(a)(1) of this Exhibit G will be based upon a depreciation schedule
which reasonably relates to the expected term of the Service Agreement
under which the asset is provided to GM,
G-1
<PAGE>
unless such a depreciation schedule is inconsistent with U.S.
Generally Accepted Accounting Principles in effect as of the effective
date of the applicable Service Agreement ("GAAP"), in which case GAAP
will be used. In the event that the asset has been depreciated in a
manner which does not reasonably relate to the expected term of the
Service Agreement, then, at the time of cancellation, if necessary,
the Contracting Parties may mutually agree upon an equitable
adjustment to the CPO to account for the difference between the
depreciation schedule used and the depreciation schedule suggested by
the foregoing.
In those instances where the GM Contracting Party has made a
substantial advance payment for the use of an asset provided under a
fixed-price or cost-plus pricing methodology, the amount of the
advance payment shall be considered in connection with the
determination of the amount of the CPO in an equitable and fair
manner.
Except as otherwise provided above, the salvage value of capital
assets and the mitigation of lease termination charges referred to
above will include the amounts, if any, recovered by EDS in the sale,
lease, sublease or alternate revenue producing use of the assets. Any
calculation of a cancellation fee under this sub-Section 1(a) will be
done in a manner which is reasonably designed to provide EDS with its
expected "benefit of the bargain" up to the effective date of
cancellation with respect to the asset according to the applicable
Service Agreement.
(b) Assets Provided under Lease to GM. In any case where the applicable
assets under a Service Agreement are provided under a lease (operating
or capital) to the GM Contracting Party, the amount of any
cancellation fee shall be a lump sum equal to the net present value of
the expected amount of the remaining lease payment stream for the
then-current term of the lease, discounted at the ninety-day LIBOR
rate published in The Wall Street Journal on or immediately prior to
the date of cancellation.
G-2
<PAGE>
(c) Alternate Pricing Methodology. Where the Service Agreement provides
for pricing on other than a fixed-price or cost-plus pricing
methodology and pricing is based on use of the assets (in terms of a
fixed charge per unit) which takes into consideration projected usage,
then the parties may agree on additional or alternative determinations
of the CPO that are related to actual usage up to the time of
cancellation.
(d) CPO for Partial Termination. Where a substantial part of the MSA
Services being provided under the Service Agreement is cancelled, the
CPO will be determined on an appropriate pro-rata basis that is agreed
upon by the parties.
2. CPO Verification and Audit. EDS will provide GM with whatever information
is in EDS' possession or that it can obtain from third parties if that
information is reasonably requested by GM to enable it to verify the CPO.
Where the CPO includes costs for capital assets that are partially complete
at termination, and are being billed to EDS on a cost-plus or time and
materials basis, EDS will for itself and GM incorporate into any agreement
for the purchase of such capital assets, a provision substantially in the
form of the following:
"Supplier shall maintain records, including all pertinent ledgers,
payroll data, books, records, correspondence, written instructions,
drawings, receipts, vouchers and other documents, for a period of one
(1) year beyond final payment under this Agreement, which adequately
substantiate the applicability and accuracy of charges for services
and related expenses to EDS ("Records") and shall, upon receipt of
reasonable advance notice from EDS, produce such Records for audit by
EDS or its designee, which shall include General Motors Corporation."
The failure on the part of EDS to negotiate such an audit right on behalf
of itself and GM shall negate any liability on the part of GM for the CPO
on such assets. Also, EDS will
G-3
<PAGE>
permit the GM Central Office at its expense to audit the books and records
of EDS to the extent necessary to allow GM to verify the CPO.
3. Shared Cost Assets.
(a) GM. In those instances where the CPO includes costs for assets that
are used in connection with other Service Agreements, then, unless
otherwise provided in any applicable Service Agreement, after
cancellation EDS will provide the GM Contracting Party with the CPO
and recommend an appropriate apportionment of the CPO among the
applicable GM Contracting Parties. If the GM Contracting Parties
cannot agree upon an apportionment within a reasonable period of time,
then EDS will be paid the CPO in full by the GM Contracting Party that
EDS determines is responsible for all or the largest share of the CPO,
and the proper apportionment will be done internally by GM.
(b) Third Party Customers. In those instances where the CPO includes costs
for assets that are used for third party customers of EDS, such use
shall not in any manner disturb the obligations of either party under
the Service Agreement, except that the CPO shall be reduced to the
extent of such third party use.
4. Transfer of Title or Lease Assumption. On the effective date of
cancellation under Section A9.4 of Exhibit A to the MSA, except (i) in the
case of an operating lease under sub-Section 1(b) of this Exhibit G, (ii)
if EDS does not own the assets, or (iii) if the assets are shared by third
party customers of EDS, GM may elect to purchase the assets by paying EDS
the CPO. If GM does not so elect to purchase the assets, then EDS will use
all reasonable efforts to sell, lease, sublease or otherwise utilize the
assets. In the event EDS is unable, after such reasonable efforts, to sell,
lease, sublease or otherwise utilize the assets, then, except in the case
of an operating lease under sub-Section 1(b) of this Exhibit G, GM will pay
EDS the CPO, and, as consideration for GM's payment of the CPO, EDS shall,
in the event it owns the assets, promptly transfer to GM title to and
possession of the assets, or, in the event EDS
G-4
<PAGE>
leases the assets, EDS shall, to the extent permitted under the applicable
lease, promptly grant to GM all the rights of EDS as lessee of the assets
and, in either case, GM shall pay or reimburse EDS for all sales, use or
other taxes based upon such transfer of title or grant of rights.
G-5
<PAGE>
EXHIBIT 10(C)
1996 ELECTRONIC DATA SYSTEMS CORPORATION
STOCK PURCHASE PLAN
WHEREAS, General Motors Corporation ("GM") established the 1984 Electronic
Data Systems Stock Purchase Plan as a plan for the employees of Electronic Data
Systems Corporation, a Texas corporation (the "Predecessor Company"), and
certain of its subsidiaries to purchase at a discount under the requirements of
Section 423 of the Internal Revenue Code shares of General Motors Corporation
Class E Common Stock; and
WHEREAS, in connection with the merger of the Predecessor Company into
Electronic Data Systems Corporation, a Delaware Corporation ("EDS"), and the
split-off of EDS from GM, the Board of Directors of EDS has determined it in the
best interests of the employees of EDS and its subsidiaries to adopt and
establish the Plan immediately after such split-off without lapse, suspension or
interruption in participation.
NOW, THEREFORE, effective as of the consummation of the split-off of EDS
from GM, EDS hereby adopts and establishes this, the 1996 Electronic Data
Systems Corporation Stock Purchase Plan.
1. Purpose of Plan. The purpose of the Plan is to provide employees of
Electronic Data Systems Corporation, a Delaware corporation ("EDS"), and
its subsidiaries (collectively, the "Company") with a strong incentive for
individual creativity and contribution to ensure the future growth of the
Company by enabling such employees to acquire shares of common stock, $.01
par value per share (the "EDS Stock"), of EDS, in the manner contemplated
by the Plan. Rights to purchase EDS Stock offered pursuant to the Plan are
a matter of separate inducement and not in lieu of any salary or other
compensation for the services of any employee. The Plan is intended to
qualify as an employee stock purchase plan within the meaning of Section
423 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Amount of Stock Subject to the Plan: Payment for Shares. The total number
of shares of EDS Stock that may be issued pursuant to rights of purchase
granted under the Plan shall not exceed 57,500 shares of the authorized EDS
Stock. In the discretion of the Board of Directors of EDS (the "Board of
Directors") or its delegate, such shares may be: (i) treasury shares,
including shares acquired by EDS in open market transactions; or (ii)
authorized but unissued shares. If a right of purchase under the Plan
expires or is terminated unexercised for any reason, the shares as to which
such right so expired or terminated again may be made subject to a right of
purchase under the Plan.
3. Administration. The Compensation and Benefits Committee of the Board of
Directors (the "Committee") shall appoint or engage any person or persons
as an administrator (the "Administrator") of the Plan, who may be, but
shall not be required to be, a member of the Committee. Any person engaged
or delegated to be the Administrator who is not an employee of EDS, shall
be required to be bonded and insured for errors and omissions
<PAGE>
insurance in such amounts and by such carrier as is deemed suitable and
appropriate by the Committee. The Committee and the Administrator shall
administer the Plan all as provided herein. The Committee shall hold
meetings at such times and places as it may determine and may take action
by unanimous written consent or by means of a meeting held by conference
telephone call or similar communications equipment pursuant to which all
persons participating in the meeting can hear each other. The Committee may
request advice or assistance or employ such other persons as it deems
necessary for proper administration of the Plan. Subject to the express
provisions of the Plan and the requirements of applicable law, the
Committee shall have authority, in its discretion, to determine when each
offering hereunder of rights to purchase shares (hereinafter "offering")
shall be made, the duration of each offering, the dates on which the
purchase period for each offering shall begin and end, the total number of
shares subject to each offering, the purchase price of shares subject to
each offering and the exclusion of any classes of employees pursuant to
Section 4(ii). Subject to the express provisions of the Plan, the Committee
has authority (a) to construe offerings, the Plan and the respective rights
to purchase shares, (b) to prescribe, amend and rescind rules and
regulations relating to the Plan and (c) to make all other determinations
necessary or advisable for administering the Plan. The determination of the
Committee with respect to matters referred to in this Section 3 as within
its province shall be conclusive, except that, to the extent required by
law or by the Certificate of Incorporation or By-Laws of EDS, the terms of
any offering shall be subject to ratification by the Board of Directors or
the Committee prior to the effective date of such offering.
4. Eligibility. No right to purchase shares shall be granted hereunder to a
person who is not an employee of EDS or a subsidiary corporation, now
existing or hereafter formed or acquired. As used in the Plan, the terms
"parent corporation" and "subsidiary corporation" shall have the meanings
respectively given to such terms in Sections 424(e) and 424(f) of the Code.
Each offering shall be made to all employees of EDS and to all employees of
any subsidiary corporations as is designated by the Committee to
participate in the Plan, excluding: (i) employees whose customary
employment is 20 hours or less per week or not more than five months in any
calendar year; (ii) in the discretion of the Committee, as specified in the
terms of any offering, the following classes of employees: officers, highly
compensated employees and employees whose principal duties consist of
supervising the work of other employees; (iii) any employee who,
immediately after the grant of a right to purchase stock pursuant to an
offering, owns stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the employee's employer or of any
subsidiary or parent corporation of the employee's employer (in determining
stock ownership of an individual, the rules of Section 424(d) of the Code
shall be applied; shares that the employee may purchase under outstanding
rights of purchase and options shall be treated as stock owned by him; and
the Committee and the Administrator may rely on representations of fact
made to them by the employee and believed by them to be true); and (iv)
directors and officers of EDS.
2
<PAGE>
5. Offerings. The Committee may make grants to all eligible employees of EDS
and to all eligible employees of any subsidiary corporation as is
designated by the Committee to participate in the Plan of rights to
purchase shares under the terms hereinafter set forth. The terms and
conditions of each offering shall state its effective date, shall define
the duration of such offering and the purchase period thereunder, shall
specify the number of shares that may be purchased thereunder, shall
specify the purchase price for such shares and shall specify what class of
employees, if any, are excluded pursuant to Section 4(ii). During the
purchase period specified in the terms of an offering (or during such
portion thereof as an eligible employee may elect to participate), payroll
deductions shall be made from such employee's compensation pursuant to
Sections 6 and 7. Any stated purchase period shall end no later than 27
months from the effective date of any offering hereunder. The measure of an
employee's participation in an offering shall be such employee's total
compensation for the purchase period specified in such offering (or for
such portion thereof as the employee is eligible to participate), subject
to appropriate adjustments that would exclude items such as reimbursement
of moving, travel, trade or business expenses.
6. Participation. An employee eligible on the effective date of an offering or
thereafter during the offering may participate in such offering by
enrolling through the Corporate Administrative System or, if unavailable to
the eligible employee, then by completing a payroll deduction authorization
form and forwarding it to the Administrator at any time prior to the
beginning of the next payroll period in which payroll deductions will be
made. The employee must authorize a regular payroll deduction from the
employee's compensation and must specify the date on which such employee's
deduction and participation in the Plan is to commence, which may not be
retroactive. An employee shall be considered a "Participant" in the Plan as
of the payroll date of the first payroll deduction.
7. Deductions. The Administrator will maintain a payroll deduction account for
each participating employee. With respect to any offering made under the
Plan, an employee may authorize a payroll deduction of any whole percentage
up to a maximum of 10% of the total compensation receives during the
purchase period specified in an offering (or during such portion thereof as
he/she may be eligible or elect to participate).
8. Deduction Changes. At any time prior to the end of the applicable purchase
period, a Participant may change or temporarily discontinue payroll
deductions by filing a new payroll deduction authorization form.
Notwithstanding, no participant shall be entitled to change a payroll
deduction more than twice or to temporarily discontinue a payroll deduction
more than once during any purchase period. In addition, no such change or
discontinuance shall become effective sooner than the next payroll period
after the Participant properly registered a change to the payroll deduction
authorization information then on file with the Administrator.
9. Withdrawal of Funds. A Participant may at any time and for any reason
withdraw the entire cash balance then accumulated in such Participant's
payroll deduction account and thereby withdraw from participating in an
offering. Upon withdrawal of the cash balance in a
3
<PAGE>
payroll deduction account, such Participant shall cease to be eligible to
participate in the offering pursuant to which the withdrawn funds were
withheld. Partial withdrawals shall not be permitted. Any cash balance
withdrawn in accordance with this Section 9 may not be transferred to any
payroll deduction account maintained for the employee pursuant to another
offering, whether under the Plan or under another such plan.
10. Right of Purchase--Option for a Maximum Number of Shares. The right of an
employee to purchase stock pursuant to an offering under the Plan shall be
an "option" (and an offering shall be the "grant" of such option) to
purchase a maximum number of shares determined by dividing: (i) 15% of the
employee's monthly base salary, determined as of the date of the offering
or the commencement of such Participant's eligibility to participate in the
offering, whichever is later, multiplied by the number of months in the
purchase period or the number of months such Participant is eligible to
participate in the offering, whichever is less; by (ii) the fair market
value of a share determined as of the date of the offering in the manner
set forth in Section 12.
11. Maximum Allotment of Rights of Purchase. Any right to purchase shares under
the Plan shall be subject to the limitations of Section 423(b)(8) of the
Code (generally limiting accrual of the right of any employee to purchase
shares under all employee stock purchase plans of EDS and any subsidiary or
parent corporation, qualified under Section 423 of the Code, to an annual
rate of $25,000 in fair market value).
12. Purchase Price. The purchase price for each share under each right of
purchase granted pursuant to an offering shall not be less than the lesser
of: (i) an amount equal to 85% of the fair market value (defined below) of
such share at the time the right of purchase is granted; or (ii) an amount
which under the terms of the option is not less than 85% of the fair market
value of such share at the time the right to purchase is exercised. The
"fair market value" of a share of EDS Stock on any given date shall be the
mean between the high and low sale prices on the New York Stock Exchange
Composite Tape for EDS Stock, as reported by the Dow Jones News/Retrieval
Service of Dow Jones and Company, Inc., on such date or on the date
immediately prior thereto on which such prices for EDS Stock are so
reported or, if not so reported, as reported in a newspaper of national
circulation selected by the Committee or, in case no such sales take place
on such date, the mean of the closing bid and asked prices (regular way) on
the New York Stock Exchange Composite Tape on such date or, if the EDS
Stock is not then listed or admitted to trading on the New York Stock
Exchange, the mean between the high and low sale prices on such date or, in
case no sales take place on such date, the mean of the closing bid and
asked prices (regular way) on the largest principal national securities
exchange on which such stock is then listed or admitted to trading, or if
not listed or admitted to trading on any principal national securities
exchange, then the last reported sales prices for such shares in the over-
the-counter market, as reported on the National Association of Securities
Dealers Automated Quotations System or, if such sale prices shall not be
reported thereon, the mean of the closing bid and asked prices as reported
thereon, or if such prices shall not be reported thereon, as the same shall
be reported by the National Quotation Bureau Incorporated, or, in all other
cases, the mean
4
<PAGE>
of two appraisals of fair market value, each of which shall be furnished by
a New York Stock Exchange member firm selected by the Committee for that
purpose. In the event the funds in the payroll deduction account of a
participating employee are in a currency other than United States dollars
on any investment date (as defined below), for purposes of determining the
maximum whole number of shares that may be purchased pursuant to Section
13, such funds shall be deemed to have been converted into United States
dollars based upon the foreign exchange selling rates, as reported by the
Dow Jones News/Retrieval Service of Dow Jones and Company, Inc., on such
date, or if not so reported on such date, as reported on the next preceding
date on which such rates are reported.
13. Method of Payment. As of the last Friday in each calendar month, except the
last calendar month of a purchase period, and as of the last day of the
purchase period (each of such dates being known as an "investment date"),
the payroll deduction account of each Participant shall be totaled. If on
an investment date, the payroll deduction account of a Participant has at
least Three Hundred and 00/100 Dollars ($300.00) or an amount equal to the
purchase price of ten (10) shares of EDS stock then, on such investment
date such Participant shall purchase without any further action, the
maximum whole number of shares (subject to the limitation provided in
Section 10) possible at the then fair market value of such shares as
determined in accordance with Section 12 together with any fees or charges
associated with such purchase that can be purchased with the funds in such
Participant's payroll deduction account, provided that fractional shares
may not be purchased. The Participant's payroll deduction account shall be
charged for the amount of the purchase and a stock certificate shall be
issued for the benefit of the Participant as soon thereafter as practicable
for the shares so purchased, which certificate may be issued in nominee
name. Participant's payroll deduction account at the end of each purchase
period shall be refunded to such Participant. All funds in payroll
deduction accounts may be used by EDS for its general corporate purposes as
the board of directors of EDS shall determine. However, the last purchase
on the last investment date of a grant year shall be for the maximum whole
number of shares (subject to the limitation provided in Section 10)
possible that can be purchased with the funds available in such
Participant's payroll deduction account, and all cash remaining in such
Participant's payroll deduction account thereafter shall be returned to the
Participant.
14. Issuance of Certificates and Payment of Expenses. Upon request and after
expiration of applicable restrictions, certificates representing shares
purchased under the Plan may be issued in the name of the employee or, if
he/she so indicates on an appropriate form: (i) in such Participant's name
jointly with a member of such Participant's family, with right of
survivorship; (ii) in the name of a fiduciary for the employee (in the
event the employee is under a legal disability to have certificates issued
in such Participant's name); or (iii) in a manner giving effect to the
status of such shares as community property in jurisdictions where
applicable. Upon termination of employment, certificates representing both
restricted and nonrestricted shares purchased under the Plan will be issued
in the name of the employee and forwarded to such Participant's account
address on file with the Plan's transfer agent of record. In the event of a
final non-appealable court-ordered account
5
<PAGE>
distribution, certificates representing both restricted and nonrestricted
shares purchased under the Plan will be issued in the name and to the
address specified in the court documents provided to the office of the
Administrator. EDS shall pay all issue or initial transfer taxes of EDS
with respect to the issuance or initial transfer of shares, as well as all
fees and expenses necessarily incurred by EDS in connection with such
issuance or initial transfer.
15. Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by a right of purchase until
a stock certificate for such shares is issued to the benefit of such
Participant, which stock certificate may be issued in nominee name. No
adjustment will be made for dividends (ordinary or extraordinary, whether
in cash or in other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued,
except as provided in Section 18.
16. Sale of Stock. Shares of stock purchased under the Plan may not be sold or
transferred within two years of the date of purchase unless they are first
offered to EDS (as designated by the Committee) at the lesser of: (i) the
price originally paid for the shares; or (ii) the fair market value (as
determined in accordance with Section 12) per share of EDS Stock on the
date the shares are offered to EDS. EDS must accept or reject this offer at
the office of the Administrator within five business days of receipt of the
offer. Shares issued under the Plan will carry a restrictive legend to this
effect.
17. Rights Not Transferable. Rights to purchase shares under the Plan are not
transferable by a participating employee and may be exercised only by such
Participant during such Participant's lifetime.
18. Adjustment of Shares. If any change is made in the number, class or rights
of shares subject to the Plan or subject to any offering under the Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, issuance of
rights to subscribe or other change in capital structure), appropriate
adjustments shall be made as to the maximum number of shares subject to the
Plan and the number of shares and price per share subject to outstanding
rights of purchase as shall be equitable to prevent dilution or enlargement
of such rights; provided, however, that any such adjustment shall comply
with the rules of Section 424(a) of the Code if the transaction is one
described in said Section 424(a); provided further that in no event shall
any adjustment be made that would render any offering other than an
offering pursuant to an employee stock purchase plan within the meaning of
Section 423 of the Code; and provided further that the issuance by EDS of
up to 120,000,000 shares of the EDS Stock, either pursuant to or outside
the ambit of the Plan, shall not require adjustment pursuant to this
Section.
19. Retirement, Termination and Death. In the event of a Participant's
retirement or termination of employment, the amount in any Participant's
payroll deduction account shall be refunded to such Participant and the
restricted and nonrestricted shares of stock held for such
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<PAGE>
Participant's benefit by the Plan shall be issued to such Participant, and
in the event of such Participant's death, such amount and stock shall be
paid and issued to such Participant's estate.
20. Amendment of the Plan. This Plan may be amended at any time by the
Committee, provided that, without the approval of the stockholders of EDS
entitled to vote thereon, no such amendment shall become effective if it
would: (i) increase the number of shares reserved for rights of purchase
under the Plan; or (ii) modify the requirements as to eligibility for
participation in the Plan.
21. Termination of the Plan. The Plan and all rights of employees hereunder
shall terminate: (i) on the investment date that participating employees
become entitled to purchase a number of shares greater than the number of
shares remain available for purchase under the Plan; or (ii) in the
discretion of the Committee, upon the completion of any purchase period. In
the event that the Plan terminates under circumstances described in (i)
above, shares remaining available for purchase under the Plan as of the
termination date shall be issued to Participants on a pro rata basis. Any
cash balances remaining in Participants' payroll deduction accounts upon
termination of the Plan shall be refunded as soon thereafter as
practicable. The powers of the Committee provided by Section 3 to construe
and administer any right to purchase shares granted prior to the
termination of the Plan shall nevertheless continue after such termination.
22. Listing of Shares and Related Matters. If at any time the Committee shall
determine, based on opinion of counsel, that the listing, registration or
qualification of the shares covered by the Plan upon any national
securities exchange or under any state or Federal law or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the sale or purchase of shares under
the Plan, no shares will be sold, issued or delivered unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to counsel.
23. Third Party Beneficiaries. None of the provisions of the Plan shall be for
the benefit of or enforceable by any creditor of a Participant. A
Participant may not create a lien on any portion of the cash balance
accumulated in such Participant's payroll deduction account or on any
shares covered by a right to purchase before a stock certificate for such
shares is issued for such Participant's benefit.
24. General Provisions. The Plan shall neither impose any obligation on EDS or
on any subsidiary corporation to continue the employment of any Participant
or eligible employee, nor impose any obligation on any Participant to
remain in the employ of EDS or of any subsidiary corporation. For purposes
of the Plan, an employment relationship shall be deemed to exist between an
individual and a corporation if, at the time of the determination, the
individual was an "employee" of such corporation within the meaning of
Section 423(a)(2) of the Code and the regulations and rulings interpreting
such Section. For
7
<PAGE>
purposes of the Plan, the transfer of an employee from employment with EDS
to employment with a subsidiary of EDS, or vice versa, shall not be deemed
a termination of employment of the employee. Subject to the specific terms
of the Plan, all employees granted rights to purchase shares hereunder
shall have the same rights and privileges.
25. Governing Law. Except where jurisdiction is exclusive to the federal courts
or except as governed by federal law, the Plan and rights to purchase
shares that may be granted hereunder shall be governed by and construed and
enforced in accordance with the laws of the State of Texas.
26. Effective Date. The Plan shall be deemed effective upon its approval by the
Board of Directors; provided, however, that no purchase period under the
Plan may begin until a Registration Statement under the Securities Act of
1993, as amended, covering the shares to be issued under the Plan has
become effective.
27. Dividend Reinvestment. Any employee or any employee who, upon separation
from EDS, was eligible for an early or normal retirement benefit from the
EDS Retirement Plan ("Retiree"), and who, pursuant to Sections 6 and 28,
has any shares to his benefit in the Plan for which certificates have not
been issued pursuant to Section 14, may elect to have any and all dividends
issued on such shares reinvested in additional shares at full fair market
value. The Administrator shall establish and communicate all procedures
necessary for employees or Retirees to reinvest dividends, including the
charging of any reasonable fee to participating employees or Retirees for
reinvesting dividends in accordance herewith.
28. Deposit of Certificated Shares. Any employee of EDS who holds EDS Stock
certificates issued in any manner specified in Section 14(i)-(iii)
representing shares of EDS Stock, may deposit the EDS Stock certificates
into the Plan by transferring such shares into nominee name. Any such
transfer of certificated shares shall be made pursuant to procedures
established by the Administrator. Any employee who elects to transfer
shares into nominee name pursuant to this Section is not required to
participate pursuant to Plan Sections 6 and 7, but shall be eligible to
invest dividends earned on such shares transferred pursuant to this Section
in accordance with Section 27.
29. Retirees. Notwithstanding anything to the contrary in Section 14 or
elsewhere in the Plan, Retirees who, by reason of Section 6 acquired shares
pursuant to the Plan, may continue to hold such shares in nominee name and
elect to invest the dividends earned therein in accordance with Section 27
but may not purchase any additional shares pursuant to Sections 6 and 7.
8
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EXHIBIT 10(D)
1996 ELECTRONIC DATA SYSTEMS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
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TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 Establishment................................................................... 1
1.2 Purpose......................................................................... 1
ARTICLE II. DEFINITIONS AND CONSTRUCTION
2.1 Definitions..................................................................... 2
2.2 Qualified Plan References.......................................................11
2.3 Gender or Number................................................................11
2.4 Severability....................................................................11
2.5 Applicable Law..................................................................11
2.6 Contractual Obligations.........................................................11
ARTICLE III. PARTICIPATION
3.1 Participation...................................................................12
3.2 Ineligible Employees............................................................13
ARTICLE IV. TARGETED AGGREGATE PENSION LEVEL
4.1 Form of Benefit.................................................................13
4.2 Targeted Aggregate Pension Level for Executives.................................14
4.3 Targeted Aggregate Pension Level for Executives Reduced At Early Retirement
("Targeted Pension Reduced At Early Retirement")................................16
4.4 Targeted Aggregate Pension Level for Executives At Late Retirement..............16
4.5 EDS SERP Benefits At Normal Retirement..........................................16
4.6 EDS SERP Benefit At Early Retirement............................................17
4.7 EDS SERP Benefit At Late Retirement.............................................17
4.8 Pre-Retirement Survivor SERP Benefit............................................17
4.9 Payment.........................................................................18
4.10 Reduction Suspension or Elimination of Benefits................................18
4.11 Contingent Rights..............................................................19
</TABLE>
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<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C>
ARTICLE V. ADMINISTRATION
5.1 Administration..................................................................19
5.2 Administration Committee........................................................19
5.3 Finality of Determination.......................................................19
5.4 Expenses........................................................................19
ARTICLE VI. MERGER, AMENDMENT, AND TERMINATION
6.1 Merger, Consolidation, or Acquisition...........................................19
6.2 Amendment and Termination.......................................................20
ARTICLE VII. MISCELLANEOUS PROVISIONS
7.1 Funding.........................................................................20
7.2 Tax Withholding.................................................................20
7.3 Other Plans.....................................................................20
7.4 Anti-assignment and Nontransferability..........................................20
</TABLE>
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1996 ELECTRONIC DATA SYSTEMS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Electronic Data Systems Corporation, a Texas corporation
("Predecessor Company"), established the Electronic Data Systems Corporation
Supplemental Executive Retirement Plan effective as of January 1, 1992;
WHEREAS, In connection with the split-off of the Predecessor Company from
General Motors Corporation and the merger of the Predecessor Company with and
into Electronic Data Systems Holding Corporation, a Delaware corporation renamed
Electronic Data Systems Corporation at the time of such merger ("EDS"), EDS has
determined it necessary to adopt and establish the Plan maintained by the
Predecessor Company without any lapse in coverage, suspension of benefits, or
interruption in participation and to make certain amendments to the Plan
required in connection with such split-off; and
NOW, THEREFORE, EDS hereby adopts and establishes this 1996 EDS
Supplemental Executive Retirement Plan as a continuation of the Electronic Data
Systems Corporation Supplemental Executive Retirement Plan effective as of the
effective time of the merger of the Predecessor Company with and into EDS.
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 Establishment. EDS hereby establishes the 1996 Electronic Data Systems
Corporation Supplemental Executive Retirement Plan (the "EDS SERP") as a
continuation of the Electronic Data Systems Corporation Supplemental Executive
Retirement Plan. The EDS SERP is intended to provide contingent Supplemental
Executive Retirement Plan Benefits ("SERP Benefits") in accordance with the
provisions herein for certain Bonus Eligible executive level employees of the
Company whose benefits under the EDS Retirement Plan (the "Qualified Plan") are
limited pursuant to the applicable provisions of the Code and the Treasury
Regulations thereunder (the "Limitations").
1.2 Purpose. This non-qualified EDS Supplemental Executive Retirement Plan
will be subject to amendment or termination at any time. The EDS SERP is
established as a unfunded non-tax-qualified mechanism which, by reason of the
rights reserved herein to issue, revoke, suspend or eliminate SERP Benefits, may
be used to enhance the Company's ability to retain the services of certain
Employees and, subject to the discretion of the Chairman and the EDS
Compensation and Benefits Committee, may be used to discourage any actions by
Employees considered to be inimical or detrimental to the Company. The EDS SERP
is intended to be an unfunded plan for a select group of management or highly
compensated employees as defined in Section 201(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended.
<PAGE>
The EDS SERP has been designed to provide a supplemental executive
retirement plan benefit ("SERP Benefit") for Employees who, on or after January
1, 1992, attain Early Retirement, Normal Retirement or Late Retirement pursuant
to the terms and conditions herein. The Targeted Pension is a single life
pension annuity calculated upon a different formula from the Qualified Plan
formulas and upon the fictions that every Employee has never married, and that
every Employee has elected to receive both the SERP Benefit and the Qualified
Plan benefits in the form of a single life annuity. Because of the formula
differences between the computational methodology used for calculating the
Targeted Pension and the computational methodology used for calculating the
Qualified Plan benefit and the fictions applied thereto, the SERP Benefit will
not completely or necessarily offset the effect of the Limitations on the
Qualified Plan benefit. In addition, to the extent an Employee elects a
Qualified Plan benefit in a form other than the form in which he or she elects
to receive his or her SERP Benefit, additional differences will occur between
the amount of the SERP Benefit and the amount produced by the difference between
the Targeted Pension Benefit and the benefit actually received from the
Qualified Plan. Accordingly, notwithstanding anything to the contrary herein,
the SERP Benefit will not, and is therefore not intended to, completely
supplement the amount of Qualified Plan benefits which would otherwise be
payable to an Employee but for the Limitations. Rather the SERP Benefit shall be
the difference between the Targeted Pension and the Qualified Plan Benefit where
both the Targeted Pension and the Qualified Plan Benefit are computed in the
form of Joint and Fifty Percent (50%) Survivor Annuity benefits that are
actuarially equivalent thereto as provided in Article IV hereof.
Unless specifically indicated otherwise, any references to pension benefits
based on the pension benefit computation formulas of the Qualified Plan shall
refer to those Qualified Plan formulas which define the Qualified Plan benefits
which could be payable commencing at the time of the Employee's Early
Retirement, Normal Retirement or Late Retirement, as the case may be, under the
EDS SERP, and from time to time thereafter.
ARTICLE II. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever the following terms are used in this EDS
Supplemental Executive Retirement Plan, they shall have the meanings set forth
below unless the context otherwise requires, and when the defined meaning is
intended herein, the first letter of each word comprising the term will be
capitalized.
(a) Actuarially Equivalent means a benefit of equivalent value to the
Targeted Pension, Targeted Pension Reduced At Early Retirement and Targeted
Pension At Late Retirement, determined on the basis of the following
interest and mortality assumptions. The mortality and interest rate
assumptions which shall be used in the calculation of Actuarially
Equivalent benefits under the EDS SERP shall be (i) a unisex mortality
table derived from the 1971 Group Annuity Mortality Table assuming a group
that is eighty percent (80%) male and twenty percent (20%) female; and,
(ii) the applicable interest rate used by the Pension Benefit Guaranty
Corporation ("PBGC") as of the first day of the Plan
2
<PAGE>
Year preceding the determination date, taking into account the ages of both
the Employee and his or her Eligible Spouse on the Employee's Retirement
Date.
(b) Administration Committee means the committee appointed by the Plan
Administrator and empowered with those powers and authorized to perform
those duties set forth herein.
(c) Chairman shall mean the Chairman of the Board of Directors of EDS.
(d) Code means the U.S. Internal Revenue Code of 1986, as amended.
(e) Company means Electronic Data Systems Corporation and such other
employers as provided for in the Retirement Plan or as otherwise authorized
or excluded by the EDS Compensation and Benefits Committee.
(f) Covered Compensation means the average of the Social Security
Taxable Wage Bases for the thirty-five (35) calendar years ending with the
calendar year in which the Employee attains Social Security Retirement Age.
In determining an Employee's Covered Compensation for any Plan Year, it is
assumed that the Social Security Taxable Wage Base in effect at the
beginning of the Plan Year will remain the same for all future years.
(i) An Employee's Covered Compensation for a Plan Year beginning
before the thirty-five (35) year period described in this subsection
is the Social Security Taxable Wage Base in effect as of the beginning
of the Plan Year. An Employee's Covered Compensation for a Plan Year
ending after the thirty-five (35) year period described in this
subsection is the Covered Compensation for the Plan Year in which the
Employee attained Social Security Retirement Age.
(ii) An Employee's Covered Compensation shall be automatically
adjusted each Plan Year. The Plan Administrator may rely upon Table II
of Attachment I of IRS Notice 89-70 and subsequent applicable IRS
publications in determining the Covered Compensation of an Employee.
(iii) For purposes of determining the Targeted Pension, the
Targeted Pension Reduced At Early Retirement and the Targeted Pension
At Late Retirement as determined in accordance with Article IV of this
EDS SERP, Covered Compensation is frozen at the date of the Employee's
actual retirement.
(g) Earliest Potential Retirement Age means, for any Employee, such
Employee's age when he or she has at least attained age fifty-five and
completed at least five (5) Years of Credited Benefit Service and when the
sum of such Employee's age plus his or her Years of Credited Service is
equal to or greater than seventy (70) years.
3
<PAGE>
(h) Early Retirement shall mean retirement by an Employee who
satisfies the SERP Benefits eligibility requirements of Article III and
retires on the Early Retirement Date as consented to in writing by the
Chairman.
(i) Early Retirement Date shall be a date which is the first day
of a month, on or after the Employee has attained his or her Earliest
Potential Retirement Age, but before the Employee has reached his or her
Normal Retirement Age. If an Employee, who has received the Company's
consent to his or her request to retire prior to Normal Retirement, were
then to decide to rescind his or her election to retire early on such Early
Retirement Date, then any Company consent to the Employee's Early
Retirement under the EDS SERP as may have given by the Chairman, shall
immediately, automatically, and without notice, be deemed to have been
withdrawn and cancelled. In the event that an Employee shall have so
rescinded his or her Early Retirement in accordance herewith, and later
decides that he or she wishes to retire early under the provisions of the
EDS SERP, he or she must re-apply for the Chairman's written consent to his
or her Early Retirement on a re-selected Early Retirement Date.
Before a date may be treated as an Early Retirement Date for purposes
of the EDS SERP, such date shall have been agreed to by the Employee and
consented to in writing, by the Chairman on behalf of the Company, as the
Employee's Early Retirement Date, provided, however, that the Chairman may
not approve his own Early Retirement Date. Accordingly, if the Chairman
wishes to retire early, then only the EDS Compensation and Benefits
Committee shall have authority to give its written consent to the
Chairman's Early Retirement Date on behalf of the Company.
Nothing contained in the EDS SERP is to be construed as in any way
obligating the Chairman or the EDS Compensation and Benefits Committee or
the Company to giving consent to an Employee's request to retire early with
an entitlement to a SERP Benefit from the EDS Supplemental Executive
Retirement Plan. The Company reserves to the Chairman and to the EDS
Compensation and Benefits Committee the right to deny any Employee requests
to approve an Early Retirement Date for any Employee including, but not
limited to, those whose continued services could be relevant to the
continued success of the Company.
(j) EDS Compensation and Benefits Committee means the
Compensation and Benefits Committee which is a committee of the Board of
Directors of EDS and duly appointed to serve in that capacity.
(k) Effective Date shall be January 1, 1992.
(l) Eligible Spouse. There are only two situations in which a spouse
may be eligible to receive benefits under the EDS SERP. Accordingly, the
term, Eligible Spouse, shall only have application in those two
circumstances.
4
<PAGE>
Case I - Eligible Spouse of a SERP Retiree. The first case
involves Participants who have retired under the EDS SERP and who are
receiving either a Joint and Fifty Percent (50%) Survivor Annuity SERP
Benefit Reduced At Early Retirement, a Joint and Fifty Percent (50%)
Survivor Annuity SERP Benefit At Normal Retirement, or a Joint and
Fifty Percent (50%) Survivor Annuity SERP Benefit At Late Retirement.
In this case the term, Eligible Spouse, means the spouse to whom the
Participant had been married (as documented by a valid marriage
license) for a period of at least the twelve (12) consecutive months
ending on the date of the Participant's retirement under the EDS SERP.
Case II - Eligible Spouse of an Employee Who Dies in Service. The
second case involves an Employee who has met the conditions of (i) or
(ii), and the conditions of (iii) and (iv):
(i) shall have attained his or her Earliest Potential
Retirement Age before his or her death, or
(ii) has received the consents required herein to
continue employment beyond his or her Normal Retirement Date
until a Late Retirement Date, and
(iii) shall have died before having retired under the EDS
SERP, and
(iv) at the time of his or her death, shall have satisfied
all of the conditions as a Participant eligible for receipt of
SERP Benefits hereunder, provided however, that if the Employee
shall have died needing the Chairman's consent to his or her Early
or Late Retirement under the SERP in order to satisfy all of the
conditions precedent to commencement of his or her receipt of SERP
benefits beginning on the first of the month on or next following
his or her death such Company consent shall be deemed to have been
given by the Chairman, but all other conditions precedent to the
Employee's receipt of SERP Benefits must have been satisfied.
In Case II involving the death of an Employee in the above
circumstances, the term, Eligible Spouse, means the spouse to whom the
Employee had been married (as documented by a valid marriage license)
for a period of at least the twelve (12) consecutive months ending on
the date of the Employee's death.
A spouse will not be deemed to be an Eligible Spouse in any case where
an Employee died in service before having reached his or her Earliest
Potential Retirement Age or after an Employee had given up the right to
receive a SERP Benefit by continuing employment beyond (A) his or her
Normal Retirement Date without having received the written consent of the
Chairman to a SERP Benefit at Late Retirement; or, (B) his or her
5
<PAGE>
Late Retirement Date without having received the written consent of the
Chairman to a SERP Benefit at a Late Retirement Date determined in
accordance with Section 2.1(w).
(m) Employee means any executive level employee who is a participant
in the EDS Executive Bonus Plan ("Bonus Eligible"), as designated by the
EDS Compensation and Benefits Committee, at the time of his or her
retirement under the EDS SERP; and, who, within the ten Plan Years
immediately prior to such retirement, also had been the recipient of at
least one EDS Executive Bonus Plan bonus award that was approved either, as
an individual amount, or as a part of an aggregate amount, by the EDS
Compensation and Benefits Committee in respect to one of such Plan Years.
(n) Final Average FICA Compensation means the average of the
Employee's annual earnings, as reported for purposes of FICA, from the
Company for the three (3) consecutive complete calendar year period
coincident with or immediately preceding the year the Employee retires
hereunder.
If an Employee's entire period of employment with the Company is
less than three (3) consecutive calendar years, the Employee's Final
Average FICA Compensation shall be determined by dividing the total
earnings, as reported for purposes of FICA, received by the Employee from
the Company by the Employee's entire period of employment (including
fractional years).
In determining an Employee's Final Average FICA Compensation
within this subsection, annual earnings in any year in excess of the Social
Security Taxable Wage Base in effect at the beginning of such year shall
not be taken into account.
The foregoing notwithstanding, no Employee shall be eligible to
be a Participant in the EDS SERP unless his or her Years of Credited
Service with the Company is greater than or equal to five (5) years.
(o) Final Average Pay means the average of the Employee's Pensionable
Pay during the highest consecutive five (5) Plan Years out of the ten (10)
Plan Years immediately preceding the Employee's retirement under the EDS
SERP.
(p) Integration Level means the lesser of an Employee's Final Average
FICA Compensation or Covered Compensation determined as of the date the
Employee retires hereunder but in no case greater than the Social Security
Taxable Wage Base in effect on the first day of the Plan Year within which
the Employee retires hereunder.
(q) Joint and Fifty Percent (50%) Survivor Annuity shall mean a
monthly benefit for the life of the Participant and at the Participant's
death, if the Participant's death precedes the death of the Participant's
Eligible Spouse, a monthly benefit of fifty percent (50%) of the monthly
amount being paid during Participant's life to the Participant's Eligible
Spouse until such Eligible Spouse's death.
6
<PAGE>
(r) Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At
Late Retirement is defined to be equal to the difference between (i) the
Joint and Fifty Percent (50%) Survivor Annuity that is Actuarially
Equivalent to the Targeted Pension At Late Retirement and (ii) the
Qualified Plan Benefit which could be payable at Late Retirement in the
actuarially equivalent benefit form of a Joint and Fifty Percent (50%)
Survivor Annuity benefit that could be paid to the Participant and his or
her spouse under the provisions of the Qualified Plan, and which may from
time to time change as a result of the operation of the Limitations in the
Qualified Plan.
(s) Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At
Normal Retirement is defined to be equal to the difference between (i) the
joint and fifty percent (50%) survivor annuity that is Actuarially
Equivalent to the Targeted Pension and (ii) the Qualified Plan Benefit
which could be payable at Normal Retirement in the actuarially equivalent
benefit form of a Joint and Fifty Percent (50%) Survivor Annuity benefit
that could be paid to the Participant and his or her spouse under the
provisions of the Qualified Plan, and which may from time to time change as
a result of the operation of the Limitations in the Qualified Plan.
(t) Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit
Reduced At Early Retirement is defined to be equal to the difference
between (i) the Joint and Fifty Percent (50%) Survivor Annuity that is
Actuarially Equivalent to the Targeted Pension Reduced At Early Retirement
and (ii) the Qualified Plan Benefit which could be payable at Early
Retirement in the actuarially equivalent benefit form of a Joint and Fifty
Percent (50%) Survivor Annuity benefit that could be paid to the
Participant and his or her spouse under the provisions of the Qualified
Plan, and which may from time to time change as a result of the operation
of the Limitations in the Qualified Plan.
(u) Late Retirement means retirement by an Employee who has at least
five (5) Years of Credited Benefit Service and satisfies the SERP
eligibility requirements of Article III and retires on the Employee's Late
Retirement Date, as consented to in writing by the Chairman.
(v) Late Retirement Date, for purposes of paying a SERP Benefit, means
a specified date occurring on the first day of a month after the Employee's
Normal Retirement Date to which the Chairman has consented. Before a date
may be treated as a Late Retirement Date for purposes of the EDS SERP, such
date shall have been agreed to by the Employee and consented to in writing,
by the Chairman on behalf of the Company, as the Employee's Late Retirement
Date. However, once a Late Retirement Date is determined in accordance
with the requirements herein, the Late Retirement Date may be an earlier or
later date requested by the Employee and consented to by the Chairman, or
otherwise specified by the Chairman, which is the first day of any month
prior to or after a previously specified Late Retirement Date and after the
Normal Retirement Date. In no event may the Chairman approve his own Late
Retirement Date. Accordingly, if the Chairman wishes to
7
<PAGE>
retire late, then only the EDS Compensation and Benefits Committee shall
have authority to give its written consent to the Chairman's Late
Retirement Date on behalf of the Company.
Nothing contained in the EDS SERP is to be construed as in any
way obligating the Chairman or the EDS Compensation and Benefits Committee
or the Company to giving consent to an Employee's request to retire late
with a benefit from the EDS SERP. The Company reserves to the Chairman and
to the EDS Compensation and Benefits Committee the right to deny any
requests to approve a Late Retirement Date for any Employee.
Notwithstanding anything to the contrary herein, this EDS
Supplemental Executive Retirement Plan is only to be construed as requiring
the compulsory retirement of certain Employees, who (i) have attained
sixty-five (65) years of age and who (ii) for the two-year period
immediately before retirement are employed in a bona fide executive or high
policymaking position, on either their respective Normal Retirement Date or
Late Retirement Date (if a Late Retirement Date has been established for
such Employee) as a precondition to the Employee's maintenance of
eligibility for receipt of SERP Benefits on retirement under this EDS SERP
provided each such Employee is entitled to an immediate nonforfeitable
annual retirement benefit from a pension, profit-sharing, savings or
deferred compensation plan or any combination of such plans, as may be
provided by EDS and all other members of the controlled group of which
Electronic Data Systems Corporation is a part, which equals in the
aggregate, at least $44,000 or such other amount as is provided by statute
at the time any such Employee reaches his or her respective Normal
Retirement Date or Late Retirement Date, if a Late Retirement Date has been
established for the Employee.
(w) Normal Retirement shall mean retirement by an Employee who
satisfies the SERP Benefit eligibility requirements of Article III and
retires on the Employee's Normal Retirement Date.
(x) Normal Retirement Age is the age of the Employee on the date on
which the following three conditions are first all satisfied: (i) that the
Employee shall have reached his or her sixty-fifth (65th) birthday and (ii)
that the sum of the Employee's age plus the Employee's Years of Credited
Service shall be equal to or greater than seventy (70) years; and (iii)
that such Employee shall have at least five (5) Years of Credited Benefit
Service.
(y) Normal Retirement Date shall be a date which is the first day of
the month that falls on or immediately after the date on which the Employee
shall have attained his or her Normal Retirement Age.
Notwithstanding anything to the contrary herein, this EDS
Supplemental Executive Retirement Plan is ONLY to be construed as requiring
the compulsory retirement of certain Employees, who (i) have attained
sixty-five (65) years of age and who (ii) for the two-year period
immediately before retirement are employed in a bona fide executive or high
policymaking position, on either their respective Normal Retirement Date or
Late
8
<PAGE>
Retirement Date (if a Late Retirement Date has been established for
such Employee) as a precondition to the Employee's maintenance of
eligibility for receipt of SERP Benefits on retirement under this EDS SERP
provided each such Employee is entitled to an immediate nonforfeitable
annual retirement benefit from a pension, profit-sharing, savings or
deferred compensation plan or any combination of such plans, as may be
provided by EDS and all other members of the controlled group of which
Electronic Data Systems Corporation is a part, which equals in the
aggregate, at least $44,000 or such other amount as is provided by statute
at the time any such Employee reaches his or her respective Normal
Retirement Date or Late Retirement Date, if a Late Retirement Date has been
established for the Employee.
(z) Participant means an Employee who has retired under the EDS SERP
and is eligible to participate pursuant to Section 3.1 hereof and is not
ineligible to participate pursuant to Section 3.2.
(aa) Pensionable Pay for any given Plan Year, Pensionable Pay is an
amount equal to the sum of both the base salary paid in the Plan Year and
the annual Executive Bonus Plan bonus that is awarded in respect of that
Plan Year under the auspices of the EDS Compensation and Benefits Committee
to certain Employees whose annual Executive Bonus Plan bonus awards are
approved, either in individual amount or in aggregate amount by the EDS
Compensation and Benefits Committee. Pensionable Pay shall not include any
amounts paid from the EDS Stock Incentive Plan.
(ab) Plan Administrator means EDS or such other person or entity as
duly appointed by the EDS Compensation and Benefits Committee to act in
such role.
(ac) Plan Year means the 12-consecutive calendar month period ending
December 31 of each year.
(ad) Qualified Plan means the EDS Retirement Plan as adopted by the
Company and amended from time to time.
(ae) Qualified Plan Benefit shall mean the hypothetical single life
annuity benefit that would be payable to the Participant during a twelve
(12) consecutive month period from the Qualified Plan, assuming the
Participant was never married and has no court order affecting his or her
benefit, as further discussed below.
For purposes of the EDS SERP, any reductions in the benefits payable
from the Qualified Plan because the Participant may have actually elected
to receive his or her benefit in a different form or because the benefit
may be reduced on account of amounts which may be payable or are being paid
to an alternate payee pursuant to Code Section 414(p), shall be ignored
when computing the SERP Benefit, and shall not effect the amount of a
Participant's Qualified Plan Benefit. Under no circumstances shall the
payment of any benefit to an alternate payee pursuant to a qualified
domestic relations order ("QDRO") work to increase or decrease any SERP
Benefit to an amount other than that
9
<PAGE>
which would be payable hereunder if there were not a benefit payable to
such alternate payee. Subject to the foregoing, the Qualified Plan Benefit
is to be calculated pursuant to the pension benefit computation formulas of
the Qualified Plan, as such formulas are in effect either (a) at the time
of the Participant's retirement under the EDS Supplemental Executive
Retirement Plan; or, (b) at the Participant's death, in the event of the
Employee's death before his or her retirement under the EDS SERP, provided
such Participant had attained his or her Earliest Potential Retirement Age
on or before his or her death, and as they may be in effect from time to
time thereafter to the extent they would be determinative of the Qualified
Plan benefit that could be payable from time to time to the Participant or
Eligible Spouse.
(af) Retirement Date means either the Early Retirement Date, Normal
Retirement Date or the Late Retirement Date as the case may be.
(ag) Social Security Retirement Age means age sixty-five (65) for
Employees born before 1938, age sixty-six (66) for Employees born after
1937 and prior to 1955, and age sixty-seven (67) for Employees born after
1954.
(ah) Social Security Taxable Wage Base means the contribution and
benefit base in effect under Section 230 of the Social Security Act as of
the first day in each Plan Year.
(ai) Targeted Pension, sometimes hereinafter called Targeted Pension
At Normal Retirement, is composed of the sum of the single life pension
annuity benefits, as calculated in accordance with Section 4.2, that could
be payable over a twelve (12) consecutive month period, from both the
Qualified Plan and the EDS SERP, to an Employee who retires on his or her
Normal Retirement Date under the assumptions that the Employee was never
married, has no outstanding QDROs affecting his or her Qualified Plan
benefits, and elects to receive his or her Qualified Plan benefits as a
single life annuity.
(aj) Targeted Pension Reduced At Early Retirement is composed of the
sum of the single life pension annuity benefits, as calculated in
accordance with Section 4.3, that could be payable over a twelve (12)
consecutive month period, from both the Qualified Plan and the EDS SERP, to
an Employee who retires on his or her Early Retirement Date with Company
consent under the assumptions that the Employee was never married, has no
outstanding QDROs affecting his or her Qualified Plan benefits, and elects
to receive his or her Qualified Plan benefits as a single life annuity.
(ak) Targeted Pension At Late Retirement is composed of the sum of the
single life pension annuity benefits, as calculated in accordance with
Section 4.4, that could be payable over a twelve (12) consecutive month
period, from both the Qualified Plan and the EDS SERP to an Employee who
retires on his or her Late Retirement Date with Company consent under the
assumptions that the Employee was never married, has no outstanding QDROs
affecting his or her Qualified Plan benefits, and elects to receive his or
her Qualified Plan benefits as a single life annuity.
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(al) Years of Credited Benefit Service shall mean the number of Years
of Credited Benefit Service (but in no event more than a maximum of thirty
(30) years of the Years of Credited Benefit Service) credited to the
Employee pursuant to the provisions of the Qualified Plan as actually in
effect on January 1, 1992.
(am) Years of Credited Service means the number of "years of service"
credited to an Employee for purposes of determining such Employee's
eligibility for early or normal retirement pursuant to the provisions of
the Qualified Plan as actually in effect on January 1, 1992, and reduced by
one year for each year during which an Employee did not accrue a "year of
service" under the Qualified Plan for reason of unemployment with the
Company, long-term disability, an unpaid leave of absence, or any other
inactive status.
2.2 Qualified Plan References. Any references herein to the Qualified
Plan shall refer to the provisions of the EDS Retirement Plan as actually in
effect as of January 1, 1992, except all references herein to the calculation or
determination of Qualified Plan Benefits, and the definition of single life
annuity and joint and fifty percent (50%) survivor annuity which could be
payable therefrom, shall refer to the controlling provisions of the Qualified
Plan as in effect at the time of the Participant's Early Retirement, Normal
Retirement or Late Retirement as applicable, and as they may be in effect from
time to time thereafter to the extent they would be determinative of the
Qualified Plan benefit that could be payable from time to time to the
Participants or Eligible Spouse. It is not intended that any Qualified Plan
benefit that could be payable is to be calculated or determined in any method or
manner other than as set forth in the controlling provisions of the Qualified
Plan.
2.3 Gender or Number. Except when otherwise indicated by the context, any
reference to the masculine gender shall also include the feminine gender, or
vice versa, and the definition of any term is the singular shall also include
the plural, or vice versa.
2.4 Severability. In the event that any provision of the EDS SERP shall
be held invalid or illegal for any reason, any illegality or invalidity shall
not affect the remaining parts of the EDS SERP, but the EDS SERP shall be
construed and enforced as if the illegal or invalid provision had never been
inserted. The EDS Compensation and Benefits Committee shall have the right and
opportunity to correct and remedy such questions of illegality or invalidity by
amendment as provided herein.
2.5 Applicable Law. To the extent not controlled by the laws of the
United States of America, this EDS Supplemental Executive Retirement Plan shall
be governed and construed in accordance with the laws of the State of Texas.
2.6 Contractual Obligations. The EDS SERP is not an employment contract.
It does not give to any person any rights to continued employment with the
Company or to continued eligibility to participate in the EDS Executive Bonus
Plan. The EDS SERP does not give any person any rights to gain or to maintain
eligibility to participate in the EDS SERP at the Normal
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Retirement Date or any other date. All Employees remain subject at all times to
change of responsibility level, including, but not limited to, loss of Bonus
Eligibility, change of job, change of salary, transfer, discipline, layoff,
discharge and any other change of employment status without regard for the
impact that any change in employment status might have upon an Employee's
eligibility to be a Participant in the EDS SERP.
ARTICLE III. PARTICIPATION
3.1 Participation. At any time after the Effective Date, the following
requirements must all be simultaneously satisfied by any Employee in the month
prior to commencement of an EDS SERP Benefit:
(a) be a participant in the EDS Executive Bonus Plan; and
(b) be in the active employment of the Company; and
(c) be a participant in the EDS Retirement Plan who has met the
eligibility requirements for receipt of benefits from the EDS Retirement
Plan that will commence on his or her Retirement Date under the EDS SERP;
and
(d) have completed at least five (5) Years of Credited Benefit
Service; and
(e) have elected to retire from the employment of the Company no later
than the Employee's Normal Retirement Date, or if consented to by the
Chairman, then no later than the Late Retirement Date, or have foregone the
EDS SERP benefits which are available only to those who do, unless such
requirement to have retired by such date has been waived in writing and a
Late Retirement Date established, in respect of such Employee by the
Chairman as required herein; or
(f) have attained Earliest Potential Retirement Age, on or before the
Early Retirement Date for the EDS SERP that has been consented to in
writing, on an apriori basis, by the Chairman as the Employee's Retirement
Date; provided, however, that in the event the Employee were to die prior
to his or her retirement under the terms of the EDS SERP and died leaving
an Eligible Spouse, then if such Employee had attained the Earliest
Potential Retirement Age on or before the date of the Employee's death,
then the Chairman's written consent to the Employee's retirement under the
terms of the EDS SERP on the first day of the month on or immediately
following the date of the Employee's death shall not be withheld assuming
the Employee would otherwise have satisfied all the qualifications for
commencement of a SERP benefit.
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3.2 Ineligible Employees.
(a) No person who has retired from the Company prior January 1, 1992,
the date that the EDS SERP became effective, shall be eligible to be a
Participant in the EDS SERP and receive an EDS SERP Benefit.
No person shall be made retroactively eligible to receive SERP
Benefits, except any Employees who become eligible on or between the
Effective Date and the date of adoption of the EDS SERP.
(b) No person shall be deemed eligible to be a Participant in the EDS
SERP unless he or she shall have been actively employed as an Employee of
the Company until at least the month prior to the commencement of his EDS
SERP Benefit.
(c) No EDS SERP Benefit shall vest. Accordingly, no EDS SERP Benefit
shall be available to any Employee as a deferred vested benefit, nor may
any Employee or former Employee grow into eligibility for an EDS SERP
Benefit while a retiree under the Qualified Plan nor while on layoff nor
while on any other type of inactive status.
(d) In addition to the rights reserved to the EDS Compensation and
Benefits Committee pursuant to Section 4.10, notwithstanding the fact that
an Employee may have satisfied the requirements for participation hereof
regarding participation in the EDS SERP, such Employee or his or her
Eligible Spouse may nevertheless be deemed to be ineligible to participate
or to continue to participate in the EDS SERP and denied benefits hereunder
if, upon consideration of the facts and circumstances and any advice or
recommendation of the Company, the EDS Compensation and Benefits Committee
finds that such Employee has
(i) violated any Company policies, or
(ii) has directly or indirectly competed against the Company
(where indirect competition could include, but not be
limited to, the Employee's having worked for or with others
that compete against the Company or do work that the Company
may otherwise have had the opportunity to compete for), or
(iii) committed a crime or other offense, or
(iv) acted in a way considered adverse to the Company, or
(v) has taken any action, or has omitted to act in such a way,
as is considered contrary to the Company's interests.
ARTICLE IV. TARGETED AGGREGATE PENSION LEVEL
FOR EXECUTIVES, SERP BENEFIT AND PAYMENT
4.1 Form of Benefit. The EDS SERP has been created to provide certain
Employees with a level of single life pension annuity benefits that would be
equal to a Targeted Aggregate
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Pension Level for Executives ("Targeted Pension"). The Targeted Pension is to be
calculated in accordance with Section 4.2 hereof, on the assumption that the
Employee retires on his or her Normal Retirement Date with a single life
annuity.
On an exception basis, the Chairman may grant the Company's consent for an
Employee who has reached his or her Earliest Potential Retirement Date to retire
prior to the Normal Retirement Date with eligibility to receive a Targeted
Aggregate Pension Level for Executives Reduced At Early Retirement ("Targeted
Pension Reduced At Early Retirement"). The Targeted Pension Reduced At Early
Retirement is to be calculated in accordance with Section 4.3 hereof. Like the
Targeted Pension, the Targeted Pension Reduced At Early Retirement is also a
single life pension annuity benefit but it is a reduced form of the Targeted
Pension since it is payable before the Normal Retirement Date as a single life
annuity.
On an exception basis, the Chairman may grant the Company's consent for an
Employee who is about to reach Normal Retirement Age to continue working for the
Company past his or her Normal Retirement Date until a Late Retirement Date
specified by the Chairman without the Employee automatically foregoing
eligibility for EDS SERP Benefits hereunder. In such event, the Employee
retiring on his or her Late Retirement Date may receive a single life pension
annuity benefit that would be equal a Targeted Aggregate Pension Level for
Executives At Late Retirement calculated in accordance with Section 4.4 hereof,
on the assumption that the Employee retires on his or her Late Retirement Date
with a single life annuity.
If the Employee has an Eligible Spouse then, subject to Section 4.9, the
Employee may elect payment in the form of a Joint and Fifty Percent (50%)
Survivor Annuity SERP Benefit At Normal Retirement, Joint and Fifty Percent
(50%) Survivor Annuity SERP Benefit At Late Retirement or Joint and Fifty
Percent (50%) Survivor Annuity SERP Benefit Reduced At Early Retirement.
4.2 Targeted Aggregate Pension Level for Executives at Normal Retirement,
or Targeted Pension, is the total annualized EDS pension benefit that would be
created by the addition of (i) a non-qualified SERP Benefit to (ii) the
Employee's Qualified Plan Benefit that could be payable at Normal Retirement.
Targeted Aggregate Pension Level for Executives
- -----------------------------------------------
The Targeted Pension which shall be payable commencing at Normal Retirement
Date in a single life annuity form shall be equal to (1) less (2) where (1) and
(2) are:
(1) 1.67% of the Employee's Final Average Pay multiplied by the
Employee's Credited Benefit Service (not to exceed thirty (30)).
(2) Twenty-two and five-tenths percent (22.5%) of the Employee's Final
Average Pay not in excess of the Employee's Integration Level. If the
Employee's Social Security Retirement Age is sixty-six (66), the twenty-two
and five-tenths percent (22.5%) is
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reduced to twenty-one percent (21%). If the Employee's Social Security
Retirement Age is sixty-seven (67), the twenty-two and five-tenths percent
(22.5%) is reduced to nineteen and five-tenths percent (19.5%). All
multiplied by an amount equal to the Employee's Credited Benefit Service
(not to exceed thirty (30)) divided by thirty (30).
The amount of the Targeted Pension, as calculated pursuant to the above formula,
shall in all events be subject to the following limitations:
(a) The amount of the Targeted Pension, as determined by the above
formula, shall be capped or limited, if and to the extent necessary, so
that on an annualized basis, the Targeted Pension shall not exceed an
amount equal to the highest annual base salary the Participant received in
any Plan Year as an Employee of the Company during the ten (10) Plan Year
period which immediately precedes the Participant's retirement under the
EDS SERP; and
(b) The Years of Credited Benefit Service, which are used in the above
formula to calculate the Targeted Pension before the application of the
aforementioned cap on the size of the Targeted Pension, shall in no event
exceed 30 years.
(c) The amount of any SERP Benefit which may be payable hereunder,
shall be limited, if and as necessary, so that the sum of (i) all
supplemental retirement plan benefits (including, but not limited to any
SERP Benefit hereunder) and (ii) all benefits from a qualified defined
benefit plan, together with any non-qualified excess plan benefits as are
based upon a qualified plan's defined benefit formulas, that are payable to
the Participant (in respect of service to all members of the controlled
group) shall not exceed the Targeted Pension that would be payable under
the EDS SERP under the assumption that all of the Participant's pensionable
service to all members of the controlled group had been rendered, instead,
to EDS alone (the "SERP Limitation Determination"). In making such SERP
Limitation Determination, if any of such defined benefits, as are payable
to the Participant by other members of the controlled group, are being paid
in any form other than the same form as the Targeted Pension (i.e., in
other than either a single pension annuity or a Joint and Fifty Percent
(50%) Survivor Annuity) whichever has been used for calculating the EDS
Serp Benefit payable hereunder, such defined benefits as are in payment
from time to time by other members of the controlled group in different
form shall be restated as an annuity payable in the same Actuarially
Equivalent form as would be assumed payable under this EDS SERP before the
above SERP Limitation Determination is made. Whenever an actuarial
conversion is required in order to restate the form of the defined pension
benefits actually being paid by other members of the controlled group as
the Actuarially Equivalent annuity having the same form as the Targeted
Pension that forms the basis for determination of the SERP Benefit in
payment hereunder, the Actuarially Equivalent annuity shall be determined
using the actuarial methodology prescribed in Section 2.1(a) hereof;
provided, however, that if any defined benefits actually being paid to the
Participant, or Eligible Spouse, by other members of the controlled group
are being paid as either a single life pension annuity, when the EDS SERP
Benefit is payable as the
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difference between two single life annuities, or as a Joint and Fifty
Percent (50%) Survivor Annuity, when the EDS SERP Benefit is payable as the
difference between two Joint and Fifty Percent (50%) Survivor Annuities, no
such actuarial conversion will be required prior to making the SERP
Limitation Determination.
4.3 Targeted Aggregate Pension Level for Executives Reduced At Early
Retirement ("Targeted Pension Reduced At Early Retirement").\\ When an Employee
is permitted to retire early with SERP Benefit eligibility, the first step in
the computational process which must be followed to determine the single life
annuity benefit herein called the Targeted Pension Reduced At Early Retirement
is to calculate the Targeted Pension which would be payable at the Employee's
Normal Retirement Date, pursuant to the computational methodology of Section 4.2
hereof, with the Employee's service and compensation history with the Company to
the Early Retirement Date being treated as if it were a service and compensation
history to Normal Retirement Date. Once the Targeted Pension has been
determined on this basis, the Targeted Pension Reduced At Early Retirement is to
be calculated by reducing the Targeted Pension by 4% or a prorata fraction
thereof, if any, for each year and fraction thereof, if any, that the Employee's
Early Retirement Date, as consented to by the Chairman on behalf of the Company,
is earlier than the Employee's Normal Retirement Date. Provided, however, that
before the above described 4% reductions are applied to the Targeted Pension to
determine the Targeted Pension Reduced At Early Retirement, the Targeted Pension
will have been computed and capped, if necessary, as provided in Section 4.2,
based upon the service, salary and bonus history that the Employee has as of his
Early Retirement Date.
4.4 Targeted Aggregate Pension Level for Executives At Late Retirement.
When an Employee is permitted to retire late with SERP Benefit eligibility, the
computational methodology of Section 4.2 hereof shall be used to calculate the
single life annuity benefit called the Targeted Pension At Late Retirement
recognizing that the Employee is retiring under the EDS SERP on his or her Late
Retirement Date with his or her Targeted Pension based upon his or her service
and compensation history with the Company to the Late Retirement Date instead of
to the Normal Retirement Date. Accordingly, the Targeted Pension At Late
Retirement is computed pursuant to Section 4.2 with the sole substitution being
the use of Late Retirement for each reference to Normal Retirement.
4.5 EDS SERP Benefits At Normal Retirement. Normal Retirement under the
EDS SERP is retirement from the Company with SERP Benefit eligibility on the
Employee's Normal Retirement Date. The SERP Benefit payable, if any, to an
Employee upon Normal Retirement is a single life pension annuity that would be
payable on the first of each month, beginning on the Employee's Normal
Retirement Date, and continuing monthly thereafter for the remainder of the
Employee's lifetime. The SERP Benefit, upon Normal Retirement, will be payable
in a monthly amount equal to one-twelfth (1/12th) of the single life pension
annuity benefit which is calculated as follows:
Targeted Pension At Normal Retirement
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(LESS) Qualified Plan Benefit payable commencing at Normal Retirement
(EQUALS) SERP Benefit commencing at Normal Retirement
The SERP Benefit commencing at Normal Retirement may from time to time
change as a result of the operation of the Limitations in the Qualified
Plan.
4.6 EDS SERP Benefit At Early Retirement. The SERP Benefit payable, if
any, to a Participant upon Early Retirement is a single life pension annuity
that would be payable on the first of each month, beginning on the Employee's
Early Retirement Date, and continuing monthly thereafter for the remainder of
the Employee's lifetime. The SERP Benefit upon Early Retirement will be payable
in a monthly amount equal to one-twelfth (1/12th) of the single life pension
annuity benefit which is calculated as follows:
Targeted Pension Reduced At Early Retirement
(LESS) Qualified Plan Benefit payable commencing at Early
Retirement
(EQUALS) SERP Benefit commencing at Early Retirement
The SERP Benefit commencing at Early Retirement may from time to time
change as a result of the operation of the Limitations in the Qualified
Plan.
4.7 EDS SERP Benefit At Late Retirement. Late Retirement under the EDS
SERP is retirement from the Company with SERP Benefit eligibility on the
Employee's Late Retirement Date. The SERP Benefit payable, if any, to a
Participant upon Late Retirement is a single life pension annuity that would be
payable on the first of each month, beginning on the Employee's Late Retirement
Date, and continuing monthly thereafter for the remainder of the Employee's
lifetime. The SERP Benefit upon Late Retirement, will be payable in a monthly
amount equal to one-twelfth (1/12th) of the single life pension annuity benefit
which is calculated as follows:
Targeted Pension at Late Retirement
(LESS) Qualified Plan Benefit payable commencing at Late Retirement
(EQUALS) SERP Benefit commencing at Late Retirement
The SERP Benefit commencing at Late Retirement may from time to time change
as a result of the operation of the Limitations in the Qualified Plan.
4.8 Pre-Retirement Survivor SERP Benefit. If a Participant dies while
employed with the Company and has satisfied the eligibility requirements set
forth in Section 3.1 and, but for dying before retiring, could be otherwise
eligible to receive a SERP Benefit Reduced at Early Retirement, or SERP Benefit
At Normal Retirement, or SERP Benefit At Late Retirement, then on
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the first month following such Participants' death, the Eligible Spouse of such
Participant shall receive a benefit hereunder equal to the fifty percent (50%)
survivor portion of the Joint and Fifty Percent (50%) Survivor Annuity SERP
Benefit At Normal Retirement, Joint and Fifty Percent (50%) Survivor Annuity
SERP Benefit At Late Retirement or Joint and Fifty Percent (50%) Survivor
Annuity SERP Benefit Reduced At Early Retirement, as applicable to which the
Participant would have been entitled had such Participant retired with the
consent of the Chairman in the case of Early Retirement or Late Retirement, as
of the date of the Participant's death ("Pre-Retirement Survivor SERP Benefit").
A Pre-Retirement Survivor SERP Benefit shall be paid to the Participant's
surviving Eligible Spouse in the form of a monthly annuity, as calculated in
accordance with this Section, for the life of the Eligible Spouse commencing on
the first day of the first month following the Participant's death. No payment
shall be made to an Eligible Spouse in accordance with this Section if, as of
the date of the Participant's death, such Participant would be deemed ineligible
to participate in the Plan pursuant to Section 3.2.
4.9 Payment. Any SERP Benefit shall be payable only in the form of either
a Joint and Fifty Percent (50%) Survivor Annuity as calculated in this Article
IV, or a single life annuity as calculated in this Article IV. Either form of
payment shall be subject to approval by the Plan Administrator. However, a
Participant who is not married to an Eligible Spouse on his or her Early
Retirement Date, Normal Retirement Date or Late Retirement Date, shall only
receive SERP Benefits in the form of a single life annuity. Participants who
may elect to receive a SERP Benefit from either of the two (2) payment options
above shall make such election in accordance with the procedures and policies
from time to time established by the Plan Administrator.
Notwithstanding anything to the contrary herein, if the Qualified Plan
Benefit which could be payable to a Participant or his or her Eligible Spouse is
increased, or decreased, then the SERP Benefit payable hereunder shall be
decreased or increased to such amount so that the SERP Benefit equals the then
difference between the applicable Targeted Pension and the Qualified Plan
Benefit. Any payment made hereunder shall be subject to the annual verification
of the continued eligibility, and the payments hereunder may be suspended or
terminated for failure to provide the information deemed necessary by the Plan
Administrator for the verification process. The Plan Administrator shall
provide the EDS Compensation and Benefits Committee with written certification
of Participants' continuing eligibility at least once during each Plan Year.
4.10 Reduction Suspension or Elimination of Benefits. The EDS Compensation
and Benefits Committee, in its sole discretion, may at any time reduce, suspend
or eliminate any SERP Benefit otherwise payable to an Employee or Participant or
an Eligible Spouse. Any such reduction, suspension or elimination of SERP
Benefits payable hereunder to an Employee or Participant shall automatically
apply to any benefits that would be payable hereunder to Participant's Eligible
Spouse. However, any decision to reduce, suspend or eliminate a benefit for
reason of a Participant's employment with a competitor of the Company or because
of actions considered inimical or detrimental to the best interests of the
Company, shall be made by the EDS Compensation and Benefits Committee after
consideration of the facts and circumstances of the situation and any advice and
recommendations received from the Chairman.
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4.11 Contingent Rights. No Employee shall have a vested or future interest
in, or entitlement to, any benefits from the Plan, nor are any benefits which
might be payable hereunder guaranteed nor shall any benefits accrue on behalf of
any Employee or Participant. As a non-qualified Plan, any benefit herefrom is
made subject to the conditions precedent as set forth herein and to the rights
reserved herein by the EDS Compensation and Benefits Committee to reduce,
suspend, or eliminate benefits hereunder, to terminate or amend the Plan, and
the EDS Compensation and Benefits Committee's discretionary authority to deem
any Employee ineligible hereunder.
ARTICLE V. ADMINISTRATION
5.1 Administration. EDS shall be the Plan Administrator. The Plan
Administrator shall have the authority which is expressly stated in this Plan as
being delegated and empowered to the Plan Administrator and shall have the
authority to administer and interpret the Plan according to Plan provisions and
as directed by the EDS Compensation and Benefits Committee.
5.2 Administration Committee. The Plan Administrator may appoint an
Administration Committee to handle the day-to-day administration of the Plan.
The Administration Committee shall have the authority of the Plan Administrator
to the extent the Plan Administrator has delegated its authority to it. A
majority of the members of the Administration Committee shall constitute a
quorum and the acts of a majority of the members present, or acts approved in
writing by a majority of the members without a meeting, shall be the acts of the
Administration Committee. Members of the Administration Committee may resign
with thirty (30) days' written notice to the Plan Administrator or may be
removed by the Plan Administrator at any time, whereupon a successor
Administration Committee member may be appointed by the Plan Administrator.
5.3 Finality of Determination. Determinations of the Plan Administrator
as to any disputed questions arising under this Plan, including questions of
construction and interpretation shall be final, binding, and conclusive upon
persons. All determinations reserved for the EDS Compensation and Benefits
Committee herein shall be final, binding and conclusive upon all persons.
5.4 Expenses. The expenses of administering the Plan shall be borne by
the Company.
ARTICLE VI. MERGER, AMENDMENT, AND TERMINATION
6.1 Merger, Consolidation, or Acquisition. In the event of a merger,
consolidation, or acquisition where the Company is not the surviving
corporation, unless the successor or acquiring corporation shall elect to
continue and carry on the Plan, this Plan shall terminate and all benefits
hereunder shall cease.
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6.2 Amendment and Termination. The EDS Compensation and Benefits
Committee may amend, modify, or terminate the Plan at any time, expressly
including the making of retroactive amendments. In the event of an amendment or
termination of the Plan pursuant to this Section, the EDS Compensation and
Benefits Committee may provide that no benefit payments will be made to any
Participant or Eligible Spouse after the effective date of such amendment or
termination, or may provide that some or all of the benefits under the Plan
shall continue to be an obligation of the Company to be paid as provided under
Section IV (Payments).
ARTICLE VII. MISCELLANEOUS PROVISIONS
7.1 Funding. Payments hereunder shall not be pre-funded by the Company
and when benefits become payable shall be paid in cash from the general assets
of the Company. No Participant, Employee, or any other person shall have any
right, title, or interest whatsoever in or to, or any preferred claim in or to,
any investment reserves, accounts, or funds that the Company may purchase,
establish, or accumulate to aid in providing the payments described in this
Plan. Nothing contained in this Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust or a fiduciary
relationship of any kind between the Company and a Participant, Employee, or any
other person.
7.2 Tax Withholding. The Company may withhold or cause to be withheld
from any benefit payment any withholding or other taxes required to be withheld
with respect to such payment and such sum as the Company may reasonably estimate
as necessary to cover any withholding or other taxes which may be due and owing
as a result of any Plan benefit or the creation or maintenance of this Plan. In
addition, the Company may withhold or cause to be withheld from any benefit
payment any amounts payable to or through the Company, including, but not
limited to, insurance premium charges.
7.3 Other Plans. No benefit payable hereunder shall be deemed
compensation to the Participant for the purposes of computing benefits to which
such Participant may be entitled under the Retirement Plan or any other plan or
arrangement of the Company for the benefit of its employees.
7.4 Anti-assignment and Nontransferability. An Employee, Participant,
Eligible Spouse or other person shall have no rights, by way of anticipation or
otherwise, to assign or otherwise dispose of any interest under this Plan, nor
shall rights be assigned or transferred by operation of law. No Plan benefits
hereunder may be assigned or made subject to a qualified domestic relations
order pursuant to Code Section 414(p).
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed
and adopted by its duly authorized officers on this ____ day of ________, 1996.
ELECTRONIC DATA SYSTEMS CORPORATION
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
AGREED AND ATTESTED:
EDS COMPENSATION AND BENEFITS COMMITTEE
- ----------------------------------
Secretary
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EXHIBIT 10(E)
ELECTRONIC DATA SYSTEMS CORPORATION
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSES OF PLAN AND DEFINITIONS
1.1 Purpose. Electronic Data Systems Holding Corporation, a Delaware
corporation (which name shall be amended to Electronic Data Systems Corporation)
(the "Company"), hereby establishes the Electronic Data Systems Corporation
Deferred Compensation Plan for Non-Employee Directors (the "Plan") for the
purpose of providing non-employee directors ("Directors") of the Company the
opportunity to defer a portion of their Director Cash Compensation and to
provide greater incentives for those Directors to attain and maintain the
highest standards of performance, to attract and retain Directors of outstanding
competence and ability, to stimulate the active interest of such persons in the
development and financial success of the Company, to further the identity of
interests of such Directors with those of the Company's stockholders generally,
and to reward such Directors for outstanding performance.
1.2 Definitions.
(a) "Applicable Annual Rate" will initially be 7.45% and will be
adjusted as of January 1 of each year, commencing January 1, 1997, to that
rate which is equal to 120% of the applicable federal long-term rate for
the month of January of such year as published by the Internal Revenue
Service pursuant to Section 1274(d) of the Code.
(b) "Beneficiary" means the person or persons designated by the
Participant, as provided in Section 4.5, to receive any payments otherwise
due the Participant under this Plan in the event of the Participant's
death.
(c) "Board of Directors" or "Board" means the Board of Directors
of the Company.
<PAGE>
(d) "Cash Compensation" means all of the cash compensation
payable to a Participant, including annual, meeting and other fees.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the committee of the Board as is designated
by the Board to administer the Plan in accordance with Article II, but
which shall initially be the Compensation and Benefits Committee of the
Board.
(g) "Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
(h) "Company" means Electronic Data Systems Corporation (the name
of which prior to Effective Date was Electronic Data Systems Holding
Corporation).
(i) "Deferred Interest Bearing Account" means the bookkeeping
account maintained for each Participant to record certain amounts deferred
by the Participant in accordance with Article III hereof.
(j) "Determination Date" means the date on which payment of a
Participant's deferred compensation is made or commences, as determined in
accordance with Section 4.1.
(k) "Effective Date" means the date upon which both the
Reincorporation and the Split-Off have been consummated.
(l) "Election Effective Date" means the date upon which a
Participant's deferred compensation is credited to his Deferred Interest
Bearing Account or his Phantom Stock Account pursuant to Section 3.3 of
this Plan.
(m) "Eligible Director" means each director of the Company who is
not a full-time employee of the Company but who receives compensation for
services as a director.
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(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(o) "Fair Market Value" of a share of Common Stock means, as of a
particular date, (i) if shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price
per share of Common Stock on the consolidated transaction reporting system
for the principal national securities exchange on which shares of Common
Stock are listed on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was
so reported, (ii) if shares of Common Stock are not so listed but are
quoted on the Nasdaq National Market, the mean between the highest and
lowest sales price per share of Common Stock reported by the Nasdaq
National Market on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was
so reported or (iii) if the Common Stock is not so listed or quoted, the
mean between the closing bid and asked price on that date, or, if there are
no quotations available for such date, on the last preceding date on which
such quotations shall be available, as reported by the Nasdaq Stock Market,
or, if not reported by the Nasdaq Stock Market, by the National Quotation
Bureau Incorporated.
(p) "Participant" means an Eligible Director of the Company who
elects to participate in the Plan.
(q) "Phantom Stock Account" means the bookkeeping account
maintained for each Participant to record certain amounts deferred by the
Participant in accordance with Article III hereof.
(r) "Phantom Stock Unit" means a unit equal to one share of
Common Stock issued and outstanding as of the Effective Date of the Plan
(as adjusted pursuant to Section 3.6), utilized for the purpose of
measuring the benefits payable under Section 4.3.
(s) "Reincorporation" means (i) the merger of Electronic Data
Systems Intermediate Corporation, a Delaware corporation and direct wholly
owned subsidiary of the Company, with and into the Company and (ii) the
merger of Electronic Data Systems Corporation, a Texas corporation and
indirect wholly owned subsidiary of the Company, with and into the Company.
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(t) "Split-Off" means the issuance or delivery of shares of
Common Stock upon conversion of all the shares of Class E Common Stock, par
value $.10 per share, of General Motors Corporation, a Delaware corporation
("General Motors") as a result of the merger of GM Mergeco Corporation, a
Delaware corporation and indirect wholly owned subsidiary of the Company,
with and into General Motors, in accordance with the terms of the Merger
Agreement to be entered into between General Motors and GM Mergeco
Corporation.
(u) "Valuation Date" means the Effective Date and the first day
of each month thereafter, or in the event the Common Stock is traded or
quoted on a national securities exchange or in the over-the-counter market,
each day on which a sale or sales of the Common Stock is reported or a
quotation for the Common Stock is available (as the case may be).
ARTICLE II
ADMINISTRATION OF THE PLAN
2.1 Committee. This Plan shall be administered by the Committee.
The Committee shall consist of at least two members of the Board.
2.2 Committee's Powers. Subject to the provisions hereof, the
Committee shall have full and exclusive power and authority to administer this
Plan and to take all actions which are specifically contemplated hereby or are
necessary or appropriate in connection with the administration hereof. The
Committee shall also have full and exclusive power to interpret this Plan and to
adopt such rules, regulations and guidelines for carrying out this Plan as it
may deem necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, determine the eligibility of individuals to
participate herein, determine the amount of Cash Compensation a Participant may
elect to defer, or waive any restriction or other provision of this Plan;
provided, however, that the Committee shall not waive any restriction or other
provision of this Plan or take any other action that would cause any benefits
provided to a Participant hereunder to be deemed "derivative securities" within
the meaning of Section 16 of the Exchange Act or the rules and regulations
promulgated thereunder (including, but not limited to, Rule 16a-1(c) or any
successor rule). The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect.
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2.3 Committee Determinations Conclusive. Any decision of the
Committee in the interpretation and administration of this Plan shall lie within
its sole and absolute discretion and shall be final, conclusive and binding on
all parties concerned.
2.4 Committee Liability. No member of the Committee or officer of
the Company to whom the Committee has delegated authority in accordance with the
provisions of Section 2.5 of this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by an
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute.
2.5 Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.
ARTICLE III
ACCOUNTS
3.1 Establishment of Accounts. The Company shall set up an
appropriate record (hereinafter called the "Deferred Interest Bearing Account")
which will from time to time reflect the name of each Participant and the
amounts deferred by such Participant to an interest bearing account pursuant to
Section 3.2. The Company shall also set up an appropriate record (hereinafter
called the "Phantom Stock Account") which will from time to time reflect the
name of each Participant, the number of Phantom Stock Units credited to such
Participant pursuant to Section 3.2, and the Fair Market Value of that number of
Phantom Stock Units credited to the Participant determined as of the Election
Effective Date.
3.2 Amount of Deferral. A Participant may elect to defer receipt of
all or any part of the Cash Compensation payable to the Participant for serving
on the Company's Board of Directors for each calendar year (or, if applicable
pursuant to Section 5.2, portion thereof) for which such deferral is elected.
At the election of the Participant, the amount deferred shall be: (a) credited
to his Deferred Interest Bearing Account; (b) credited to his Phantom Stock
Account; or (c) a combination of both. If a Participant chooses to receive a
credit to his Phantom Stock Account, a number of Phantom Stock Units (rounded up
to the nearest whole number) having a Fair Market Value on the Election
Effective Date equal to the dollar amount of fees the Participant elects to
forego in the next year in exchange for Phantom Stock Units shall be credited to
such account. A Participant
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may only elect to defer Cash Compensation which is otherwise payable after an
election to defer compensation is made pursuant to Section 5.1 hereof.
3.3 Crediting of Deferred Amounts. Any Cash Compensation credited to
a Participant's Deferred Interest Bearing Account or Phantom Stock Account shall
be credited to such account on the last day of the month in which the deferred
Cash Compensation would otherwise have been paid. For example, if a Participant
effectively elects to defer Cash Compensation to his Deferred Interest Bearing
Account for a calendar year by notifying the Company in the manner provided in
Section 5.1, the Cash Compensation which accrues for the month of January shall
be credited to such Participant's Deferred Interest Bearing Account on January
31.
3.4 Interest on Deferred Interest Bearing Accounts. The amount of
deferred compensation credited to a Participant's Deferred Interest Bearing
Account will bear interest from but excluding the date so credited, to and
including the Determination Date, at a rate per annum equal to the Applicable
Annual Rate in effect from time to time, compounded annually, and such interest
shall be credited to the Deferred Interest Bearing Account as of the last day of
each calendar year (or, if applicable, the Determination Date). Thereafter,
interest so credited shall similarly bear interest from but excluding the date
so credited, to and including the Determination Date, at a rate per annum equal
to the Applicable Annual Rate in effect from time to time, compounded annually
and credited as of the last day of each calendar year (or, if applicable, the
Determination Date).
3.5 Dividends. As of each date that dividends are paid with respect
to Common Stock, a Participant who has any outstanding Phantom Stock Units
credited to his Phantom Stock Account shall have an amount credited to his
Deferred Interest Bearing Account with respect to such dividends and thereafter
such amount shall bear interest as provided in Section 3.4. The amount credited
in respect of dividends shall be equal to the dollar amount of the dividend per
share of Common Stock multiplied by the number of Phantom Stock Units credited
to the Participant's Phantom Stock Account as of the payment date of such
dividend.
3.6 Adjustments.
-----------
(a) Exercise of Corporate Powers. The existence of this Plan and any
outstanding Phantom Stock Units credited hereunder shall not affect in any
manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its
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business or any merger or consolidation of the Company, or any issue of
bonds, debentures, preferred or prior preference stock (whether or not such
issue is prior to, on a parity with or junior to the Common Stock) or the
dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) Recapitalizations, Reorganizations and Other Activities. In the
event of any subdivision or consolidation of outstanding shares of Common
Stock, declaration of a dividend payable in shares of Common Stock or other
stock split, then (i) the number of Phantom Stock Units and (ii) the
appropriate Fair Market Value and other price determinations for such
Phantom Stock Units shall each be proportionately adjusted by the Board to
reflect such transaction. In the event of any other recapitalization or
capital reorganization of the Company, any consolidation or merger of the
Company with another corporation or entity, the adoption by the Company of
any plan of exchange affecting the Common Stock or any distribution to
holders of Common Stock of securities or property (other than normal cash
dividends or dividends payable in Common Stock), the Board shall make
appropriate adjustments to (i) the number of Phantom Stock Units and (ii)
the appropriate Fair Market Value and other price determinations for such
Phantom Stock Units to give effect to such transaction; provided that such
adjustments shall only be such as are necessary to preserve, without
increasing, the value of such units. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation, the Board shall be authorized to issue or assume units by
means of substitution of new units, as appropriate, for previously issued
units or an assumption of previously issued units as part of such
adjustment.
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ARTICLE IV
PAYMENTS
4.1 Period of Deferral. A Participant may elect that payment of the
compensation deferred under the Plan be made or commence at (a) a date that is
five years following the date of the termination of the Participant's status as
a Director of the Company, or (b) termination of the Participant's status as a
Director of the Company. If alternative (a) is elected by the Participant,
payment will be made or will commence within sixty (60) days after the date that
is five years after termination of the Participant's status as a Director of the
Company. If alternative (b) is elected by the Participant, payment will be made
or will commence within sixty (60) days after termination of the Participant's
status as a Director of the Company.
4.2 Payment of Amounts in Deferred Interest Bearing Account. As of
the Determination Date, the sum of the amounts theretofore credited to the
Participant's Deferred Interest Bearing Account plus all interest accrued
thereon to, and including, the Determination Date (the "Total Deferred
Compensation Amount") shall be calculated. A Participant may elect to receive
payment of the Total Deferred Compensation Amount in any manner consistent with
Section 4.4.
4.3 Payment of Amounts in Phantom Stock Account. As of the
Determination Date, the aggregate Fair Market Value on the Valuation Date
coinciding with or immediately preceding the Determination Date of that number
of Phantom Stock Units then credited to a Participant's Phantom Stock Account
(the "Total Deferred Unit Amount") shall be calculated. A Participant may elect
to receive payment of the Total Deferred Unit Amount in any manner consistent
with Section 4.4.
4.4 Form of Payment. Payment to a Participant of amounts in his
Deferred Interest Bearing Account and his Phantom Stock Account shall be made in
cash. Payment to a Participant of amounts in both accounts shall be made by one
of the following methods: (a) a lump sum, (b) three substantially equal
consecutive annual installments, or (c) five substantially equal consecutive
annual installments. The Total Deferred Compensation Amount and the Total
Deferred Unit Amount shall then bear interest from, but excluding, the
Determination Date to, and including, the date paid at the Applicable Annual
Rate as in effect from time to time, compounded annually, and the payment of
each annual installment shall be accompanied by payment of the amount of
interest accrued thereon.
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4.5 Death Prior to Payment. In the event that a Participant dies
prior to payment of all of the amounts payable pursuant to the Plan, any
remaining amounts together with all interest accrued thereon, shall be paid to
the Participant's designated Beneficiary in a lump sum within sixty (60) days
following the Company's notification of the Participant's death. If no
Beneficiary has been designated, such payment shall be made to the Participant's
estate. A beneficiary designation, or revocation of a prior beneficiary
designation, shall be effective only if it is made in writing on a form provided
by the Company, signed by the Participant and received by the Committee. In the
event that a Participant dies prior to payment of all of the amounts payable
pursuant to the Plan, and the designated Beneficiary dies prior to payment of
all the amounts payable pursuant to the Plan, payment shall be made to the
Participant's estate in a lump sum within sixty (60) days of notification of the
Beneficiary's death.
4.6 Payments to Minors and Incompetents. Should the Participant
become incompetent or should the Participant designate a Beneficiary who is a
minor or incompetent, the Company shall be authorized to pay such funds to a
parent or guardian of such minor or incompetent, or directly to such minor or
incompetent, whichever manner the Committee shall determine in its sole
discretion.
ARTICLE V
ELECTING DEFERRALS
5.1 Manner of Electing Deferral. Each election made by a Participant
to defer compensation under the Plan (i) shall take the form of a written
document (provided by the Company) signed by the Participant and filed with the
Committee, (ii) shall designate the calendar year for which, or commencing with
which, deferral is elected, the account to which such deferral shall be
credited, the period of deferral and the form and manner of payment and (iii)
cannot be revoked or modified if either (a) the proposed revocation or
modification applies to amounts deferred with respect to a calendar year which
has already commenced at the time such revocation or modification is proposed to
be effected or (b) the Committee determines in its sole discretion that the
proposed revocation or modification could cause any benefits provided to a
Participant hereunder to be treated as "derivative securities" within the
meaning of Section 16 of the Exchange Act or the rules and regulations
promulgated thereunder (including, but not limited to, Rule 16a-1(c) or any
successor rule.) An election to defer may be made as to the Cash Compensation
payable for a single calendar year (or portion thereof, if applicable) or period
of years.
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5.2 Election by a New Director. An election to defer Cash
Compensation under the Plan may be made by a new Director of the Company within
thirty (30) days after election to the Company's Board of Directors and shall
apply to Cash Compensation payable after the date of such election.
ARTICLE VI
MISCELLANEOUS
6.1 Unfunded Plan. Nothing contained herein shall be deemed to
create a trust of any kind or create any fiduciary relationship. Insofar as it
provides for rights to cash or Common Stock, this Plan shall be unfunded. Funds
invested hereunder shall continue for all purposes to be part of the general
funds of the Company. To the extent that a Participant acquires a right to
receive payments from the Company under the Plan, such right shall not be
greater than the right of any unsecured general creditor of the Company and such
right shall be an unsecured claim against the general assets of the Company.
Although bookkeeping accounts may be established with respect to Participants
who are entitled to cash or rights thereto under this Plan, any such accounts
shall be used merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time be represented by cash or
rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company, the Board or the Committee be deemed to be a
trustee of any cash or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to cash
or rights thereto under this Plan shall be based solely upon any contractual
obligations that may be created by this Plan, and no such liability or
obligation of the Company shall be deemed to be secured by any pledge or other
encumbrance on any property of the Company. Neither the Company nor the Board
nor the Committee shall be required to give any security or bond for the
performance of any obligation that may be created by this Plan.
6.2 Title to Funds Remains with Company. Amounts credited to each
Participant's Deferred Interest Bearing Account and Phantom Stock Account shall
not be specifically set aside or otherwise segregated, but will be combined with
corporate assets. Title to such funds will remain with the Company and the
Company's only obligation will be to make timely payments to Participants in
accordance with the Plan.
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6.3 Statement of Account. A statement will be furnished to each
Participant annually on or about February 15 of each year stating the balance of
the Participant's Deferred Interest Bearing Account and Phantom Stock Account
and accrued interest thereon as of the preceding December 31st.
6.4 Assignability. Except as provided in Section 4.5, no right to
receive payment hereunder shall be transferable or assignable by a Participant
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules thereunder. Any attempted assignment of any benefit under this Plan in
violation of this Section 6.4 shall be null and void.
6.5 Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law, except that no amendment, modification or termination shall, without the
consent of the Participant, impair the rights of any Participant to the balance
in such Participant's Deferred Interest Bearing Account or Phantom Stock Account
or the amount of interest accrued thereon as of the date of such amendment,
modification or termination. The Board may at any time and from time to time
delegate to the Committee any or all of this authority under this Section 6.5.
6.6 Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Delaware.
6.7 Effective Date. The Plan shall be effective as of the Effective
Date.
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ELECTRONIC DATA SYSTEMS CORPORATION
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
NOTICE OF ELECTION
To the Committee:
In accordance with the Deferred Compensation Plan for Non-Employee
Directors (the "Plan"), I hereby elect to defer receipt of the cash portion of
the compensation, including annual, meeting and other fees, payable to me
indicated below for my services as a Director of Electronic Data Systems
Corporation for (check one):
[ ] [Available only to new Directors making an election pursuant to
Section 5.2 of the Plan.] The remainder of this calendar year.
[ ] The calendar year beginning January 1, 19__.
[ ] The calendar year beginning January 1, 19__ and for each calendar
year thereafter until ________________.
[ ] I do not wish at this time to elect deferral.
1. THE AMOUNT OF COMPENSATION I ELECT TO DEFER IS ______________________ .
2. CREDIT MY DEFERRED COMPENSATION TO THE FOLLOWING ACCOUNT(S) (check one):
[ ] 100% to my Deferred Interest Bearing Account only; or
[ ] 100% to my Phantom Stock Account only; or
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[ ] To both my Deferred Interest Bearing Account and my Phantom Stock
Account in the proportion designated below (for a total of 100%):
___________% to my Deferred Interest Bearing Account; and
___________% to my Phantom Stock Account.
3. PERIOD OF DEFERRAL (check one):
[ ] Until the termination of my service as a Director.
[ ] Until the 5th calendar year following termination of my service as a
Director.
4. MY DEFERRED COMPENSATION PLUS INTEREST ACCRUED THEREON AT CONCLUSION OF THE
DEFERRAL PERIOD SHALL BE DISTRIBUTED AS FOLLOWS:
[ ] Lump sum
[ ] Three annual installments
[ ] Five annual installments.
I understand that in the event of my death prior to receipt of all amounts
payable to me pursuant to the Plan, the balance shown in my Deferred Interest
Bearing Account and my Phantom Stock Account will be paid in a lump sum to my
designated Beneficiary or to my estate if I have not designated a Beneficiary or
my Beneficiary dies prior to receiving such lump-sum payment.
I understand further that upon commencement of the year for which this
election applies, this election is irrevocable as to amounts deferred for that
year and that no change in the timing or form of payment can be made thereafter.
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I acknowledge that I have received a copy of the Plan and have read its
provisions and agree to be bound by the terms contained therein.
Signed:
- -------------------- -------------------------
DATE DIRECTOR
ELECTRONIC DATA SYSTEMS
CORPORATION
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ELECTRONIC DATA SYSTEMS CORPORATION
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
DESIGNATION OF BENEFICIARY
To the Committee:
In accordance with the Deferred Compensation Plan for Non-Employee
Directors (the "Plan"), I hereby designate the following individual as my
Beneficiary:
Name of Individual:
--------------------------------------------------------------------
First MI Last
Social Security Number:
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
Street Address
--------------------------------------------------------------------
City State Zip Code
Relationship to Director:
--------------------------------------------------------------------
I understand that in the event of my death prior to receipt of all amounts
payable to me pursuant to the Plan, the balance shown in my Deferred Interest
Bearing Account and my Phantom Stock Account will be paid in a lump sum to my
designated Beneficiary or to my estate if I have not designated a Beneficiary or
my Beneficiary dies prior to receiving such lump-sum payment.
I acknowledge that I have received a copy of the Plan and have read its
provisions and agree to be bound by the terms contained therein. This
beneficiary designation revokes and supersedes any previous beneficiary
designation made by me.
Signed:
- ----------------------- ---------------------------
DATE DIRECTOR
ELECTRONIC DATA SYSTEMS
CORPORATION
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EXHIBIT 10(F)
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is entered into as of [Date], 1996 ("Agreement"), between
Electronic Data Systems Holding Corporation, a Delaware corporation (the
"Company"), and [Name] ("Indemnitee").
BACKGROUND STATEMENT AND RECITALS
Highly competent and experienced persons are becoming more reluctant to
serve corporations as directors or in other capacities unless they are provided
with adequate protection through insurance and adequate indemnification against
inordinate risks of claims and actions against them arising out of their service
to and activities on behalf of the corporation.
The Board of Directors of the Company (the "Board") has determined that the
inability to attract and retain such persons would be detrimental to the best
interests of the Company and its stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
The Board has also determined that it is reasonable, prudent and necessary
for the Company, in addition to purchasing and maintaining directors' and
officers' liability insurance (or otherwise providing for adequate arrangements
of self-insurance), contractually to obligate itself to indemnify such persons
to the fullest extent permitted by applicable law so that they will serve or
continue to serve the Company free from undue concern that they will not be so
indemnified.
Indemnitee is willing to serve, continue to serve and to take on additional
service for or on behalf of the Company on the condition that he be so
indemnified.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following words and terms shall have the following
respective meanings:
"Change in Control" means a change in control of the Company occurring
after the Public Status Date of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without limiting
the generality of the foregoing, a Change in Control shall be deemed to have
occurred (irrespective of the applicability of the initial clause of this
definition) if at any time after the Public Status Date (a) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding
(i) any employee benefit plan of the Company or of any subsidiary of the
Company, and (ii) any entity organized, appointed or established by the Company
pursuant to the terms of any such plan) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities without the prior approval of at
least two-thirds of the members of the whole Board in office immediately prior
to such person attaining such percentage interest; (b) the Company is a party to
a merger, consolidation, share exchange, sale of assets or other reorganization,
or a proxy contest, as a consequence of which members of the Board in office
immediately prior to such transaction or event constitute less than a majority
of the whole Board thereafter; or (c) during any period of two consecutive
years, individuals who at the beginning of such period constituted members of
the Board (including for this purpose any new member whose election or
nomination for election by the Company's stockholders was approved by at least
two-thirds of the members of the whole Board then still in office who were
members of the Board at the beginning of such period) cease for any reason to
constitute a majority of the whole Board. Notwithstanding the foregoing, a
Change in Control shall not be deemed to have occurred solely as a result of the
General Motors Corporation Hourly Rate Employees Pension Plan becoming the
beneficial owner of 20% or more of the combined voting power of the Company's
then outstanding securities in a transaction in which it acquires securities of
the Company from General Motors Corporation in exchange for, or as a
distribution with respect to, securities of General Motors Corporation.
"Claim" means an actual or threatened claim or request for relief.
"Corporate Status" means the status of a person who is or was a director,
nominee for director, officer, employee, agent or fiduciary of the Company
(including any predecessors to the Company), Electronic Data Systems Corporation
or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request of
the Company.
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"Disinterested Director," with respect to any request by Indemnitee for
indemnification hereunder, means a director of the Company who neither is nor
was a party to the Proceeding or subject to a Claim, issue or matter in respect
of which indemnification is sought by Indemnitee.
"DGCL" means the Delaware General Corporation Law and any successor statute
thereto as either of them may be amended from time to time.
"Expenses" means all attorneys' fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees
and all other disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, or participating in
(including on appeal), a Proceeding.
"Independent Counsel" means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither contemporaneously is, nor
in the five years theretofore has been, retained to represent (a) the Company or
Indemnitee in any matter material to either such party, (b) any other party to
the Proceeding giving rise to a claim for indemnification hereunder or (c) the
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding voting securities (other than, in each such case, with respect to
matters concerning the rights of Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements). Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
"person" shall have the meaning ascribed to such term in Sections 13(d) and
14(d) of the Exchange Act.
"Proceeding" means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, administrative hearing or
any other proceeding, whether civil, criminal, administrative or investigative
and whether or not based upon events occurring, or actions taken, before the
date hereof (except any of the foregoing initiated by Indemnitee pursuant to
Article VI or Section 7.8 to enforce his rights under this Agreement), and any
inquiry or investigation that could lead to, and any appeal in or related to,
any such action, suit, arbitration, alternative dispute resolution mechanism,
hearing or proceeding.
"Public Status Date" means the first date on which the Company has
outstanding a class of equity securities registered under the Exchange Act.
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ARTICLE II
SERVICES BY INDEMNITEE
Section 2.1 Services. Indemnitee agrees to serve, or continue to serve,
as a director of the Company and, as the Company has requested or may request
from time to time, as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. [Indemnitee agrees to serve, or continue to serve, as a
director of the Company. Indemnitee may from time to time also agree to serve,
as the Company may request from time to time, as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.]/1/ Indemnitee and the Company each
acknowledge that they have entered into this Agreement as a means of inducing
Indemnitee to serve, or continue to serve, the Company in such capacities.
Indemnitee may at any time and for any reason resign from such position or
positions (subject to any other contractual obligation or any obligation imposed
by operation of law). The Company shall have no obligation under this Agreement
to continue Indemnitee in any such position or positions.
- --------------------
/1/ If this Agreement is to entered into between the Company and a new
director, use the bracketed language in lieu of the immediately preceding
sentence.
ARTICLE III
INDEMNIFICATION
Section 3.1 General. The Company shall indemnify, and advance Expenses
to, Indemnitee to the fullest extent permitted by applicable law in effect on
the date hereof and to such greater extent as applicable law may thereafter from
time to time permit. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the right to be indemnified
and to have Expenses advanced in all Proceedings to the fullest extent permitted
by Section 145 of the DGCL. The provisions set forth in this Agreement are
provided in addition to and as a means of furtherance and implementation of, and
not in limitation of, the obligations expressed in this Article III.
Section 3.2 Proceedings Other Than by or in Right of the Company.
Indemnitee shall be entitled to indemnification pursuant to this Section 3.2 if,
by reason of his Corporate Status, he was, is or is threatened to be made, a
party to any Proceeding, other than a Proceeding by or in the right of the
Company. Pursuant to this Section 3.2, the Company shall indemnify Indemnitee
against Expenses, judgments, penalties, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with any such Expenses, judgments, penalties, fines and amounts paid
in settlement) actually and reasonably
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incurred by him or on his behalf in connection with such Proceeding or any
Claim, issue or matter therein, 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
Company, and with respect to any criminal Proceeding, had no reasonable cause to
believe his conduct was unlawful. Nothing in this Section 3.2 shall limit the
benefits of Section 3.1 or any other Section hereunder.
Section 3.3 Proceedings by or in Right of the Company. Indemnitee shall
be entitled to indemnification pursuant to this Section 3.3 if, by reason of his
Corporate Status, he was, is or is 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. Pursuant to this Section 3.3, the Company shall indemnify Indemnitee
against Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any Claim, issue or matter therein, 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 Company. Notwithstanding the foregoing, no
indemnification against such Expenses shall be made in respect of any Claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, that, if applicable law so permits,
indemnification against such Expenses shall nevertheless be made by the Company
in such event if and only to the extent that the Court of Chancery of the State
of Delaware or other court of competent jurisdiction (the "Court"), or the court
in which such Proceeding shall have been brought or is pending, shall so
determine. Nothing in this Section 3.3 shall limit the benefits of Section 3.1
or any other Section hereunder.
ARTICLE IV
EXPENSES
Section 4.1 Expenses of a Party Who Is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement to the contrary (except as
set forth in Section 7.2(c) or 7.6), and without a requirement for any
determination described in Section 5.2, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him or on his behalf in
connection with any Proceeding to which Indemnitee was or is a party by reason
of his Corporate Status and in which Indemnitee is successful, on the merits or
otherwise. If Indemnitee is not wholly successful, on the merits or otherwise,
in a Proceeding but is successful, on the merits or otherwise, as to any Claim,
issue or matter in such Proceeding, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him or on his behalf
relating to each successfully resolved Claim, issue or matter. For purposes of
this Section 4.1 and without limitation, the termination of a Claim, issue or
matter in a Proceeding by dismissal, with or without prejudice, shall be deemed
to be a successful result as to such Claim, issue or matter.
Section 4.2 Expenses of a Witness or Non-Party. Notwithstanding any other
provision of this Agreement to the contrary, to the extent that Indemnitee is,
by reason of his Corporate Status, a witness or otherwise participates in any
Proceeding at a time when he is not
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a party in the Proceeding, the Company shall indemnify him against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith.
Section 4.3 Advancement of Expenses. The Company shall pay all reasonable
Expenses incurred by or on behalf of 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
pursuant to Article V within 15 days after the receipt by the Company of a
written request from Indemnitee requesting such payment or payments from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee. Indemnitee hereby undertakes and agrees that he will reimburse and
repay the Company for any Expenses so advanced to the extent that it shall
ultimately be determined (in a final adjudication by a court from which there is
no further right of appeal or in a final adjudication of an arbitration pursuant
to Section 6.1 if Indemnitee elects to seek such arbitration) that Indemnitee is
not entitled to be indemnified by the Company against such Expenses.
ARTICLE V
PROCEDURE FOR DETERMINATION OF ENTITLEMENT
TO INDEMNIFICATION
Section 5.1 Request by Indemnitee. To obtain indemnification under this
Agreement, Indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification. The Secretary or an
Assistant Secretary of the Company shall, promptly upon receipt of such a
request for indemnification, advise the members of the Board in writing that
Indemnitee has requested indemnification.
Section 5.2 Determination of Request. Upon written request by Indemnitee
for indemnification pursuant to Section 5.1, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case as follows:
(a) If a Change in Control shall have occurred, by Independent
Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee unless Indemnitee shall request that such
determination be made by the Disinterested Directors, in which case in the
manner provided for in clause (i) of paragraph (b) below;
(b) If a Change in Control shall not have occurred, (i) by a majority
vote of the Disinterested Directors, even though less than a quorum of the
Board, or (ii) if there are no Disinterested Directors, or if such
Disinterested Directors so direct, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to the
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Indemnitee, or (iii) if Indemnitee and the Company mutually agree, by the
stockholders of the Company; or
(c) As provided in Section 5.4(b).
If it is so determined that Indemnitee is entitled to indemnification hereunder,
payment to Indemnitee shall be made within 15 days after such determination.
Indemnitee shall cooperate with the person or persons making such determination
with respect to Indemnitee's entitlement to indemnification, including providing
to such person upon reasonable advance request any documentation or information
that is not privileged or otherwise protected from disclosure and that is
reasonably available to Indemnitee and reasonably necessary for such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person or
persons making such determination shall be borne by the Company (irrespective of
the determination as to Indemnitee's entitlement to indemnification), and the
Company shall indemnify and hold harmless Indemnitee therefrom.
Section 5.3 Independent Counsel. If a Change in Control shall not have
occurred and the determination of entitlement to indemnification is to be made
by Independent Counsel, the Independent Counsel shall be selected by (a) a
majority vote of the Disinterested Directors, even though less than a quorum of
the Board or (b) if there are no Disinterested Directors, by a majority vote of
the Board, and the Company shall give written notice to Indemnitee, within 10
days after receipt by the Company of Indemnitee's request for indemnification,
specifying the identity and address of the Independent Counsel so selected. If
a Change in Control shall have occurred and the determination of entitlement to
indemnification is to be made by Independent Counsel, the Independent Counsel
shall be selected by Indemnitee, and Indemnitee shall give written notice to the
Company, within 10 days after submission of Indemnitee's request for
indemnification, specifying the identity and address of the Independent Counsel
so selected (unless Indemnitee shall request that such selection be made by the
Disinterested Directors, in which event the Company shall give written notice to
Indemnitee, within 10 days after receipt of Indemnitee's request for the
Disinterested Directors to make such selection, specifying the identity and
address of the Independent Counsel so selected). In either event, (i) such
notice to Indemnitee or the Company, as the case may be, shall be accompanied by
a written affirmation of the Independent Counsel so selected that it satisfies
the requirements of the definition of "Independent Counsel" in Article I and
that it agrees to serve in such capacity and (ii) Indemnitee or the Company, as
the case may be, may, within seven days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection. Any objection to selection of
Independent Counsel pursuant to this Section 5.3 may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of the definition of "Independent Counsel" in Article I, and the objection shall
set forth with particularity the factual basis of such assertion. If such
written objection is timely made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until the Court has determined that such
objection is without merit. In the event of a timely written objection to a
choice of Independent Counsel, the party originally selecting the Independent
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Counsel shall have seven days to make an alternate selection of Independent
Counsel and to give written notice of such selection to the other party, after
which time such other party shall have five days to make a written objection to
such alternate selection. If, within 30 days after submission of Indemnitee's
request for indemnification pursuant to Section 5.1, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the Court for resolution of any objection that shall have been made
by the Company or Indemnitee to the other's selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person selected by the
Court or by such other person as the Court shall designate, and the person with
respect to whom an objection is so resolved or the person so appointed shall act
as Independent Counsel under Section 5.2. The Company shall pay any and all
reasonable fees and expenses incurred by such Independent Counsel in connection
with acting pursuant to Section 5.2, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 5.3, regardless of
the manner in which such Independent Counsel was selected or appointed. Upon
the due commencement of any judicial proceeding or arbitration pursuant to
Section 6.1, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
Section 5.4 Presumptions and Effect of Certain Proceedings.
(a) Indemnitee shall be presumed to be entitled to indemnification
under this Agreement upon submission of a request for indemnification
pursuant to Section 5.1, and the Company shall have the burden of proof in
overcoming that presumption in reaching a determination contrary to that
presumption. Such presumption shall be used by Independent Counsel (or
other person or persons determining entitlement to indemnification) as a
basis for a determination of entitlement to indemnification unless the
Company provides information sufficient to overcome such presumption by
clear and convincing evidence.
(b) If the person or persons empowered or selected under this Article
V to determine whether Indemnitee is entitled to indemnification shall not
have made a determination within 60 days after receipt by the Company of
Indemnitee's request for indemnification, the requisite determination of
entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification, absent (i) a knowing
misstatement by Indemnitee of a material fact, or knowing omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with Indemnitee's request for indemnification, or
(ii) a prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not
to exceed an additional 30 days, if the person making the determination
with respect to entitlement to indemnification in good faith requires such
additional time for the obtaining or evaluating of documentation and/or
information relating to such determination; provided further, that the 60-
day limitation set forth in this Section 5.4(b) shall not apply and such
period shall be extended as necessary (i) if within
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30 days after receipt by the Company of Indemnitee's request for
indemnification under Section 5.1 Indemnitee and the Company have agreed,
and the Board has resolved, to submit such determination to the
stockholders of the Company pursuant to Section 5.2(b) for their
consideration at an annual meeting of stockholders to be held within 90
days after such agreement and such determination is made thereat, or a
special meeting of stockholders for the purpose of making such
determination to be held within 60 days after such agreement and such
determination is made thereat, or (ii) if the determination of entitlement
to indemnification is to be made by Independent Counsel, in which case the
applicable period shall be as set forth in clause (c) of Section 6.1.
(c) The termination of any Proceeding or of any Claim, issue or
matter by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its
equivalent, shall not by itself adversely affect the rights of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in
good faith or in a manner that he reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to believe that
his conduct was unlawful. Indemnitee shall be deemed to have been found
liable in respect of any Claim, issue or matter only after he shall have
been so adjudged by the Court after exhaustion of all appeals therefrom.
ARTICLE VI
CERTAIN REMEDIES OF INDEMNITEE
Section 6.1 Indemnitee Entitled to Adjudication in an Appropriate Court.
If (a) a determination is made pursuant to Article V that Indemnitee is not
entitled to indemnification under this Agreement, (b) there has been any failure
by the Company to make timely payment or advancement of any amounts due
hereunder, or (c) the determination of entitlement to indemnification is to be
made by Independent Counsel and such determination shall not have been made and
delivered in a written opinion within 90 days after the latest of (i) such
Independent Counsel's being appointed, (ii) the overruling by the Court of
objections to such counsel's selection or (iii) expiration of all periods for
the Company or Indemnitee to object to such counsel's selection, Indemnitee
shall be entitled to commence an action seeking an adjudication in the Court of
his entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the commercial arbitration rules of
the American Arbitration Association. Indemnitee shall commence such action
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such action pursuant to
this Section 6.1, or such right shall expire. The Company shall not oppose
Indemnitee's right to seek any such adjudication or award in arbitration.
Section 6.2 Adverse Determination Not to Affect any Judicial Proceeding.
If a determination shall have been made pursuant to Article V that Indemnitee is
not entitled to
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indemnification under this Agreement, any judicial proceeding or arbitration
commenced pursuant to this Article VI shall be conducted in all respects as a de
novo trial or arbitration on the merits, and Indemnitee shall not be prejudiced
by reason of such initial adverse determination. In any judicial proceeding or
arbitration commenced pursuant to this Article VI, Indemnitee shall be presumed
to be entitled to indemnification or advancement of Expenses, as the case may
be, under this Agreement and the Company shall have the burden of proof in
overcoming such presumption and to show by clear and convincing evidence that
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
Section 6.3 Company Bound by Determination Favorable to Indemnitee in any
Judicial Proceeding or Arbitration. If a determination shall have been made or
deemed to have been made pursuant to Article V that Indemnitee is entitled to
indemnification, the Company shall be irrevocably bound by such determination in
any judicial proceeding or arbitration commenced pursuant to this Article VI and
shall be precluded from asserting that such determination has not been made or
that the procedure by which such determination was made is not valid, binding
and enforceable, in each such case absent (a) a knowing misstatement by
Indemnitee of a material fact, or a knowing omission of a material fact
necessary to make a statement by Indemnitee not materially misleading, in
connection with Indemnitee's request for indemnification or (b) a prohibition of
such indemnification under applicable law.
Section 6.4 Company Bound by the Agreement. The Company shall be
precluded from asserting in any judicial proceeding or arbitration commenced
pursuant to this Article VI that the procedures and presumptions of this
Agreement are not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the Company is bound by all the
provisions of this Agreement.
Section 6.5 Indemnitee Entitled to Expenses of Judicial Proceeding. If
Indemnitee seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and the Company shall
indemnify Indemnitee against, any and all expenses (of the types described in
the definition of Expenses in Article I) actually and reasonably incurred by him
in such judicial adjudication or arbitration but only if Indemnitee prevails
therein. If it shall be determined in such judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses or other benefit sought, the expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall be
equitably allocated between the Company and Indemnitee. Notwithstanding the
foregoing, if a Change in Control shall have occurred, Indemnitee shall be
entitled to indemnification under this Section 6.5 regardless of whether
Indemnitee ultimately prevails in such judicial adjudication or arbitration.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Non-Exclusivity.
(a) The rights of Indemnitee to receive indemnification and
advancement of Expenses under this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled under
applicable law, the Certificate of Incorporation or Bylaws of the Company, any
other agreement, vote of stockholders or a resolution of directors, or
otherwise. No amendment or alteration of the Certificate of Incorporation or
Bylaws of the Company or any provision thereof shall adversely affect
Indemnitee's rights hereunder and such rights shall be in addition to any rights
Indemnitee may have under the Company's Certificate of Incorporation, Bylaws and
the DGCL or otherwise. To the extent that there is a change in the DGCL or other
applicable law (whether by statute or judicial decision) that allows greater
indemnification by agreement than would be afforded currently under the
Company's Certificate of Incorporation or Bylaws and this Agreement, it is the
intent of the parties hereto that the Indemnitee shall enjoy by virtue of this
Agreement the greater benefit so afforded by such change.
(b) The Company shall not amend the Bylaws of the Company in a manner
that adversely affects Indemnitee's rights to indemnification thereunder
existing as of the date hereof until the six-year anniversary of the Public
Status Date.
Section 7.2 Insurance and Subrogation.
(a) To the extent the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise that such person
serves at the request of the Company, Indemnitee shall be covered by such policy
or policies in accordance with its or their terms to the maximum extent of the
coverage available for any such director, officer, employee, agent or fiduciary
under such policy or policies.
(b) In the event of any payment by the Company under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring suit to enforce such
rights.
(c) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee
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has otherwise actually received such payment under the Company's Certificate of
Incorporation or Bylaws or any insurance policy, contract, agreement or
otherwise.
Section 7.3 Certain Settlement Provisions. The Company shall have no
obligation to indemnify Indemnitee under this Agreement for amounts paid in
settlement of a Proceeding or Claim without the Company's prior written consent.
The Company shall not settle any Proceeding or Claim in any manner that would
impose any fine or other obligation on 12 Indemnitee without Indemnitee's prior
written consent. Neither the Company nor Indemnitee shall unreasonably withhold
their consent to any proposed settlement.
Section 7.4 Duration of Agreement. This Agreement shall continue for
so long as Indemnitee serves as a director, nominee for director, officer,
employee, agent or fiduciary of the Company or, at the request of the Company,
as a director, nominee for director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, and thereafter shall survive until and terminate upon the
latest to occur of (a) the expiration of 10 years after the latest date that
Indemnitee shall have ceased to serve in any such capacity; (b) the final
termination of all pending Proceedings in respect of which Indemnitee is granted
rights of indemnification or advancement of Expenses hereunder and of any
proceeding commenced by Indemnitee pursuant to Article VI relating thereto; or
(c) the expiration of all statutes of limitation applicable to possible Claims
arising out of Indemnitee's Corporate Status.
Section 7.5 Notice by Each Party. Indemnitee shall promptly notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document or communication relating
to any Proceeding or Claim for which Indemnitee may be entitled to
indemnification or advancement of Expenses hereunder; provided, however, that
any failure of Indemnitee to so notify the Company shall not adversely affect
Indemnitee's rights under this Agreement except to the extent the Company shall
have been materially prejudiced as a direct result of such failure. The Company
shall notify promptly Indemnitee in writing, as to the pendency of any
Proceeding or Claim that may involve a claim against the Indemnitee for which
Indemnitee may be entitled to indemnification or advancement of Expenses
hereunder.
Section 7.6 Certain Persons Not Entitled to Indemnification.
Notwithstanding any other provision of this Agreement to the contrary,
Indemnitee shall not be entitled to indemnification or advancement of Expenses
hereunder with respect to any Proceeding or any Claim, issue or matter therein,
brought or made by Indemnitee against the Company or any affiliate of the
Company, except as specifically provided in Article V or Article VI.
Section 7.7 Indemnification for Negligence, Gross Negligence, etc.
Without limiting the generality of any other provision hereunder, it is the
express intent of this Agreement that Indemnitee be indemnified and Expenses be
advanced regardless of Indemnitee's acts of negligence, gross negligence or
intentional or willful misconduct to the extent that indemnification
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and advancement of Expenses is allowed pursuant to the terms of this Agreement
and under applicable law.
Section 7.8 Enforcement. The Company agrees that its execution of
this Agreement shall constitute a stipulation by which it shall be irrevocably
bound in any court or arbitration in which a proceeding by Indemnitee for
enforcement of his rights hereunder shall have been commenced, continued or
appealed, that its obligations set forth in this Agreement are unique and
special, and that failure of the Company to comply with the provisions of this
Agreement will cause irreparable and irremediable injury to Indemnitee, for
which a remedy at law will be inadequate. As a result, in addition to any other
right or remedy he may have at law or in equity with respect to breach of this
Agreement, Indemnitee shall be entitled to injunctive or mandatory relief
directing specific performance by the Company of its obligations under this
Agreement.
Section 7.9 Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon, shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors, assigns,
heirs, executors, administrators, legal representatives. The Company shall
require and cause any direct or indirect successor (whether by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, by written agreement in form and substance reasonably
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place.
Section 7.10 Amendment. This Agreement may not be modified or
amended except by a written instrument executed by or on behalf of each of the
parties hereto.
Section 7.11 Waivers. The observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party entitled to enforce such term only
by a writing signed by the party against which such waiver is to be asserted.
Unless otherwise expressly provided herein, no delay on the part of any party
hereto in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
Section 7.12 Entire Agreement. This Agreement and the documents
expressly referred to herein constitute the entire agreement between the parties
hereto with respect to the matters covered hereby, and any other prior or
contemporaneous oral or written understandings or agreements with respect to the
matters covered hereby are expressly superseded by this Agreement.
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Section 7.13 Severability. If any provision of this Agreement
(including any provision within a single section, paragraph or sentence) or the
application of such provision to any person or circumstance, shall be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, it being the
intent and agreement of the parties that this Agreement shall be deemed amended
by modifying such provision to the extent necessary to render it valid, legal
and enforceable while preserving its intent, or if such modification is not
possible, by substituting therefor another provision that is valid, legal and
unenforceable and that achieves the same objective. Any such finding of
invalidity or unenforceability shall not prevent the enforcement of such
provision in any other jurisdiction to the maximum extent permitted by
applicable law.
Section 7.14 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery of
a standard overnight courier or when delivered by hand or (c) the expiration of
five business days after the date mailed by certified or registered mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other addresses for a party as shall be specified by like notice):
If to the Company, to:
Electronic Data Systems Holding Corporation
5400 Legacy Drive, Mail Stop #H3-3D-05
Plano, Texas 75024
Attention: General Counsel
Facsimile: (214) 605-5610
If to Indemnitee, to:
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Facsimile:
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Section 7.15 Certain Construction Rules.
(a) The article and section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. As used in this
Agreement, unless otherwise provided to the contrary, (i) all
references to days shall be deemed references to calendar days and
(ii) any reference to a "Section" or "Article" shall be deemed to
refer to a section or article of this Agreement. The words "hereof,"
"herein" and "hereunder" and words of similar import
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referring to this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Unless otherwise specifically provided for herein, the term "or" shall
not be deemed to be exclusive. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns,
pronouns and verbs shall include the plural and vice versa.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; references to "serving at the
request of the Company" shall include any service as a director,
nominee for director, officer, employee or agent of the Company which
imposes duties on, or involves services by, such director, nominee,
officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests
of the Company" as referred to in this Agreement.
Section 7.16 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof.
Section 7.17 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument,
notwithstanding that both parties are not signatories to the original or same
counterpart.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered to be effective as of the date first above written.
ELECTRONIC DATA SYSTEMS HOLDING
CORPORATION
By:
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Name:
-----------------------------
Title:
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INDEMNITEE
[Signature]
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Name: [Printed Name]
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EXHIBIT 10(G)
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ELECTRONIC DATA SYSTEMS CORPORATION
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Trustee
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INDENTURE
Dated as of May 15, 1995
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PARTIES............................................................ 1
RECITALS OF THE COMPANY............................................ 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions........................................... 1
"Act"................................................. 2
"Affiliate"........................................... 2
"Attributable Debt"................................... 2
"Authenticating Agent"................................ 2
"Board of Directors".................................. 2
"Board Resolution".................................... 2
"Business Day"........................................ 2
"Commission".......................................... 2
"Company"............................................. 3
"Company Request" or "Company Order".................. 3
"Consolidated Net Tangible Assets".................... 3
"Corporate Trust Office".............................. 3
"Corporation"......................................... 3
"Debt"................................................ 3
"Defaulted Interest".................................. 3
"defeasance".......................................... 3
"Depositary".......................................... 3
"Direction"........................................... 3
"Exempt Securities"................................... 3
"Event of Default".................................... 3
"Funded Debt"......................................... 3
"Global Security"..................................... 4
"Global Security Registered Owner".................... 4
"Holder".............................................. 4
"Indenture"........................................... 4
"Interest"............................................ 4
"Interest Payment Date"............................... 4
"Maturity"............................................ 4
"Mortgage"............................................ 4
"Officer's Certificate"............................... 4
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"Opinion of Counsel".................................. 4
"Original Issue Discount Security".................... 4
"Outstanding"......................................... 4
"Paying Agent"........................................ 5
"Person".............................................. 5
"Place of Payment".................................... 5
"Predecessor Security"................................ 5
"Real Property"....................................... 6
"Redemption Date"..................................... 6
"Redemption Price".................................... 6
"Regular Record Date"................................. 6
"Repurchase Date"..................................... 6
"Repurchase Price".................................... 6
"Responsible Officer"................................. 6
"Restricted Subsidiary"............................... 6
"Restricted Security"................................. 7
"Rule 144A Information"............................... 7
"Sale and Leaseback Transaction"...................... 7
"Securities".......................................... 7
"Securities Act"...................................... 7
"Security Register" and "Security Registrar".......... 7
"Special Record Date"................................. 7
"Stated Maturity"..................................... 7
"Subsidiary".......................................... 7
"Trustee"............................................. 7
"Trust Indenture Act"................................. 7
"U.S. Government Obligations"......................... 7
"Vice President"...................................... 8
"Voting Stock"........................................ 8
Section 102. Form of Documents Delivered to Trustee................ 8
Section 103. Acts of Holders; Record Dates......................... 8
Section 104. Notices, Etc., to Trustee and Company................. 10
Section 105. Notice to Holders; Waiver............................. 11
Section 106. Applicability of Trust Indenture Act.................. 11
Section 107. Effect of Headings and Table of Contents.............. 11
Section 108. Successors and Assigns................................ 11
Section 109. Separability Clause................................... 11
Section 110. Benefits of Indenture................................. 12
Section 111. Governing Law......................................... 12
Section 112. Legal Holidays........................................ 12
Section 113. Execution in Counterparts............................. 12
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ARTICLE TWO
Security Forms
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Section 201. Forms Generally................................................. 12
Section 202. Form of Trustee's Certificate of Authentication................. 13
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series............................. 13
Section 302. Denominations.................................................... 15
Section 303. Execution, Authentication, Delivery and Dating................... 16
Section 304. Temporary Securities............................................. 17
Section 305. Registration, Registration of Transfer and Exchange.............. 18
Section 306. Mutilated, Destroyed, Lost and Stolen Securities................. 20
Section 307. Payment of Principal and Interest; Interest Rights Preserved..... 20
Section 308. Persons Deemed Owners............................................ 22
Section 309. Cancellation..................................................... 22
Section 310. Computation of Interest.......................................... 22
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.......................... 23
Section 402. Application of Trust Money....................................... 24
ARTICLE FIVE
Remedies
Section 501. Events of Default................................................ 24
Section 502. Acceleration of Maturity; Rescission and Annulment............... 25
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.. 27
Section 504. Trustee May File Proofs of Claim................................. 27
Section 505. Trustee May Enforce Claims Without Possession of Securities...... 28
Section 506. Application of Money Collected................................... 28
Section 507. Limitation on Suits.............................................. 28
Section 508. Unconditional Right of Holders to Receive Principal Premium and
Interest......................................................... 29
Section 509. Restoration of Rights and Remedies............................... 29
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Section 510. Rights and Remedies Cumulative.................................. 29
Section 511. Delay or Omission Not Waiver.................................... 29
Section 512. Control by Holders.............................................. 30
Section 513. Waiver of Past Defaults......................................... 30
Section 514. Undertaking for Costs........................................... 30
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities............................. 31
Section 602. Notice of Defaults.............................................. 32
Section 603. Certain Rights of Trustee....................................... 32
Section 604. Not Responsible for Recitals or Issuance of Securities.......... 33
Section 605. May Hold Securities............................................. 33
Section 606. Money Held in Trust............................................. 34
Section 607. Compensation and Reimbursement.................................. 34
Section 608. Disqualification; Conflicting Interests......................... 34
Section 609. Corporate Trustee Required; Eligibility......................... 38
Section 610. Resignation and Removal; Appointment of Successor............... 38
Section 611. Acceptance of Appointment by Successor.......................... 40
Section 612. Merger, Conversion, Consolidation or Succession to Business..... 41
Section 613. Compliance with Tax Laws........................................ 41
Section 614. Appointment of Authenticating Agent............................. 41
ARTICLE SEVEN
Communications to Holders
Section 701. Communications to Holders....................................... 43
ARTICLE EIGHT
Consolidation, Merger, Conveyance or Transfer
Section 801. Consolidations and Mergers of Company and Conveyances Permitted
Subject to Certain Conditions................................... 44
Section 802. Rights and Duties of Successor Corporation...................... 44
Section 803. Officer's Certificate and Opinion of Counsel.................... 45
ARTICLE NINE
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Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders............... 45
Section 902. Supplemental Indentures with Consent of Holders.................. 46
Section 903. Execution of Supplemental Indentures; Opinions................... 47
Section 904. Effect of Supplemental Indentures................................ 47
Section 905. Conformity with Trust Indenture Act.............................. 48
Section 906. Reference in Securities to Supplemental Indentures............... 48
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest...................... 48
Section 1002. Maintenance of Office or Agency................................. 48
Section 1003. Money for Securities Payments to Be Held in Trust............... 49
Section 1004. Statement by Officers as to Default............................. 49
Section 1005. Limitation on Liens............................................. 50
Section 1006. Limitation on Sales and Leasebacks.............................. 51
Section 1007. Waiver of Certain Covenants..................................... 51
Section 1008. Delivery of Certain Information................................. 52
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article........................................ 52
Section 1102. Election to Redeem; Notice to Trustee........................... 52
Section 1103. Selection by Trustee of Securities to Be Redeemed............... 52
Section 1104. Notice of Redemption............................................ 53
Section 1105. Deposit of Redemption Price..................................... 53
Section 1106. Securities Payable on Redemption Date........................... 54
Section 1107. Securities Redeemed in Part..................................... 54
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article........................................ 54
Section 1202. Satisfaction of Sinking Fund Payments with Securities........... 55
Section 1203. Redemption of Securities for Sinking Fund....................... 55
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ARTICLE THIRTEEN
Defeasance
Section 1301. Applicability of Article; Company's Option to Effect Defeasance. 55
Section 1302. Defeasance and Discharge........................................ 56
Section 1303. Covenant Defeasance............................................. 56
Section 1304. Conditions of Defeasance........................................ 56
Section 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous............................................ 57
Section 1306. Reinstatement................................................... 58
ARTICLE FOURTEEN
Repurchase of Securities at Option of Holders
Section 1401. Applicability of Article........................................ 58
Section 1402. Notice of Repurchase Date....................................... 58
Section 1403. Deposit of Repurchase Price..................................... 59
Section 1404. Securities Payable on Repurchase Date........................... 59
Section 1405. Securities Repurchased in Part.................................. 59
ARTICLE FIFTEEN
Corporate Obligation Only
Section 1501. Indenture and Securities Solely Corporate Obligations........... 60
TESTIMONIUM................................................................... 61
SIGNATURES.................................................................... 61
ACKNOWLEDGMENTS............................................................... 62
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INDENTURE
INDENTURE, dated as of May 15, 1995, between Electronic Data Systems
Corporation, a corporation duly organized and existing under the laws of the
state of Texas (the "Company"), and Texas Commerce Bank National Association, a
national banking association organized under the laws of the United States, as
Trustee (the "Trustee").
RECITALS OF THE COMPANY
A. The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (the "Securities"), to be
issued in one or more series unlimited as to principal amount, to bear such
rates of interest, to mature at such times and to have such other provisions as
in this Indenture provided.
B. All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Securities are authenticated, issued and delivered, and in consideration of the
premises and the purchase of the Securities by the Holders (as defined herein)
thereof, the Company and the Trustee covenant and agree with each other, for the
benefit of all Holders from time to time of the Securities or of any series
thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
For all purposes of this Indenture and of any Indenture supplemental
hereto, except as otherwise expressly provided or unless the context otherwise
requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation;
(3) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
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(4) the word "or" joining two or more words or clauses may also mean
the word "and" joining those same words or clauses;
(5) the word "including" means including without limitation; and
(6) words in the singular include the plural and words in the plural
include the singular.
"Act," when used with respect to any Holder, has the meaning specified
in Section 103.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of that Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Attributable Debt" means, as to any particular Sale and Leaseback
Transaction, at any date as of which the amount thereof is to be determined, the
total amount determined by multiplying (i) the greater of (a) the fair value of
the Real Property subject to such arrangement (as determined by any two of the
Chairman of the Board or any Vice Chairman of the Company, its President, its
Treasurer and its Controller) or (b) the net proceeds of the sale of such Real
Property to the lender or investor by (ii) a fraction, the numerator of which is
the number of months in the unexpired initial term of the lease of such Real
Property and the denominator of which is the number of months in the full
initial term of such lease; provided, however, that Sale and Leaseback
Transactions with respect to Real Property financed by obligations issued by a
state or local governmental unit (whether or not tax exempt pursuant to Section
103(b)(4)(F), 103(b)(4)(E) or 103(b)(6) of the Internal Revenue Code, or any
successor provision thereof) shall not be included in any calculation of
Attributable Debt.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company, the Finance Committee of the board of directors of the Company, or any
duly authorized committee or subcommittee thereof.
"Board Resolution" means a copy of a resolution delivered to the
Trustee that is certified by the Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification.
"Business Day" when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York, New York, or Houston, Texas, and the Place of
Payment are authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the United States Securities Exchange
Act of 1934.
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"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
delivered to the Trustee that is signed in the name of the Company by any of the
following: its Chairman of the Board, its Vice Chairman of the Board, its
President, any Vice President, its Treasurer, any Assistant Treasurer, its
Controller, any Assistant Controller, its Secretary or any Assistant Secretary.
"Consolidated Net Tangible Assets" means the aggregate amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any current
liabilities for money borrowed having a maturity of less than 12 months but by
its terms being renewable or extendible beyond 12 months from such date at the
option of the borrower) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent balance sheet of the Company and its consolidated
subsidiaries and computed in accordance with generally accepted accounting
principles.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located in Houston, Texas, except that with respect to the
presentation of Securities for payment or for registration of transfer and
exchange, such term shall also mean the office of the Trustee's agent in the
Borough of Manhattan, the city and state of New York, at which at any particular
time its corporate agency business shall be conducted.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Debt" has the meaning specified in Section 1005.
"Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 301.
"Direction" has the meaning specified in Section 103(c).
"Exempt Securities" has the meaning given it in Section 1008.
"Event of Default" has the meaning specified in Section 501.
"Funded Debt" means all indebtedness for money borrowed having a
maturity of more than 12 months from the date as of which the amount thereof is
to be determined.
"Global Security" means a Security evidencing all or part of a series
of Securities, issued to the Depositary for such series or its nominee, and
registered in the name of such Depositary or nominee.
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"Global Security Registered Owner" has the meaning given it in Section
305.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
The term "Indenture" shall also include the terms of particular series of
Securities established as contemplated by Section 301, whether or not a
supplemental indenture is entered into with respect thereto.
"Interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption, occurrence of any Repurchase
Date or otherwise.
"Mortgage" has the meaning specified in Section 1005.
"Officer's Certificate" means a certificate delivered to the Trustee
that is signed by any of the following officers of the Company: its Chairman of
the Board, its Vice Chairman of the Board, its President, any Vice President,
its Treasurer, any Assistant Treasurer, its Controller, any Assistant
Controller, its Secretary or any Assistant Secretary.
"Opinion of Counsel" means a written opinion of counsel from counsel
for the Company (who may be an employee of the Company), or outside counsel for
the Company.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding," when used with respect to any series of Securities,
means, as of the date of determination, all Securities of that series which are
authenticated and delivered under this Indenture, except:
(i) Securities of that series previously cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities of that series for whose payment or redemption money in
the necessary amount has been previously deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made; and
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(iii) Securities of that series which have been paid pursuant to Section
306 or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities of any series have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
(A) the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that would
be due and payable as of the date of such determination upon acceleration of the
Maturity thereof pursuant to Section 502, (B) the principal amount of a Security
denominated in one or more foreign currencies or currency units shall be the
U.S. dollar equivalent, determined in the manner provided as contemplated by
Section 301 on the date of original issuance of such Security, of the principal
amount (or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent on the date of original issuance of such Security of the amount
determined as provided in (A) above) of such Security, and (C) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Notwithstanding the foregoing clause (C), Securities so
owned by the Company, such obligor, or such Affiliate that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities so long as the pledgee is not the Company or any other obligor upon
the Securities or an Affiliate of the Company or of such other obligor.
"Paying Agent" means initially the Trustee or the Trustee's agent in
the Borough of Manhattan, the city and state of New York, and subsequently means
any Person authorized by the Company to pay the principal of, premium (if any),
or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or any other entity or government or any agency or
political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any
series, means offices of the Paying Agent or the Trustee in the Borough of
Manhattan, City of New York, or such other place or places where the principal
of, premium (if any), and interest on the Securities of that series are payable
as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Real Property" means any real property, and any building, structure
or other facility thereon, located in the United States (excluding its
territories and possessions, but including Puerto Rico), owned or leased by the
Company or any Subsidiary of the Company, the gross book value (without
deduction of any depreciation reserves) of which on the date as of which the
determination is being made exceeds 1% of
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Consolidated Net Tangible Assets, other than any such real property, building,
structure or other facility or portion thereof (i) that is financed by
obligations issued by a state or local governmental unit (whether or not tax
exempt pursuant to Section 103(b)(4)(F), 103(b)(4)(E) or 103(b)(6) of the
Internal Revenue Code of 1954, or any successor provision thereof in the
Internal Revenue Code of 1986), (ii) that consists of approximately 175.35 acres
currently known as the Company's Forest Lane property located in Dallas, Texas,
and more particularly described on Exhibit A hereto, (iii) that consists of
approximately 381 acres and currently known as the Company's Plano headquarters
property located in Plano, Texas, and more particularly described on Exhibit A
hereto, or (iv) which if not owned or leased by the Company or its Subsidiaries,
in the opinion of the Board of Directors of the Company, would not have a
material adverse effect on the business conducted by the Company and its
Subsidiaries as an entirety.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the fifteenth day (whether or not a
Business Day) next preceding such Interest Payment Date or such other date with
respect to Securities of any series specified as contemplated by Section 301.
"Repurchase Date," when used with respect to any Security of any
series to be repurchased, means the date, if any, fixed for such repurchase
pursuant to Section 301.
"Repurchase Price," when used with respect to any Security of any
series to be repurchased, means the price, if any, at which such Security is to
be repurchased pursuant to Section 301.
"Responsible Officer," when used with respect to the Trustee, means
the Chairman or Vice Chairman of the Board of Directors, the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant
Treasurer or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred at the Trustee's Corporate Trust Office because of that person's
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary that owns a Real
Property, except a Subsidiary that is engaged primarily in financing the
operations of the Company or its Subsidiaries, or both, outside the states of
the United States, and (a) more than 50% of whose net sales and operating
revenues during the preceding four calendar quarters was derived from, or more
than 50% of whose operating properties is located in, the United States
(excluding its territories and possessions, but including Puerto Rico), or (b)
more than 50% of whose assets consists of securities of other Restricted
Subsidiaries.
"Restricted Security" means a Security that is a "restricted security"
as defined in Rule 144(a)(3) under the Securities Act or any successor provision
thereto or a Security that by its terms can only be sold pursuant to Regulation
S, Rule 144, or Rule 144A under the Securities Act (or successor provisions
thereto) or in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4 of the Securities Act; provided, however,
that once the Security is sold pursuant to the provisions of Rule 144, including
Rule 144(k), it will cease to be a Restricted Security.
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"Rule 144A Information" means the information satisfying the
requirements of Rule 144A(d)(4) under the Securities Act.
"Sale and Leaseback Transaction" has the meaning specified in Section
1006.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities of any series authenticated
and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means a corporation, association, partnership or other
entity of which more than 80% of the outstanding Voting Stock is owned, directly
or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument is qualified under such act, to
the extent required by law, as amended from time to time.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
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"Vice President" when used with respect to the Trustee means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president," and when used with respect to the Company
means any vice president who is an officer of the Company, whether or not
designated by a number or word or words before such title.
"Voting Stock" means stock of the class or classes having general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such corporation, association,
partnership or other entity (irrespective of whether or not at the time stock of
any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
Section 102. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of counsel may be based, insofar as it relates to factual matters or information
with respect to which is in the possession of the Company, upon a certificate or
opinion of, or representations by, an officer or officers of the Company, unless
such counsel knows that the certificate or opinion or representations with
respect to such matters are erroneous. Any Opinion of Counsel may be stated to
be based on the opinion of other counsel, in which event it shall be accompanied
by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 103. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is expressly hereby required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including
a Depositary that is a Holder of a Global Security, may make, give or take, by a
proxy, or proxies, duly appointed in writing, any
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request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted in this Indenture to be made, given or taken by
Holders, and a Depositary that is a Holder of a Global Security may provide its
proxy or proxies to the beneficial owners of interest in any such Global
Security.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by an officer of a corporation or a member of a partnership,
acting on behalf of such corporation or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority.
Notwithstanding the foregoing, the fact and date of the execution of any such
instrument or writing, and the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient.
(c) Except as provided in the next paragraph of this subsection (c) or
as specifically provided otherwise pursuant to Section 301 with respect to any
series of securities, the Company may set any day as the record date for the
purpose of determining the Holders of Securities of any series entitled to give
or take any request, demand, authorization, direction, notice, consent, waiver
or other action, or to vote on any action, authorized or permitted to be given
or taken by Holders of Securities of such series. With regard to any record
date set pursuant to this subsection (c), the Holders of Outstanding Securities
of the relevant series on such record date (or their duly appointed agents), and
only such Persons, shall be entitled to give or take the relevant action,
whether or not such Holders remain Holders after such record date. With regard
to any action that may be given or taken hereunder only by Holders of a
requisite principal amount of Outstanding Securities of any series (or their
duly appointed agents) and for which a record date is set pursuant to this
subsection (c), the Company may, at its option, set an expiration date after
which no such action purported to be given or taken by any Holder shall be
effective hereunder unless given or taken on or prior to such expiration date by
Holders of the requisite principal amount of Outstanding Securities of such
series on such record date (or their duly appointed agents). On or prior to any
expiration date set pursuant to this subsection (c), the Company may, on one or
more occasions at its option, extend such date to any later date. Nothing in
this subsection (c) shall prevent any Holder (or any duly appointed agent
thereof) from giving or taking, after any expiration date, any action identical
to, or, at any time, contrary to or different from any action given or taken, or
purported to have been given or taken, hereunder by a Holder on or prior to such
date, in which event the Company may set a record date in respect hereof
pursuant to this subsection (c).
Notwithstanding the foregoing, upon receipt by the Trustee, with
respect to Securities of any series, of (i) any Notice of Default pursuant to
Section 501, (ii) any declaration of acceleration, or any rescission and
annulment of any such declaration pursuant to Section 502, or (iii) any
direction given pursuant to Section 512 (any such notice, declaration,
rescission and annulment, or direction being referred to herein as a
"Direction"), a record date shall automatically and without any other action by
any Person be set for the purpose of determining the Holders of Outstanding
Securities of such series entitled to join in such Direction, which record date
shall be the close of business on the day the Trustee receives such Direction.
The Holders of Outstanding Securities of such series on such record date (or
their duly appointed agents), and only such Persons, shall be entitled to join
in such Direction, whether or not such Holders remain Holders after such record
date; provided that, unless such Direction shall have become effective by virtue
of Holders of the requisite principal amount of Outstanding Securities of such
series on such record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date, such Direction shall
automatically and without any action by any Person be cancelled and be of no
further effect. Nothing in this paragraph shall prevent a Holder (or a duly
appointed agent thereof) from giving, before or after the expiration of such 90-
day period, a Direction contrary to or different from, or, after the expiration
of such period,
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identical to, a Direction that has been cancelled pursuant to the proviso to the
preceding sentence, in which event a new record date in respect thereof shall be
set pursuant to this subsection (c).
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange thereof or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee, any
Security Registrar, any Paying Agent, any Authenticating Agent, or the Company
in reliance thereon, whether or not notation of such action is made upon such
Security.
Section 104. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
(which includes by telecopy) to or with the Trustee at its Corporate Trust
Office, 600 Travis, 8th Floor, Houston, Texas 77002, Attention: Vice
President, Corporate Trust Department, or at such other address as
previously furnished in writing to the Holders and the Company by the
Trustee for such purpose, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, registered or certified mail postage prepaid, to the
Company addressed to it at EDS Treasury Operations, H1-3F-35, 5400 Legacy
Drive, Plano, Texas 75024, Attention: Manager Capital Markets, with a copy
to EDS Legal Affairs, 5400 Legacy Drive, Plano, Texas 75024, Attention:
General Counsel or at any other addresses previously furnished in writing
to the Trustee by the Company for such purpose.
Section 105. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice mailed to the Holder in the
manner herein prescribed shall be conclusively deemed to have been received by
such Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
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Section 106. Applicability of Trust Indenture Act.
This Indenture shall not be qualified under the Trust Indenture Act
until such time as the Company, in its sole discretion, shall elect to so
qualify this Indenture upon 30 day's prior written notice to the Trustee. When
and if the Company qualifies this Indenture with the Commission under the Trust
Indenture Act, the provisions of the Trust Indenture Act shall govern this
Indenture and a supplemental indenture to this Indenture shall be executed which
shall amend or replace all provisions herein that are not permitted under that
act.
Section 107. Effect of Headings and Table of Contents.
The Article and section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 109. Separability Clause.
In case any provision in this Indenture or in the Securities of any
series shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Security Registrar,
any Paying Agent, any Authenticating Agent, and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 111. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Repurchase Date, sinking fund payment date or Stated Maturity or Maturity of any
Security of any series or any date by which any report or other information is
due pursuant to any provision of this Indenture shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of such
Securities) payment of interest or principal (and premium, if any) or delivery
of such report or information need not be made on or by such date, but may be
made on the next succeeding Business Day with the same force and effect (a) with
respect to any payment, as if made on the Interest Payment Date, Repurchase Date
or Redemption Date, sinking fund payment date or at the Stated Maturity or
Maturity, and (b) with respect to any such report or other information, as if
delivered by the stated due date. No interest shall accrue for the period from
and after such Interest Payment
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Date, Redemption Date, Repurchase Date, sinking fund payment date or Stated
Maturity or Maturity, as the case may be to such next succeeding Business Day.
Section 113. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
The Securities of each series shall be in substantially the form as
shall be established without the approval of any Holders by or pursuant to a
Board Resolution in accordance with Section 301 or in one or more indentures
supplemental hereto, in each case, including without limitation such appropriate
legends, insertions, omissions, substitutions and other variations as are
required or are not prohibited by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as necessary or appropriate to comply with any
law or with any rule or regulation made pursuant thereto or with any rules or
regulations of any securities exchange on which such series of Securities may be
listed, or to conform to general usage, or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
The definitive Securities of each series shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Section 202. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities designated as [name of series], which is
a series referred to in the within-mentioned Indenture.
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
As Trustee
By
----------------------------------------
Authorized Signatory
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ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities of all series which may
be issued, executed, authenticated, delivered and Outstanding under this
Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established, without the approval of any Holders, by or pursuant to authority
granted by one or more Board Resolutions and, subject to Section 303, there
shall be set forth in an Officer's Certificate, or established in one or more
indentures supplemental hereto, prior to the issuance of Securities of any
series, any or all of the following, as applicable:
(1) the title of the Securities of the series (which shall distinguish
the Securities of such series from all other series of Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities of the series authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or
1405 and except for any Securities of the series which, pursuant to Section
303, are deemed never to have been authenticated and delivered hereunder);
(3) if other than the Trustee, the identity of each Security Registrar
and Paying Agent;
(4) the date or dates, or the method by which such date or dates are
determined or extended, on which the principal and premium (if any) of the
Securities of the series shall be payable;
(5) the rate or rates (which may be fixed or variable) at which the
Securities of the series shall bear interest, or the method by which such
rates will be determined, if any, the date or dates from which such
interest shall accrue, the Interest Payment Dates on which any such
interest shall be payable, or the method by which such date will be
determined, and the basis upon which interest shall be calculated if other
than that of a 360-day year of twelve thirty-day months;
(6) If other than the fifteenth day next preceding an Interest Payment
Date, the Regular Record Date with respect to an Interest Payment Date;
(7) the place or places, if any, other than or in addition to the
Corporate Trust Office, where the principal of, premium (if any), and
interest on Securities of the series shall be payable;
(8) the period or periods within which, the price or prices at which,
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company if the Company
is to have such option;
(9) the obligation, if any, of the Company to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and
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the period or periods within which, the price or prices at which, and the
terms and conditions upon which Securities of the series shall be redeemed,
repaid, or purchased, in whole or in part, pursuant to such obligation;
(10) if other than denominations of $250,000 and integral multiples of
$1,000 in excess thereof, the denominations in which Securities of the
series shall be issuable;
(11) if other than the currency of the United States of America, the
currency, currencies or currency units in which payment of the principal,
premium (if any), and interest on any Securities of the series shall be
payable and the manner of determining the equivalent thereof in the
currency of the United States of America for purposes of the definition of
"Outstanding" in Section 101;
(12) if the amount of payments of principal of, premium (if any), or
interest on any Securities of the series may be determined with reference
to an index, the manner in which such amounts shall be determined;
(13) if the principal of, premium (if any), or interest on any
Securities of the series is to be payable, at the election of the Company
or a Holder thereof, in one or more currencies or currency units other than
that or those in which the Securities are stated to be payable, the
currency, currencies or currency units in which payment of the principal
of, premium (if any), and interest on Securities of such series as to which
such election is made shall be payable, and the periods within which and
the terms and conditions upon which such election is to be made;
(14) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502
or provable in bankruptcy pursuant to Sections 503 and 504;
(15) the application, if any, of either or both of Section 1302 and
Section 1303 to the Securities of the series;
(16) any addition to or change in the Events of Default with respect
to the Securities of the series and any change in the right of the Trustee
or the Holders to declare the principal of, premium (if any), and interest
on, such Securities due and payable;
(17) the applicability of, and any addition to or change in the
covenants and definitions currently set forth in this Indenture or in the
terms currently set forth in Article Eight or Article Ten;
(18) if and as applicable, that the Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities
and, in such case, the Depositary or Depositaries for such Global Security
or Global Securities and any circumstances other than those set forth in
Section 305 in which any such Global Security may be transferred to, and
registered and exchanged for Securities of the series registered in the
name of, a Person other than the Depositary for such Global Security or
nominee thereof, and in which any such transfer may be registered; and
(19) any other terms of the series (which terms shall not be
prohibited by the provisions of this Indenture, except as permitted by
Section 901(4)).
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All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officer's Certificate
referred to above or in any such indenture supplemental hereto. All Securities
of any one series need not be issued at the same time. Unless otherwise
provided, Securities within a single series may have different terms and a
series may be reopened, without the consent of the Holders, for issuance of
additional Securities of such series.
If any of the terms of the series are established by action taken by
or pursuant to one or more Board Resolutions, a copy of an appropriate record of
such action(s) shall be certified by the Secretary or any Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officer's Certificate setting forth the terms of the Securities of such series.
Section 302. Denominations.
Unless other denominations and amounts shall be fixed from time to
time by or pursuant to one or more Board Resolutions, the Securities of each
series shall be issued in registered form without coupons in such denominations
as shall be specified as contemplated by Section 301. In the absence of any
contrary provisions with respect to the Securities of any series pursuant to
Section 301, the Securities of such series shall be issuable in denominations of
$250,000 and integral multiples of $1,000 in excess thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board of Directors, its President, any of its Vice Presidents,
the Chief Financial Officer, the Treasurer or any Assistant Treasurer and
attested by its Secretary or any of its Assistant Secretaries. The signature of
any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time properly serving as such officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities as
provided in this Indenture. In authenticating such Securities and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon,
(a) a copy of the Board Resolutions pertaining to such Securities;
(b) an executed supplemental indenture, if any;
(c) an Officer's Certificate, if there is no supplemental indenture;
and
(d) an Opinion of Counsel stating:
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(1) that the form of such Securities has been established in
conformity with the provisions of this Indenture;
(2) that the terms of such Securities have been established in
conformity with the provisions of this Indenture; and
(3) that such Securities have been duly authorized and, when
executed, authenticated, issued and delivered in accordance with the
terms of this Indenture, and assuming due authentication thereof by
the Trustee, and when such Securities are delivered and paid for by
the purchaser thereof, will constitute valid and legally binding
obligations of the Company enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; provided, however,
that such Opinion of Counsel need express no opinion as to whether a
court in the United States would render a money judgement in a
currency other than that of the United States and the counsel
rendering such Opinion of Counsel shall be entitled to assume for
purposes of such Opinion of Counsel that the internal laws of any
state other than the state of Texas are the same as the internal laws
of the state of Texas.
If such form and terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under such Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of any series are not to be originally issued at
one time, it shall not be necessary to deliver the Board Resolution and the
Officer's Certificate or supplemental indenture otherwise required pursuant to
Section 301 or a Company Order or an Opinion of Counsel otherwise required
pursuant to such preceding paragraph at or prior to the time of authentication
of each Security of such series if such documents are delivered at or prior to
the authentication upon original issuance of the first Security of such series
to be issued.
Each Security shall be dated and issued as of the date of its
authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or its Authenticating Agent by manual signature, and
such certificate upon any such Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any such Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 309, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities of that series which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
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substantially of the tenor of the definitive Securities of that series in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities. In the case of
Securities of any series, such temporary Securities may be in the form of Global
Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable, subject to Section
305 hereof, for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor one or more definitive Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor. Until so
exchanged the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series and tenor.
Section 305. Registration, Registration of Transfer and Exchange.
The Company may act as, or may appoint an agent or the Trustee to act
as, the depository for the safekeeping of certificated Securities, issuing agent
of the Securities, and registrar for the registration of Securities and
transfers of Securities (the "Security Registrar)" pursuant to Section 301. The
Company shall cause to be kept a register (the register maintained by the
Trustee, any agent, or in any other office or agency of the Company in a Place
of Payment being herein sometimes collectively referred to as the "Security
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Securities and of transfers of
Securities. Unless the Company or another agent is designated as the Security
Registrar with respect to any series of Securities pursuant to Section 301, the
Trustee is hereby appointed "Security Registrar" of each series of Securities
for the purpose of registering Securities and transfers of Securities on such
Security Register as herein provided at the Corporate Trust Office in the
Borough of Manhattan, The City of New York. The Security Register shall contain
such information as is necessary to ensure that the Securities are registered as
to principal and interest as required by United States federal tax laws.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount and tenor bearing a number not contemporaneously outstanding.
No Security to be issued upon exchange of an Outstanding Security shall be
issued in a denomination less than $250,000 unless otherwise specified pursuant
to Section 301.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denomination or
denominations and of a like aggregate principal amount and denomination or
tenor, upon surrender of such Securities to be exchanged at such office or
agency, and upon payment of any taxes or governmental charges as hereinafter
provided. Whenever any such Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
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All Securities of any series issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities of the same series surrendered upon such
registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company or the Trustee shall require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of such
Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1405 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of, or exchange Securities of any series during a period beginning at the
opening of business 15 days before any selection of Securities of that series to
be redeemed and ending at the close of business on the day of the mailing of a
notice of redemption of Securities of that series selected for redemption under
Section 1104, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any such Security being redeemed in part, or (iii) to register the transfer of
or exchange any Security during a period beginning five days before the date of
Maturity with respect to such Securities and ending on such date of Maturity.
Notwithstanding the foregoing and except as otherwise specified or
contemplated by Section 301, no Global Security shall be exchangeable pursuant
to this Section 305 or Sections 304, 906, 1107 and 1405 for Securities
registered in the name of, and no transfer of a Global Security of any series
may be registered to, any Person other than the Depositary for such Security or
its nominee unless (1) such Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for such Global Security or if the Company
determines that the Depositary is unable to continue as Depositary and the
Company thereupon fails to appoint a successor Depositary, (2) the Company
executes and delivers to the Trustee a Company Order that such Global Security
shall be so exchangeable and the transfer thereof so registerable, (3) the
Company provides for such exchange pursuant to Section 301, or (4) there shall
have occurred and be continuing an Event of Default, or an event which after
notice or lapse of time would be an Event of Default, with respect to the
Securities evidenced by such Global Security. Upon the occurrence in respect of
any Global Security of any series of any one or more of the conditions specified
in clauses (1), (2), (3) or (4) of the preceding sentence or such other
conditions as may be specified as contemplated by Section 301 for such series,
such Global Security may be exchanged for Securities of the same series
registered in the names of, and the transfer of such Global Security may be
registered to, such Persons (including Persons other than the Depositary with
respect to such series and its nominees) as such Depositary shall direct.
Notwithstanding any other provisions of this Indenture, any Security of any
series authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, any Global Security of that series shall also be a
Global Security and shall bear the legend specified in the Officer's Certificate
or supplemental indenture specified in Section 201 except for any Security of
that series authenticated and delivered in exchange for, or upon registration of
transfer of, a Global Security pursuant to the preceding sentence.
In the event that a Global Security is deposited upon issuance with a
Depositary, it will be registered in the name of the Depositary or a nominee of
the Depositary (the "Global Security Registered Owner"). Payments in respect of
the principal of and interest on any Securities registered in the name of the
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Global Security Registered Owner will be payable to the Global Security
Registered Owner in its capacity as the registered owner of such Global
Security. The Company and the Trustee may treat the person in whose names the
Securities, including the Global Security, are registered as the owner thereof
for the purpose of receiving such payments and for any and all other purposes
whatsoever. None of the Company, the Trustee, the Security Registrar, the
Paying Agent or any agent of the Company or the Trustee will have any
responsibility or liability for (i) any aspect of the records relating to or
payments made on account of the beneficial ownership interests of the Global
Security by the Depositary or any of its participants, or for maintaining,
supervising or reviewing any records of the Depositary or any of its
participants relating to the beneficial ownership interests of the Global
Security, (ii) the payments to the beneficial owners of the Global Security of
amounts paid to the Global Security Registered Owner, or (iii) for any other
matter relating to the actions and practices of the Depositary or any of its
participants. Neither the Company nor the Trustee will be liable for any delay
by the Global Security Registered Owner or the Depositary or any of its
participants in identifying the beneficial owners of the Securities, and the
Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Security Registered Owner or the
Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the Securities to be issued).
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee or the
Company, together with such security, bond or indemnity as may be required by
the Company or the Trustee to save each of them and any agent of either of them
harmless, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same series and of like tenor
and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security, bond or indemnity in a form satisfactory to both of them
to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
Notwithstanding the provisions of the previous paragraphs of this
Section 306, in case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
or the Trustee shall require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee), if any, connected
therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security of the same series shall
constitute an original additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities of that series duly issued
hereunder. A new Security shall have such legends as are on the old Security,
unless the Company provides otherwise.
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Principal and Interest; Interest Rights Preserved.
Principal, premium (if any), and interest due on a Security at
Maturity or upon redemption or repurchase will be paid by wire transfer in
immediately available funds against presentation and surrender of the Security
by the Holder thereof at the office of the Paying Agent, but only if appropriate
wire transfer instructions have been received in writing (or such other means as
deemed acceptable by the Paying Agent) by the Paying Agent not less than 15 days
before Maturity or the Redemption Date or repayment date. In the event such
instructions are not received by such 15th day, such principal, premium (if
any), and interest due will be paid by check against such presentation and
surrender.
Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest. All interest payments on any Security (other than interest
due at Maturity or on redemption or repayment) will be made by mailing a check
for such interest, payable to or upon the written order of the Person entitled
thereto pursuant to Section 301, to the address of such Person as it appears on
the Security Register. Notwithstanding the foregoing, the Holder of Securities
in an aggregate principal amount in excess of $10,000,000 may elect to receive
payments of interest (other than interest payable on the Stated Maturity or on
redemption or repayment) via wire transfer in immediately available funds to a
bank in the United States of America by making arrangements therefor in writing
(or such other means as deemed acceptable by the Paying Agent) with the Paying
Agent not later than the Regular Record Date immediately preceding the
applicable Interest Payment Date.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date for
Securities of such series (herein called "Defaulted Interest") shall forthwith
cease to be payable to the registered Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment (which
date of proposed payment shall be not less than 25 days after the receipt
by the Trustee of the notice of proposed payment), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit on
or prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly
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notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Securities of such series at
his address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of such
series in respect of which interest is in default are listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of, premium (if any),
and (subject to Sections 305 and 307) any interest on such Security and for all
other purposes whatsoever, whether or not such Security be overdue, and none of
the Company, the Trustee, or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Notwithstanding the foregoing, with respect to any Global Security,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by any Depositary, as a Holder, with respect to
such Global Security or impair, as between such Depositary and owners of
beneficial interests in such Global Security, the operation of customary
practices governing the exercise of the rights of such Depositary (or its
nominee) as Holder of such Global Security.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all such Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section. The Trustee is hereby directed by the Company to destroy all
cancelled Securities held by the
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Trustee or hold such Securities in accordance with the Trustee's standard
retention policy, and the Trustee shall provide the Company with a certificate
of a Responsible Officer certifying as to the destruction or retention of such
Securities, all in accordance with the Trustee's customary procedures.
Section 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year consisting of twelve 30-day months. No
interest will accrue with respect to the 31st day of any month.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect to any
series of Securities specified in a Company Request (except as to any surviving
rights of registration of transfer or exchange of Securities herein expressly
provided for), and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when
(1) either
(A) all Securities of such series theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid for as provided in Section 306
and (ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in Section
1003) have been delivered to the Trustee for cancellation; or
(B) all Securities of such series not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal, premium (if any), and interest to the date of
such deposit (in the case of such Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
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(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture with respect to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to a series of Securities, the obligations of the Company and the
Trustee to the Holders of Securities of other series not so satisfied and
discharged, the obligations of the Company to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under Section 614, and,
if money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
Subject to provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities of each
series and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, for all sums due or to become due
thereon for principal, premium (if any), and interest.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default," wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of that default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series when it becomes due and payable at its
Maturity; or
(3) default in the deposit of any sinking fund payment, when due by
the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture with respect to any Security of that
series (other than a covenant or warranty a default in the performance of
which or the breach of which is elsewhere in this Section specifically
dealt with or that has expressly been included in this Indenture solely for
the benefit of series of Securities other than that series), and
continuance of that default or breach for a period of 90 days after there
has been
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given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice
specifying the default or breach and requiring it to be remedied and
stating that the notice is a "Notice of Default" hereunder; or
(5) if an event of default as defined in any mortgage, indenture,
bonds, debentures, notes or instrument under which there may be issued, or
by which there may be secured or evidenced, any indebtedness of the Company
for money borrowed, whether such indebtedness now exists or shall hereafter
be created, shall happen and shall result in more than $50,000,000 (or its
equivalent in any other currency) in principal amount of such indebtedness
becoming or being declared due and payable before the date on which it
would otherwise become due and payable, and that acceleration shall not be
rescinded or annulled, or that indebtedness shall not have been discharged,
within a period of 10 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying the event
of default and requiring the Company to cause the acceleration to be
rescinded or annulled or to cause that indebtedness to be discharged and
stating that the notice is a "Notice of Default" hereunder; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of all or
substantially all of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of all or substantially all of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company in furtherance of any such action; or
(8) any other Event of Default provided with respect to Securities of
that series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 25% in
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aggregate principal amount of the Outstanding Securities of that series may
declare the principal amount (or, if any of the Securities of that series are
Original Issue Discount Securities, such portion of the principal amount of such
Securities as may be specified in the terms thereof) of all of the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount), plus any interest accrued on the
Securities of such series to the date of declaration, shall become immediately
due and payable.
Upon payment (i) of (A) such principal amount and (B) such interest
and (ii) of interest on any overdue principal and overdue interest at the rate
or rates prescribed therefor in the Securities (in each case to the extent that
the payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of principal of and interest on the
Securities of such series shall terminate.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences (and the
particular event on which the declaration of acceleration is based shall no
longer be grounds for a declaration of acceleration) if both
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all Outstanding
Securities of that series,
(B) the principal of (and premium, if any, on) any Outstanding
Securities of that series which have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or
rates prescribed therefor or in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of (or premium, if any) or
interest on Securities of that series which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest on
any Security of any series when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security of any series at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of Securities of such series, the whole amount then due and payable on
such Securities for principal, premium (if any), and interest and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal, premium (if any), and any overdue interest, at the rate or
rates prescribed therefor in such series of Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, adjustment, composition or other judicial proceeding
relative to the Company (or any other obligor upon the Securities of any
series), its property or its creditors, the Trustee (irrespective of whether the
principal of the Securities of any series shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal, premium, (if any), or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise, to (i) file and prove a claim for
the whole amount, or such lesser amount as may be provided for in the Securities
of such series, of principal, premium (if any), and interest (if any) owing and
unpaid in respect of the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and of the Holders allowed
in such judicial proceeding, and (ii) collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or
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composition affecting the Securities of any series or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or any of the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium (if
any), or interest, upon presentation of the Securities and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of the amounts then due and unpaid for
principal of, premium (if any), and interest on the Securities in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium (if any),
and interest, respectively; and
THIRD: To the payment of the remainder, if any, to the Company or any
other Person or Persons entitled thereto.
Section 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that same
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that same series shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
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(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that same series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 508. Unconditional Right of Holders to Receive Principal Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, premium (if any), and (subject to Section
307) any interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of repurchase at the option of the Holder, on the
Repurchase Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of Securities of
any series to exercise any right or remedy accruing upon any Event of Default
with respect to such series of Securities shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
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Section 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the
applicable Outstanding Securities of any series shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the applicable Outstanding Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities of any series may on behalf of the Holders of all
the Securities of such series waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of, premium (if any), or interest
on any Security of such series when due (other than amounts due and payable
solely upon acceleration pursuant to Section 502) unless theretofore paid
in full and cured in accordance with the terms of this Indenture, or
(2) in respect of a covenant or provision hereof which under Section
902 cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder by his acceptance
of Securities shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit other than the Trustee of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of any series, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of, premium (if any), or interest on any Security on or after the
Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
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The Trustee
Section 601. Certain Duties and Responsibilities.
(a) With respect to Securities of any series, except during the
continuance of an Event of Default with respect to the Securities of such
series,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture; but in the case of any such statements, certificates or opinions
which by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(b) With respect to Securities of any series, in case an Event of
Default with respect to the Securities of such series has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it with respect to Securities of any series in
good faith in accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities of such series, determined
as provided in and subject to Section 512, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
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(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee shall transmit by mail to
all Holders of Securities of such series, as their names and addresses appear in
the Security Register, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of, premium (if
any), or interest on any Security of such series or in the payment of any
sinking fund installment with respect to Securities of such series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities of
such series; and provided, further, that in the case of any default of the
character specified in Section 501(4) with respect to Securities of such series,
no such notice to Holders shall be given until at least 90 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series. Except with respect
to an Event of Default pursuant to Section 501(1), (2) or (3), the Trustee shall
not be charged with knowledge of any default or Event of Default hereunder
unless written notice thereof shall have been given to a Responsible Officer at
the Corporate Trust Office by the Company, a Paying Agent, any Holder or an
agent of any Holder.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities of any series pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security
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or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
pertaining to the Securities, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Securities and perform its obligations
hereunder. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of the Securities or the
proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Paying Agent, any Authenticating Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Section
608, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Authenticating Agent, Security Registrar or
such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation for all
services rendered by it hereunder as has been agreed upon in writing prior
to the performance of such services (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
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(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence, willful misconduct
or bad faith on its own part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency, reorganization or other similar
law.
Section 608. Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section, with respect to the Securities of any series, it shall,
within 90 days after ascertaining that it has such conflicting interest, either
eliminate such conflicting interest or resign with respect to the Securities of
that series in the manner and with the effect hereinafter specified in this
Article.
(b) In the event that the Trustee shall fail to comply with the
provisions of Subsection (a) of this Section with respect to the Securities of
any series, the Trustee shall, within 10 days after the expiration of such 90-
day period, transmit by mail to the Company and all Holders of Securities of
that series, as their names and addresses appear in the Security Register,
notice of such failure.
(c) For the purposes of this Section, the Trustee shall be deemed to
have a conflicting interest with respect to the Securities of any series if the
Securities of such series are in default (as determined in accordance with the
provisions of Section 501, but exclusive of any period of grace or requirement
of notice) and
(1) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any series other than that series or is trustee
under another indenture under which any other securities or certificates of
interest or participation in any other securities of the Company are
outstanding, unless such other indenture is a collateral trust indenture
under which the only collateral consists of Securities issued under this
Indenture;
(2) the Trustee or any of its directors or executive officers is an
obligor upon the Securities or an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
the Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of the
Company, or of an underwriter (other than the Trustee itself) for the
Company who is currently engaged in the business of underwriting, except
that (i) one
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individual may be a director or an executive officer, or both, of the
Trustee and a director or an executive officer, or both, of the Company but
may not be at the same time an executive officer of both the Trustee and
the Company; (ii) if and so long as the number of directors of the Trustee
in office is more than nine, one additional individual may be a director or
an executive officer, or both, of the Trustee and a director of the
Company, and (iii) the Trustee may be designated by the Company or by any
underwriter for the Company to act in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, escrow agent or
depositary, or in any other similar capacity, or, subject to the provisions
of paragraph (1) of this Subsection, to act as trustee, whether under an
indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons; or
10% or more of the voting securities of the Trustee is beneficially owned
either by an underwriter for the Company or by any director, partner or
executive officer thereof, or is beneficially owned, collectively, by any
two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), (i) 5% or more of the voting securities, or 10% or
more of any other class of security, of the Company not including the
Securities issued under this Indenture and securities issued under any
other indenture for which the Trustee is also trustee, or (ii) 10% or more
of any class of security of an underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 5% or more of the voting securities of any person who,
to the knowledge of the Trustee, owns 10% or more of the voting securities
of, or controls directly or indirectly or is under direct or indirect
common control with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 10% or more of any class of security of any person
who, to the knowledge of the Trustee, owns 50% or more of the voting
securities of the Company; or
(9) the Trustee owns, on May 15 in any calendar year, in the capacity
of executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of
25% or more of the voting securities, or of any class of security, of any
person, the beneficial ownership of a specified percentage of which would
have constituted a conflicting interest under paragraph (6), (7) or (8) of
this Subsection. As to any such securities of which the Trustee acquired
ownership through becoming executor, administrator or testamentary trustee
of an estate which included them, the provisions of the preceding sentence
shall not apply, for a period of two years from the date of such
acquisition, to the extent that such securities included in such estate do
not exceed 25% of such voting securities or 25% of any such class of
security. Promptly after May 15 in each calendar year, the Trustee shall
make a check of its holdings of such securities in any of the above-
mentioned capacities as of such May 15. If the Company fails to make
payment in full of the principal of, premium (if any), or interest on any
of the Securities of any series when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the Trustee
shall make a prompt check of its holdings of such securities in any of the
above-mentioned capacities as of the date of the expiration of such 30-day
period, and after such date, notwithstanding
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the foregoing provisions of this paragraph, all such securities so held by
the Trustee, with sole or joint control over such securities vested in it,
shall, but only so long as such failure shall continue, be considered as
though beneficially owned by the Trustee for the purposes of paragraphs
(6), (7) and (8) of this Subsection.
The specification of percentages in paragraphs (5) to (9), inclusive,
of this Subsection shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraphs (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this
Subsection only, (i) the terms "security" and "securities" shall include only
such securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness; (ii) an obligation shall be deemed to
be "in default" when a default in payment of principal shall have continued for
30 days or more and shall not have been cured; and (iii) the Trustee shall not
be deemed to be the owner or holder of (A) any security which it holds as
collateral security, as trustee or otherwise, for an obligation which is not in
default as defined in clause (ii) above, or (B) any security which it holds as
collateral security under this Indenture, irrespective of any default hereunder,
or (C) any security which it holds as agent for collection, or as custodian,
escrow agent or depositary, or in any similar representative capacity.
(d) For the purposes of this Section:
(1) The term "underwriter," when used with reference to the Company,
means every person who, within three years prior to the time as of which
the determination is made, has purchased from the Company with a view to,
or has offered or sold for the Company in connection with, the distribution
of any security of the Company outstanding at such time, or has
participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the direct
or indirect underwriting of any such undertaking, but such term shall not
include a person whose interest was limited to a commission from an
underwriter or dealer not in excess of the usual and customary
distributors' or sellers' commission.
(2) The term "director" means any director of a corporation or any
individual performing similar functions with respect to any organization,
whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization or a government or political subdivision
thereof. As used in this paragraph, the term "trust" shall include only a
trust where the interest or interests of the beneficiary or beneficiaries
are evidenced by a security.
(4) The term "voting security" means any security presently entitling
the owner or holder thereof to vote in the direction or management of the
affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents
for the owner or holder of such security are currently entitled to vote in
the direction or management of the affairs of a person.
(5) The term "Company" means any obligor upon the Securities of any
series.
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(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
(e) The percentages of voting securities and other securities
specified in this Section shall be calculated in accordance with the following
provisions:
(1) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section (each of whom
is referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person.
(2) A specified percentage of a class of securities of a person means
such percentage of the aggregate amount of securities of the class
outstanding.
(3) The term "amount," when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares and the number of units if relating to
any other kind of security.
(4) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced
by such other class of securities is not in default as to principal or
interest or otherwise;
(iii) securities pledged by the issuer thereof as security for
an obligation of the issuer not in default as to principal or interest
or otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer
thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise
voting rights thereof.
(5) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, however, that, in
the case of secured evidences of indebtedness, all of which are issued
under a single indenture, differences in the interest rates or maturity
dates of various series thereof shall not be deemed sufficient to
constitute such series different classes and provided, further, that, in
the case of unsecured evidences of indebtedness, differences in the
interest rates or maturity dates thereof shall not be deemed sufficient to
constitute them securities of different classes, whether or not they are
issued under a single indenture.
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Section 609. Corporate Trustee Required; Eligibility.
The Company shall at all times maintain a Security Registrar and an
office or agency (which in each case shall be the Trustee unless otherwise
specified pursuant to Section 301 or by Company Order) in the Borough of
Manhattan, the City of New York, for the payment of principal, premium (if any),
and interest on the Securities. There shall at all times be a Trustee hereunder
which shall be a corporation organized and doing business under the laws of the
United States or of any state of the United States which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority. Such Trustee shall have a combined
capital and surplus of at least $50,000,000 and maintain a Corporate Trust
Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving not less than 30 days prior written notice to
the Company specifying its intention to resign, the reason therefor, and
specifying the date on which the resignation shall become effective.
Notwithstanding the foregoing, unless the reason for such resignation is a
conflict pursuant to Section 608, then such Trustee must resign with respect to
all Securities if the Trustee resigns with respect to any series of Securities.
If the instrument of acceptance by a successor Trustee required by Section 611
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by the Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the Trustee
and to the Company.
(d) The Trustee may be removed with respect to any or all series of
Securities at any time upon 30 days' notice by the filing with it of an
instrument in writing signed on behalf of the Company by a duly authorized
officer of the Company specifying such removal and the date on which it is to
become effective.
(e) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security of any series for at least six months, or
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(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder who has been a bona fide Holder of a Security of any series at least
six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee with respect to any series of Securities or all Securities,
or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a
Security of any series for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to such series of Securities or all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by or pursuant to
a Board Resolution, shall appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
611, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give or cause to be given notice of each
resignation and each removal of the Trustee with respect to the Securities of
any series and each appointment of a successor Trustee with respect to the
Securities of any series to all Holders of Securities of such series in the
manner provided in Section 105. Each notice shall include the name of the
successor Trustee with respect to the Securities of such series and the address
of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of
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the retiring Trustee and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments reasonably necessary for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts referred to in paragraph (a) or (b) of this Section, as the
case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
In case any Securities shall not have been authenticated by such predecessor
Trustee, any successor Trustee may authenticate and deliver such Securities in
either its own name or that of its predecessor Trustee, with full force and
effect which this Indenture provides for the certificate of authentication of
the Trustee.
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Section 613. Compliance with Tax Laws.
The Trustee hereby agrees to comply with all U.S. Federal income tax
information reporting and withholding requirements with respect to payments of
principal, premium (if any) and interest on the Securities, whether acting as
Trustee, Security Registrar, Paying Agent or otherwise with respect to the
Securities.
Section 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding, the Trustee
may appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue and upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 306, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Any such appointment shall be evidenced
by an instrument in writing signed by a Responsible Officer of the Trustee, a
copy of which instrument shall be promptly furnished to the Company. Wherever
reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by federal or state authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may resign at any
time by giving written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent and to the Company.
Upon receiving such a notice of resignation or upon such a termination, or in
case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee for such Securities
may appoint a successor Authenticating Agent which shall be acceptable to the
Company and shall mail written notice of such appointment by first-class mail,
postage prepaid, to all Holders of Securities of the series with respect to
which such Authenticating Agent will serve, as their names and addresses appear
in the Security Register. Any successor Authenticating Agent upon acceptance of
its appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if
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originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities designated as [name of series],
which is a series referred to in the within-mentioned Indenture.
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
As Trustee
By:
------------------------------
As Authenticating Agent
By:
------------------------------
Authorized Signatory
ARTICLE SEVEN
Communications to Holders
Section 701. Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders received by the Trustee in its
capacity as Security Registrar.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Trustee and furnish to the Trustee reasonable proof that
each such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Indenture or under the Securities and is accompanied by a copy of the
form of proxy or other communication which such applicants propose to transmit,
then the Trustee shall, within five business days after the receipt of such
application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 701(a), or
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(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee in accordance with Section 701(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 701(a) a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interest of the Holders or would be in violation of
applicable law. Such written statement shall specify the basis of such opinion.
(c) Every Holder, by receiving and holding Securities, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Holders in accordance with
Section 701(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Section 701(b).
ARTICLE EIGHT
Consolidation, Merger, Conveyance or Transfer
Section 801. Consolidations and Mergers of Company and Conveyances Permitted
Subject to Certain Conditions.
The Company shall not consolidate with, or sell or convey all or
substantially all of its assets to, or merge with or into any other person or
entity unless (i) either the Company shall be the continuing corporation, or the
successor shall be a corporation organized and existing under the laws of the
United States of America or a state thereof and the successor corporation shall
expressly assume the due and punctual payment of the principal of and interest
on all the Debentures and the due and punctual performance and observance of all
of the covenants and conditions of the Company under this Indenture by
supplemental indenture satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation; (ii) the Company or the successor corporation,
as the case may be, shall not, immediately after the merger or consolidation, or
the sale or conveyance, be in default in the performance of any such covenant or
condition; and (iii) after giving effect to the transaction, no event which,
after notice or lapse of time, would become an Event of Default shall have
occurred or be continuing.
Section 802. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale or conveyance and upon
any such assumption by the successor corporation, such successor corporation
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the party of the first part, and the predecessor
corporation shall be relieved of any further obligation under this Indenture and
the Securities. Such successor
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corporation thereupon may cause to be signed, and may issue either in its own
name or in the name of the Company, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor corporation,
instead of the Company, and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Securities
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Securities of any series so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Securities of that series theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Securities had
been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
Section 803. Officer's Certificate and Opinion of Counsel.
The Trustee, subject to the provisions of Sections 601 and 603, may
receive an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale or conveyance, and any such
assumption, complies with the provisions of this Article Eight.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by or
pursuant to one or more Board Resolutions, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee and the Company, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities of any series in bearer form, registrable or not registrable as
to principal, and with or without interest coupons, or to permit or
facilitate the issuance of Securities of any series in uncertificated form;
or
(4) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities; provided,
however, that any such addition, change or elimination (i) shall neither
(A) apply to any Security of any series created prior to the execution of
such supplemental
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indenture and entitled to the benefit of such provision nor (B) modify the
rights of the Holder of any such Security with respect to such provision or
(ii) shall become effective only when there is no such Security
Outstanding; or
(5) to secure the Securities of any series; or
(6) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
(8) to cure any ambiguity or defect in and to correct or supplement
any provision in this Indenture or any Security of any series that may be
inconsistent with any other provision in this Indenture or in the Security
of such series, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided, however, that any such
action pursuant to this clause (8) shall not adversely affect the interests
of the Holders of Securities of any series in any material respect; or
(9) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect qualification of this Indenture
under the Trust Indenture Act and to add to this Indenture such other
provisions as may be expressly permitted by the Trust Indenture Act; or
(10) to amend or supplement the restrictions on and procedures for
resale, attempted resale and other transfers of any series of Securities
(whether or not Outstanding) to reflect any change in applicable law or
regulation (or interpretation thereof) or in practices relating to the
resale or transfer of Restricted Securities generally.
Section 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities of all series at the time
Outstanding affected by such supplemental indenture (voting as one class), by
the Act of said Holders delivered to the Company and the Trustee, the Company,
when authorized by or pursuant to a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security of each series affected thereby,
(1) extend the Stated Maturity of the principal of, or any installment
of principal of or interest on, any such Security, or reduce the principal
amount thereof or the rate of interest thereon or premium (if any), payable
upon the redemption thereof, or reduce the obligation of the Company to pay
principal amounts, or reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502, or change any
Place of Payment where, or the coin or currency in which, any such Security
of such series or any principal, premium (if any), or interest thereon is
payable, or impair
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the right to institute suit for the enforcement of any such payment on or
after the due date thereof (or, in the case of redemption, on or after the
Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
modifications or amendments to this Indenture or to the terms and
conditions of that series of securities, or to approve any supplemental
indenture, or the consent of whose Holders is required for any waiver with
respect to such series (of compliance with certain provisions of this
Indenture or of certain defaults hereunder and their consequences) provided
for in this Indenture, or
(3) modify the obligation of the Company pursuant to Section 609 and
otherwise to maintain a registrar or an office or agency in the Borough of
Manhattan, The City of New York, for the payment of principal, premium (if
any), and interest on the Securities, or
(4) modify any of the provisions of this Section, Section 513 or
Section 1007, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be deemed to require
the consent of any Holder with respect to changes in the references to the
"Trustee" and concomitant changes in this Section and Section 1007, or the
deletion of this proviso, in accordance with the requirements of Sections
611(b) and 901(7).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures; Opinions.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture and, in connection with the original
issuance of any series, stating the items enumerated in Section 303(d)(1), (2)
and (3). The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act if at that date the
Indenture shall then be qualified under the Trust Indenture Act.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Company, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and premium (if
any), and interest on the Securities of that series in accordance with the terms
of the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of each such office or agency. If
at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
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Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of any Securities, it will, on or before each due date of
the principal of, premium (if any), or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium (if any), or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, on or before each due date of the principal of,
premium (if any), or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided in the following paragraph, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (i) hold all sums held by it for
the payment of the principal of, premium (if any), or interest on any Securities
of that series in trust for the benefit of the Holders of such Securities of
that series until such sums shall be paid to such Holders or otherwise disposed
of as herein provided; (ii) give the Trustee notice of any default by the
Company (or any other obligor upon any Securities of that series) in the making
of any payment of principal, premium (if any), or interest; and (iii) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct the Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, the Company
and such Paying Agent shall be released from all further liability with respect
to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium (if
any), or interest on any Security of any series and remaining unclaimed for one
year after such principal, premium (if any), or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such deposited money, and all liability of the Company as trustee
thereof, shall thereupon cease.
Section 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, a statement
signed by the President, any Vice President, the Treasurer, or any Assistant
Treasurer of the Company stating that in the course of the performance by the
signer of such officer's duties as an officer of the Company such officer would
normally obtain knowledge of
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any default by the Company in the performance or fulfillment of any covenant,
agreement or condition contained in this Indenture, and stating whether such
officer has obtained knowledge of any such default, and, if so, specifying each
such default of which the signer has knowledge and the nature thereof.
Section 1005. Limitation on Liens.
The Company will not itself, and will not permit any Restricted
Subsidiary to, incur, issue, assume or guarantee any notes, bonds, debentures or
other similar evidences of indebtedness for money borrowed (notes, bonds,
debentures or other similar evidences of indebtedness for money borrowed being
hereinafter called "Debt") secured by pledge of, or mortgage or other lien on,
any Real Property of the Company or any Restricted Subsidiary, or any shares of
stock or Debt of any Restricted Subsidiary (pledges, mortgages and other liens
being hereinafter called "Mortgage" or "Mortgages"), without effectively
providing that the Securities (together with, if the Company shall so determine,
any other Debt of the Company or that Restricted Subsidiary then existing or
thereafter created that is not subordinate to such Securities) shall be secured
equally and ratably with (or prior to) such secured Debt (for the purpose of
providing such equal and ratable security the principal amount of such
Securities shall mean and shall not be less than that principal amount which
could be declared to be due and payable pursuant to Section 502 on the date of
the making of such effective provision and the extent of such equal and ratable
security shall be adjusted, to the extent permitted by law, as and when that
principal amount changes over time pursuant to Section 502 and any other
provision hereof), so long as such secured Debt shall be so secured, unless,
after giving effect thereto, the aggregate amount of all such secured Debt plus
all Attributable Debt of the Company and its Restricted Subsidiaries in respect
of Sale and Leaseback Transactions (other than such Sale and Leaseback
Transactions the proceeds of which are applied to reduce indebtedness under
clause (2) of Section 1006) would not exceed 10% of Consolidated Net Tangible
Assets; provided, however, that this Section shall not apply to, and there shall
be excluded from secured Debt in any computation under this Section, Debt
secured by:
(1) Mortgages existing as of the date of this Indenture;
(2) Mortgages on property of, or on any shares of stock (or other
interest in) or Debt of, any corporation, association, partnership or other
entity existing at the time such entity becomes a Restricted Subsidiary or
an obligor under this Indenture;
(3) Mortgages in favor of the Company or any Restricted Subsidiary by
a Restricted Subsidiary;
(4) Mortgages (including the assignment of moneys due or to become due
thereon) in favor of the United States of America or any state thereof, or
any agency, department or other instrumentality thereof, to secure
progress, advance or other payments pursuant to any contract or provision
of any statute;
(5) Mortgages on property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation) or to secure the payment of all or any part of the purchase
price, construction cost, or development cost thereof or to secure any Debt
incurred prior to, at the time of, or within 360 days after, the
acquisition of such property or shares or Debt or the completion of any
such construction or development for the purpose of financing all or any
part of the purchase price or construction cost or development cost
thereof; and
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(6) any extension, renewal or refinancing (or successive extensions,
renewals or refinancings), as a whole or in part, of any Mortgage referred
to in the foregoing clauses (1) to (5), inclusive; provided, however, that
(i) such extension, renewal or refinancing Mortgage shall be limited to all
or a part of the same property, shares of stock or Debt that secured the
Mortgage extended, renewed or refinanced (plus improvements on such
property) and (ii) the principal amount of Debt secured by such Mortgage at
such time is not increased in an amount exceeding 105% thereof.
Section 1006. Limitation on Sales and Leasebacks.
The Company will not itself, and it will not permit any Restricted
Subsidiary to, enter into any arrangement with any bank, insurance company or
other lender or investor (not including the Company or any Restricted
Subsidiary) or to which any such lender or investor is a party, providing for
the leasing by the Company or any such Restricted Subsidiary for a period,
including renewals, in excess of three years of any Real Property that has been
or is to be sold or transferred, more than 360 days after the completion of
construction and commencement of full operation thereof, by the Company or any
such Restricted Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such Real Property (herein referred to as a "Sale and Leaseback Transaction")
unless either:
(1) the Company or such Restricted Subsidiary could create Debt
secured by a Mortgage pursuant to Section 1005 on the Real Property to be
leased back in an amount equal to the Attributable Debt with respect to
such Sale and Leaseback Transaction without equally and ratably securing
the Securities, or
(2) the Company or such Restricted Subsidiary within 120 days after
the sale or transfer shall have been made by the Company or by any such
Restricted Subsidiary, applies an amount equal to the net proceeds of the
sale of the Real Property sold and leased back pursuant to such arrangement
to the retirement of Securities or Funded Debt of the Company or any of its
Restricted Subsidiaries.
Section 1007. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 1005 and 1006 with respect to
the Securities of any series if before or after the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Securities
of such series shall, by the Act of such Holders, either waive such compliance
in such instance or generally waive compliance with such term, provision or
condition, but no such waiver shall extend to or affect such term, provision or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
Section 1008. Delivery of Certain Information.
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At any time when the Company is not subject to Section 13 or 15(d) of the
United States Securities Exchange Act of 1934, as amended, for the benefit of
Holders from time to time of any of the Securities which are not registered
under the Securities Act ("Exempt Securities"), upon request of a Holder of
Exempt Securities, the Company will furnish or cause to be furnished at its
expense Rule 144A Information to that Holder or to a prospective purchaser of
the Exempt Security designated by that Holder, as the case may be, unless at
that time (1) the Commission shall have waived such requirement in writing or
otherwise taken the position that subsection 144A(d)(4)(i) does not apply to the
Company or (2) the provision of such information shall no longer be required by
law to effect resales under Rule 144A under the Securities Act or otherwise to
effect resales without registration under the Securities Act. As used in this
Section 1008 only, "Holder" shall include a holder of interest in a Global
Security which is an Exempt Security and prospective purchaser of an Exempt
Security shall include a prospective purchaser of an interest represented by a
Global Security which is an Exempt Security.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Securities of any series)
in accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all the Securities of any series, the Company shall, at
least 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed, the Redemption Price, the place or places of payment, that payment
will be made upon presentation and surrender of such Securities, that such
redemption is pursuant to the mandatory or optional sinking fund, or both, if
such be the case, that interest, if any (or, in the case of Original Issue
Discount Securities, original issue discount) accrued to the date fixed for
redemption will be paid as specified in such notice, and that on and after that
date interest, if any, thereon or on the portions thereof to be redeemed (or, in
the case of Original Issue Discount Securities, original issue discount) will
cease to accrue. In the case of any redemption of such Securities prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities, the Company shall furnish the Trustee with an Officer's Certificate
evidencing compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If fewer than all the Securities of any series are to be redeemed
(unless all of the Securities of such series issued on the same day with the
same terms are to be redeemed), the particular Securities of such series to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to the minimum authorized denomination for Securities of that series or
any integral multiple
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thereof) of the principal amount of Securities of such series of a denomination
larger than the minimum authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company and the Security
Registrar (if other than the Trustee) in writing of the Securities selected for
redemption and, in the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any such Securities redeemed or to be redeemed only in part, to
the portion of the principal amount of such Securities which has been or is to
be redeemed.
Section 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if fewer than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption of
any Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay on the Redemption Date the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date.
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Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any such Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium (if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in such Security.
Section 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series, if such sinking fund is
established pursuant to Section 301, except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of any Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
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Section 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to the Securities of such series required to be made pursuant to the terms of
such Securities as provided for by the terms of such series; provided that such
Securities so delivered or applied as a credit have not been previously so
credited. Such Securities shall be received and credited for such purpose by
the Trustee at the applicable Redemption Price specified in such Securities for
redemption through operation of the sinking fund, and the amount of such sinking
fund payment shall be reduced accordingly. Such Securities shall first be
applied to the sinking fund payment next due, and any excess shall be applied to
the following sinking fund payments in the order they are due.
Section 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officer's
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202 and will also deliver to the Trustee any Securities to
be so delivered and credited. Not less than 30 days before each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
Defeasance
Section 1301. Applicability of Article; Company's Option to Effect Defeasance.
If pursuant to Section 301 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 1302 or (b) covenant
defeasance of the Securities of a series under Section 1303, then the provisions
of such Section or Sections, as the case may be, together with the other
provisions of this Article Thirteen, shall be applicable to the Securities of
such series, and the Company may at its option by or pursuant to Board
Resolution, at any time, with respect to such Securities of any series, elect to
have either Section 1302 or Section 1303 applied to the Outstanding Securities
of such series upon compliance with the conditions set forth in this Article
Thirteen.
Section 1302. Defeasance and Discharge.
Upon the Company's exercise of the above option applicable to this
Section with respect to any Securities of or within a series, the Company shall
be deemed to have been discharged from its obligations with respect to the
Outstanding Securities of such series on the date the conditions set forth in
Section 1304 are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be
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deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities of such series and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Outstanding Securities to receive, solely from the trust fund
described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of, premium (if any), and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002, 1003 and Article
Fourteen and with respect to the Trustee under Section 607, (C) the rights,
powers, trusts, duties, and immunities of the Trustee hereunder including
pursuant to Section 607 hereof and (D) this Article Thirteen. Subject to
compliance with this Article Thirteen, the Company may exercise its option under
this Section 1302 notwithstanding the prior exercise of its option under Section
1303 with respect to such Securities.
Section 1303. Covenant Defeasance.
Upon the Company's exercise of the above option applicable to this
Section with respect to any Securities of or within a series, the Company shall
be released from its obligations under Sections 501(5), 1005 and 1006 and, if
specified pursuant to Section 301, its obligations under any other covenant,
with respect to the Outstanding Securities of such series on and after the date
the conditions set forth below are satisfied (hereinafter, "covenant
defeasance") and such Securities shall thereafter be deemed to be not
"Outstanding" for the purpose of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with
Sections 501(5), 1005 and 1006 or such other covenants, but shall continue to be
deemed Outstanding for all other purposes hereunder. For this purpose, such
covenant defeasance means that, with respect to the Outstanding Securities of
such series, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section or
such other covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or by reason of any reference in any such
Section to any other provision herein or in any other document and such omission
to comply shall not constitute a default or an Event of Default under Sections
501(4), 501(5), 501(8) or otherwise, as the case may be, but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
Section 1304. Conditions of Defeasance.
The following shall be the conditions to application of either Section
1302 or Section 1303 to the Outstanding Securities of or within a series:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 609 who shall agree to comply with the provisions of this
Article Thirteen applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest, if any, in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment of principal of, premium (if any), and interest, if
any, on such Securities, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of, premium (if any), and each installment of principal of,
premium (if any) and interest, if any, on the
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Outstanding Securities of such series on the stated Maturity of such
principal or installment of principal or interest and (ii) any mandatory
sinking fund payments or analogous payments applicable to the Outstanding
Securities of such series on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Securities.
(2) No Event of Default or event which with notice or lapse of time or
both would become an Event of Default under Subsections 501(6) and (7) with
respect to any other series of Securities, at any time during the period
ending on the 123rd day after the date of such deposit or, if longer,
ending on the day following the expiration of the longest preference period
applicable to the Company in respect of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a party
or by which it is bound.
(4) In the case of an election under Section 1302, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred.
(5) In the case of an election under Section 1303, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance has not occurred.
(6) The Company delivers to the Trustee an Officer's Certificate
stating that all conditions precedent to the defeasance and discharge of
the Securities of such series as contemplated by this Article Thirteen have
been satisfied.
Section 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively, for purposes of
this Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal, premium (if any), and interest (if any), but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities of such series.
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Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1304 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
Section 1306. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Article Thirteen by reason
of any legal proceeding or by reason of any order or judgment of any court or
government authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
of the defeased series shall be revived and reinstated as though no deposit had
occurred pursuant to this Article Thirteen until such time as the Trustee or any
Paying Agent is permitted to apply all such money or U.S. Government Obligations
in accordance with this Article Thirteen.
ARTICLE FOURTEEN
Repurchase of Securities at Option of Holders
Section 1401. Applicability of Article.
Securities of any series which are repurchasable before their Stated
Maturity at the option of the Holders shall be repurchasable in accordance with
their terms and (except as otherwise specified as contemplated by Section 301
for Securities of any series) in accordance with this Article.
Section 1402. Notice of Repurchase Date.
Notice of any Repurchase Date with respect to Securities of any series
shall, unless otherwise specified by the terms of the Securities of any series,
be given by the Company not less than 45 nor more than 60 days prior to such
Repurchase Date to each Holder of Securities of such series in accordance with
Section 105.
The notice as to Repurchase Date shall state:
(1) the Repurchase Date;
(2) the Repurchase Price;
(3) the place or places where such Securities are to be surrendered
for payment of the Repurchase Price and the date by which Securities must
be so surrendered in order to be repurchased;
(4) a description of the procedure which a Holder must follow to
exercise a repurchase right; and
(5) that exercise of the option to elect repurchase is irrevocable.
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No failure of the Company to give the foregoing notice shall limit any Holder's
right to exercise a repurchase right.
Section 1403. Deposit of Repurchase Price.
On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Repurchase Price of and (unless the Repurchase Date
shall be an Interest Payment Date) accrued interest, if any, on all of the
Securities of such series which are to be repurchased on that date.
Section 1404. Securities Payable on Repurchase Date.
The form of option to elect repurchase having been delivered as
specified in the form of Security for such series as provided in Section 201,
the Securities of such series so to be repurchased shall, on the Repurchase
Date, become due and payable at the Repurchase Price applicable thereto and from
and after such date (unless the Company shall default in the payment of the
Repurchase Price and accrued interest) such Securities shall cease to bear
interest. Upon surrender of any such Security for repurchase in accordance with
said notice, such Security shall be paid by the Company at the Repurchase Price
together with accrued interest to the Repurchase Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to such Repurchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any such Security shall not be paid upon surrender thereof for
repurchase, the principal (and premium, if any) shall, until paid, bear interest
from the Repurchase Date at the rate prescribed therefor in such Security.
Section 1405. Securities Repurchased in Part.
Any Security which by its terms may be repurchased in part at the
option of the Holder and which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series, of any authorized
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unrepurchased portion of the principal of the Security
so surrendered.
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ARTICLE FIFTEEN
Corporate Obligation Only
Section 1501. Indenture and Securities Solely Corporate Obligations.
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture, any indenture supplement, or in any Security,
because of any indebtedness evidenced thereby, shall be had against any
incorporator, or against any past, present or future stockholder, employee,
officer or director, as such, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, under any
rule of law, statute or constitutional provision or by the enforcement of any
assessment or penalty or by any legal or equitable proceeding or otherwise, all
such liability, whether at common law, in equity, by any constitution, statute
or otherwise, of incorporators, stockholders, employees, officers or directors
being expressly waived and released by the acceptance of the Securities by the
Holders thereof and as part of the consideration of the issuance of the
Securities.
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Texas Commerce Bank National Association hereby accepts the trusts in
this Indenture upon the terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed on May 26, 1995, to be effective as of the day and year first
above written.
ELECTRONIC DATA SYSTEMS CORPORATION
By: _________________________
Title: ___________________
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee
By: __________________________
Title: ____________________
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ACKNOWLEDGMENTS
THE STATE OF
COUNTY OF
Before me, a Notary Public, on this day personally appeared
_________________________, known to me to be the person and officer whose name
is subscribed to the foregoing instrument, who acknowledged to me that the same
was the act of Electronic Data Systems Corporation and that he [she] executed
the same as the act of that corporation for the purposes and consideration
expressed therein and in the capacity stated therein.
Given under my hand and seal of office this ___ day of ____________, 1995.
___________________________________
Notary Public in and for the
State of
(SEAL) My commission expires the ___ day of__________, 19__.
THE STATE OF
COUNTY OF
Before me, a Notary Public, on this day personally appeared
_________________________, known to me to be the person and officer whose name
is subscribed to the foregoing instrument, who acknowledged to me that the same
was the act of Texas Commerce Bank National Association and that he [she]
executed the same as the act of that corporation for the purposes and
consideration expressed therein and in the capacity stated therein.
Given under my hand and seal of office this ___ day of ____________, 1995.
___________________________________
Notary Public in and for the
State of
(SEAL) My commission expires the ___ day of __________, 19__.
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EXHIBIT A
---------
FOREST LANE DESCRIPTION
The Forest Lane property consists of 175.3498 acres located in the City of
Dallas, Dallas County, Texas, Being part of Block 7462 of Electronic Data
Systems Addition M.J. Sanchez Survey Abstract 1272 and Hiram Wilburn Survey
Abstract 1568. The site is bound by White Rock Creek on the East, Forest Lane
on the South, Hillcrest Road on the West and Churchill Way on the North.
PLANO TEXAS DESCRIPTION
The Plano Texas property consists of 363 acres (plus the approximately 18-acre
parcel on which the Education Buildings referred to below are located) located
in the City of Plano, Collin County, Texas, bound by White Rock Creek on the
East, Tennyson Parkway on the South, Parkwood Drive on the West and Legacy Drive
on the North. The property currently contains the following principal
facilities:
EDS Centre Building, Cluster I, Cluster II, Cluster III; IPC I, IPC II, IPC III,
IPC IV; IMC Command Center; Health and Fitness Facility; Vehicle Service Center;
Heliport; and Ground Maintenance Facility.
Also included in this Plano Texas Description is Education Building 1, Education
Building 2, Education Building 3, and Education Building 4 located in the City
of Plano, Collin County Texas Bound By Tennyson Parkway on the North and
Democracy Drive on the West.
A-1
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EXHIBIT 10(H)
================================================================================
$1,250,000,000
ELECTRONIC DATA SYSTEMS CORPORATION
================================================================================
REVOLVING CREDIT AND TERM LOAN AGREEMENT
DATED AS OF
OCTOBER 4, 1995
CITIBANK, N.A.,
as Administrative Agent
and
BANCO SANTANDER - NEW YORK BRANCH,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
CHEMICAL BANK,
CITIBANK, N.A.,
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
and NATIONSBANK OF TEXAS, N.A.,
as Arrangers
and
BANQUE NATIONALE DE PARIS,
CIBC INC.,
PNC BANK, NATIONAL ASSOCIATION,
TORONTO DOMINION (TEXAS), INC., and
WACHOVIA BANK OF GEORGIA, N.A.,
as Managers
and
the other lenders named herein, as LENDERS
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I. DEFINITION OF TERMS
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Definitions................................................ 1
1.2 Other Definitional Provisions.............................. 12
ARTICLE II. FACILITY
2.1 Committed Loans............................................ 13
2.2 Committed Loan Borrowing Procedure; Disbursement........... 13
2.3 Bid Rate Loans............................................. 15
2.4 Optional Extension of the Commitment Termination Date...... 17
2.5 Conversion to Term Loan.................................... 19
2.6 Several Obligations........................................ 20
ARTICLE III. TERMS OF PAYMENT
3.1 Notes...................................................... 21
3.2 Payments on Committed Loan Notes and Bid Rate Notes........ 21
3.3 Interest................................................... 22
3.4 Continuation/Conversion With Respect to Committed Loans.... 22
3.5 Funding Losses............................................. 24
3.6 Default Rates.............................................. 24
3.7 Interest and Fee Calculations.............................. 24
3.8 Voluntary Principal Prepayments............................ 24
3.9 Inadequacy of Eurodollar or CD Loan Pricing................ 25
3.10 Illegality................................................. 25
3.11 Increased Cost and Reduced Return.......................... 26
3.12 Several Obligations........................................ 27
3.13 Taxes...................................................... 28
3.14 Application of Principal Payments.......................... 30
3.15 Payments, Computations, Judgments, etc..................... 31
3.16 Mitigation of Circumstances; Replacement of Affected
Lenders, etc............................................. 31
3.17 Failure to Pay Additional Amounts.......................... 32
ARTICLE IV. FEES; MODIFICATION OF COMMITMENTS
4.1 Facility Fee................................................. 33
4.2 Reduction or Cancellation of Commitments..................... 33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE V. CONDITIONS PRECEDENT
5.1 Initial Availability...................................... 33
5.2 Each Advance.............................................. 34
5.3 Waiver of Conditions to Bid Rate Loans.................... 34
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
6.1 EDS Representations and Warranties........................ 35
ARTICLE VII. COVENANTS
7.1 Use of Proceeds........................................... 36
7.2 Accounting Books and Financial Records; Inspections....... 37
7.3 Items to be Furnished..................................... 37
7.4 Taxes..................................................... 38
7.5 Maintenance of Corporate Existence, Assets, Business
and Insurance........................................... 38
7.6 Compliance with Laws and Documents........................ 38
7.7 Regulation U.............................................. 38
7.8 Net Worth................................................. 38
7.9 Mergers; Consolidations; Transfers of Assets.............. 39
7.10 Pari Passu................................................ 39
7.11 ERISA..................................................... 39
ARTICLE VIII. DEFAULT
8.1 Default................................................... 39
8.2 Default Under Certain Other Debt.......................... 41
ARTICLE IX. RIGHTS AND REMEDIES UPON DEFAULT
9.1 Remedies Upon Default..................................... 41
9.2 Waivers by Borrower and Others............................ 41
9.3 Delegation of Duties and Rights........................... 41
9.4 Lenders Not in Control.................................... 41
9.5 Cumulative Remedies....................................... 42
9.6 Expenditures by Lenders................................... 42
9.7 Performance by Administrative Agent....................... 42
ARTICLE X. THE ADMINISTRATIVE AGENT
10.1 Appointment and Authorization............................. 42
10.2 Note Holders.............................................. 43
10.3 Consultation with Counsel................................. 43
10.4 Documents................................................. 43
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
10.5 Resignation or Removal of Administrative Agent............. 43
10.6 Responsibility of Administrative Agent..................... 43
10.7 Notices of Default......................................... 44
10.8 Independent Investigation.................................. 44
10.9 Indemnification of Administrative Agent.................... 44
10.10 Arrangers and Managers..................................... 45
10.11 Benefit of Article X....................................... 45
ARTICLE XI. MISCELLANEOUS
11.1 Number and Gender of Words................................. 45
11.2 Headings................................................... 45
11.3 Exhibits................................................... 45
11.4 Communications............................................. 45
11.5 Exceptions to Covenants.................................... 47
11.6 Survival................................................... 47
11.7 Governing Law.............................................. 47
11.8 Maximum Interest Rate...................................... 47
11.9 Entirety and Amendments.................................... 48
11.10 Waivers.................................................... 48
11.11 Multiple Counterparts...................................... 49
11.12 Parties Bound; Participations and Assignments.............. 49
11.13 Consent to Jurisdiction; Waiver of Jury Trial.............. 52
11.14 Payment of Expenses........................................ 52
11.15 Invalid Provisions......................................... 53
11.16 Borrowers' Right of Offset................................. 53
11.17 Indemnification of Lenders................................. 54
11.18 Designation of EDS Affiliates as Borrowers................. 54
11.19 Lenders' Right of Setoff; Payments
Set Aside; Sharing of Payments........................... 54
</TABLE>
iii
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A-1 Form of EDS Committed Loan Note
Exhibit A-2 Form of Committed Loan Note for Borrowers other than EDS
Exhibit B Form of Term Note
Exhibit C Form of Bid Rate Note
Exhibit D Form of Unconditional Guaranty Agreement
Exhibit E Form of Notice of Advance
Exhibit F Form of Request for Bids
Exhibit G Form of Offer of Bid Rate Loans
Exhibit H Form of Notice of Continuation/Conversion
Exhibit I Form of Notice of Term Loan Conversion
Exhibit J Form of Notice of Term Loan Rollover
Exhibit K Form of Assignment and Acceptance
Exhibit L Form of Opinion of Counsel
Exhibit M Form of Bid Rate Loan Confirmation
Exhibit N Form of Officers' Certificate
Schedule 1 Lender Information
Schedule 2 Designated EDS Affiliates
Schedule 6.1 Litigation
iv
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Revolving Credit and Term Loan Agreement (the "AGREEMENT") is
entered into as of the 4th day of October, 1995, by and among Electronic Data
Systems Corporation, a Texas corporation (hereinafter called "EDS"), the
financial institutions listed on the signature pages of this Agreement under the
heading "LENDERS," and which hereafter become parties hereto pursuant to Section
11.12 hereof, including BANCO SANTANDER - NEW YORK BRANCH, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, CHEMICAL BANK, CITIBANK, N.A., CREDIT
LYONNAIS CAYMAN ISLAND BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK and
NATIONSBANK OF TEXAS, N.A., as Arrangers and CITIBANK, N.A., as Administrative
Agent for such lenders to the extent and in the manner provided in Article X
below ("ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, EDS has requested that Lenders (as hereinafter defined)
provide EDS and certain EDS Affiliates (as hereinafter defined) with a revolving
credit and term loan facility and Lenders are willing to provide such a facility
to EDS and such EDS Affiliates upon the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
ARTICLE I
---------
DEFINITION OF TERMS
-------------------
1.1. Definitions. As used herein, the following terms have the
meanings assigned to them in this Article I or in the section or recital
referred to below:
ACCOUNTS shall have the meaning assigned to such term in Section
11.16.
ADJUSTED CD RATE means, for any day, a rate per annum determined
pursuant to the following formula:
ACDR (% [CDBR ]* + AR
---------
per annum) = [1.00 -DRP]
where CDBR equals the CD Base Rate in effect on such day (expressed as a
decimal), DRP equals the Domestic Reserve Percentage in effect on such day
and AR equals the Assessment Rate in effect on such day (expressed as a
decimal).
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/10,000th of 1%.
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<PAGE>
ADMINISTRATIVE AGENT shall have the meaning assigned to such term in
the preamble hereof.
ADVANCE means an amount loaned to one or more Borrowers by any Lender
pursuant to this Agreement.
AFFILIATE of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person if such
Person possesses, directly or indirectly, power to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
AGGREGATE COMMITTED SUM means, as of any date, the aggregate of the
Committed Sums of all Lenders in effect on such date.
AGREEMENT means this Revolving Credit and Term Loan Agreement,
including the Schedules and Exhibits hereto, as the same may be renewed,
extended, amended, supplemented, or modified from time to time.
APPLICABLE LENDING OFFICE means, with respect to each Lender, such
Lender's Eurodollar Lending Office for Eurodollar Loans and such Lender's
Domestic Lending Office for all Loans other than Eurodollar Loans.
APPLICABLE MARGIN, with respect to the calculation of the CD Rate or
the Eurodollar Rate, means the applicable percentage amount set forth in the
table below:
Committed Loans:
Eurodollar Loans: 0.175%
CD Loans: 0.300%
Term Loans:
Eurodollar Loans: 0.175%
CD Loans: 0.300%
ASSESSMENT RATE means, for any day, the lowest net annual assessment
rate (rounded upward, if necessary, to the next higher 1/10,000th of 1%)
determined by the Administrative Agent to be generally applicable to member
banks of the Federal Reserve System in New York City with deposits exceeding Two
Hundred Fifty Million Dollars ($250,000,000), and which meet the highest minimum
capitalization ratios and supervisory subgroup designations specified by
applicable Tribunals for qualification for the lowest assessment rate as of the
date of such determination.
2
<PAGE>
ASSIGNEE shall have the meaning assigned to such term in Section
11.12(c).
AVAILABILITY DATE means the later of (a) the date when sufficient
Lenders have executed this Agreement so that the Aggregate Committed Sum is
equal to or greater than $1,250,000,000, or (b) the date when all conditions
precedent in Section 5.1 have been satisfied in full or waived.
BASE RATE, with respect to any day, means the greater of (a) the
average of the rates of interest publicly announced by each Domestic Reference
Bank as its Dollar prime rate, base lending rate or reference rate as in effect
for that day or (b) the Federal Funds Rate plus 0.50% per annum, all as
determined by Administrative Agent and notified to EDS. Each change in the
prime rate or base lending rate so announced by such Domestic Reference Bank
will be effective as of the effective date of the announcement or, if no
effective date is specified, as of the date of the announcement. Such rate is a
reference rate only and is not intended to be the lowest rate of interest
charged by Lenders in connection with extensions of credit to debtors.
BASE RATE LOAN means any Loan or Bid Rate Loan hereunder bearing
interest at a rate that is calculated by reference to the Base Rate.
BID DATE shall have the meaning assigned to such term in Section
2.3(b).
BID RATE means, with respect to each Lender, the rate of interest bid
by such Lender with respect to a Bid Rate Loan in response to a Request for
Bids.
BID RATE LOAN and BID RATE LOANS shall have the meanings assigned to
such terms in Section 2.3.
BID RATE LOAN BORROWING DATE means the proposed date of availability
of a Bid Rate Loan requested by a Borrower in its Request for Bids.
BID RATE LOAN CONFIRMATION shall have the meaning assigned to such
term in Section 2.3(d).
BID RATE NOTES shall have the meaning assigned to such term in Section
3.1 and BID RATE NOTE shall mean any of the Bid Rate Notes.
BORROWER means EDS and any Designated EDS Affiliate if, at the time in
question, such Designated EDS Affiliate has an outstanding request for a Loan or
a Bid Rate Loan or is obligated for payment of one or more Loans or Bid Rate
Loans outstanding hereunder, and Borrowers means all of the Persons that meet
the foregoing criteria, in each case as designated in the applicable Notice(s)
of Advance, Request(s) for Bids or Notice(s) of Continuation/Conversion.
BORROWING DATE means the date requested by a Borrower on which a Loan
is to be advanced.
3
<PAGE>
BUSINESS DAY means any day, other than a Saturday or Sunday, on which
commercial banks generally are open for business in Dallas, Texas and New York,
New York, and in each other location of a Lender's Applicable Lending Office.
CD BASE RATE means, with respect to any Interest Period, the rate of
interest determined by Administrative Agent to be the arithmetic average
(rounded upward, if necessary, to the next higher 1/10,000th of 1%) of the
prevailing rates per annum bid at 9:00 a.m. (New York time) (or as soon
thereafter as practicable) on the first day of such Interest Period by two (2)
or more New York certificate of deposit dealers of recognized standing for the
purchase at face value from each Domestic Reference Bank of its certificates of
deposit in an amount comparable to the unpaid principal amount of the CD Loan of
Lenders to which such Interest Period applies and having a maturity equal to
such Interest Period.
CD LOAN means any Loan hereunder bearing interest at a rate that is
calculated by reference to the CD Base Rate.
CD RATE means the Adjusted CD Rate plus the Applicable Margin.
CHANGE OF CONTROL means the acquisition by any Person or any
combination of a Person and its Affiliates, of an aggregate of more than fifty
percent (50%) of the total issued and outstanding shares of the voting stock of
EDS.
CODE means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated and rulings issued thereunder.
COMMITMENT means the obligation of each Lender to make Advances to
Borrowers under this Agreement.
COMMITMENT TERMINATION DATE means 12:00 noon (New York, New York time)
on the 364th day after the Availability Date, or such later date as may be
accepted by one or more Lenders pursuant to Section 2.4; provided, however, as
to any Lender which does not agree to a requested extension of the Commitment
Termination Date, the Commitment Termination Date for such Lender shall continue
to be the date so scheduled prior to EDS's request that such Lender extend the
Commitment Termination Date.
COMMITTED LOAN means any Advance by any Lender to any Borrower
pursuant to such Lender's Commitment and COMMITTED LOANS shall mean all of such
Loans.
COMMITTED LOAN NOTES shall have the meaning assigned to such term in
Section 3.1, and COMMITTED LOAN NOTE shall mean any of the Committed Loan Notes.
COMMITTED SUM means, for each Lender, the maximum aggregate principal
sum which such Lender has committed to lend to Borrowers as set forth in
Schedule 1 opposite such Lender's name and the caption "Committed Sum," subject,
however, to any increases or reductions in such Lender's Committed Sum occurring
during the term of the Facility.
4
<PAGE>
COMPENSATION RATE means, for any day, the Federal Funds Rate for such
day.
DEBT of any Person means all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon such Person's balance
sheet as liabilities, but in any event including liabilities secured by any lien
or encumbrance existing on property owned or acquired by such Person or a
Subsidiary thereof (whether or not the liability secured thereby shall have been
assumed), obligations which have been or under GAAP should be capitalized for
financial reporting purposes, obligations under acceptance facilities and
reimbursement obligations and all guaranties, endorsements, and other contingent
obligations with respect to Debt of others, including, but not limited to, any
obligations to acquire any such Debt, to purchase, sell, or furnish property or
services primarily for the purpose of enabling such other Person to make payment
of any of such Debt, or to otherwise assure the owner of any of such Debt
against loss with respect thereto.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable domestic or foreign liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, fraudulent transfer or conveyance Laws, suspension
of payments, or similar Laws from time to time in effect affecting the Rights
of creditors generally.
DEFAULT shall have the meaning assigned to such term in Article VIII.
DESIGNATED EDS AFFILIATE means any EDS Affiliate if, at the time in
question, such EDS Affiliate is named on Schedule 2 hereto, as such Schedule is
supplemented or amended pursuant to Section 11.18.
DOLLARS and the symbol $ mean lawful money of the United States of
America.
DOMESTIC LENDING OFFICE means, as to each Lender, its office or branch
identified in Schedule 1 as its Domestic Lending Office or such other office or
branch of such Lender as such Lender may from time to time specify to EDS and
the Administrative Agent.
DOMESTIC REFERENCE BANKS means Citibank, N.A., Bank of America
National Trust and Savings Association, and NationsBank of Texas, N.A., and
DOMESTIC REFERENCE BANK means each of them; provided that if any Domestic
Reference Bank regularly fails to provide quotations to the Administrative Agent
or regularly provides quotations that in the judgment of EDS are not
representative of the rates at which deposits are generally available to
Lenders, EDS may request (by notice to the Administrative Agent, which shall
promptly notify the other parties hereto) that such bank be replaced as a
Domestic Reference Bank by another Lender. In the event that only two (2)
Domestic Reference Banks shall so provide quotations to the Administrative
Agent, the Administrative Agent shall make the calculations required hereunder
using such quotations.
DOMESTIC RESERVE PERCENTAGE means, for any day, that percentage
(expressed as a decimal) which Administrative Agent determines is in effect on
such day, as prescribed by the
5
<PAGE>
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation, any
basic, supplemental, marginal and emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits exceeding Two Hundred
Fifty Million Dollars ($250,000,000) in respect of new non-personal time
deposits in Dollars in New York City having a maturity equal to the related
Interest Period and in an amount of $100,000 or more.
EDS shall have the meaning assigned to such term in the preamble
hereof.
EDS AFFILIATE means any Person which is, directly or indirectly,
wholly or partially owned by EDS.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
EUROCURRENCY BUSINESS DAY means a Business Day on which dealings in
Eurodollar deposits are carried out in the London interbank market.
EUROCURRENCY RESERVE PERCENTAGE means, for any day, that percentage
(expressed as a decimal) which Administrative Agent determines is in effect on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor), at which reserves (including without limitation any basic,
supplemental, marginal and emergency reserves) are imposed by the Board of
Governors of the Federal Reserve System in respect of "eurocurrency
liabilities," as defined under Regulation D of the Board of Governors of the
Federal Reserve System (or any applicable regulation which may be substituted
for Regulation D).
EURODOLLAR LENDING OFFICE means, as to each Lender, its office or
branch in London or New York City identified in Schedule 1 as its Eurodollar
Lending Office or such other office or branch of such Lender as such Lender may
hereafter designate by notice to EDS and the Administrative Agent, but no such
designation shall be effective if EDS notifies such Lender and the
Administrative Agent promptly thereafter that, in EDS's reasonable
determination, such designation would have adverse consequences to EDS or any
other Borrower to a material extent.
EURODOLLAR LOAN means any Loan or Bid Rate Loan hereunder bearing
interest at a rate that is calculated by reference to the LIBOR Rate.
EURODOLLAR RATE means the LIBOR Rate for Dollars plus the Applicable
Margin.
EURODOLLAR REFERENCE BANKS means Citibank, N.A., Bank of America
National Trust and Savings Association and Credit Lyonnais Cayman Island Branch,
and EURODOLLAR REFERENCE BANK means each of them; provided that if any
Eurodollar Reference Bank regularly fails to provide quotations to the
Administrative Agent or regularly provides quotations that in the judgment of
EDS are not representative of the rates at which deposits are generally
available to Lenders in the relevant currencies, EDS may request (by notice to
the Administrative Agent, which shall promptly notify the other parties hereto)
that such Eurodollar Reference Bank be
6
<PAGE>
replaced as a Eurodollar Reference Bank by another Lender. In the event that
only two (2) Eurodollar Reference Banks shall so provide quotations to the
Administrative Agent, the Administrative Agent shall make the calculations
required hereunder using such quotations.
EXCLUDED TAX means any, and EXCLUDED TAXES means all, Taxes imposed on
or measured by the net income of any Lender or the Administrative Agent, and
franchise taxes imposed on any of them, by the jurisdiction under the laws of
which such Lender or the Administrative Agent (as the case may be) is organized
or any political subdivision thereof and, in the case of each Lender, Taxes
imposed on its net income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof.
EXHIBIT means an exhibit attached hereto unless otherwise specified.
EXTENSION RESPONSE DATE shall have the meaning assigned to such term
in Section 2.4.
FACILITY means the 364-day revolving credit and term loan facility
provided for in this Agreement.
FEDERAL FUNDS RATE for any day means the rate set forth for such day
(or, if such day is not a Business Day the next preceding Business Day) opposite
the caption "Federal Funds (Effective)" in the weekly statistical release
designated as "H.15(519)", or any successor publication, published by the Board
of Governors of the Federal Reserve System or, if such rate is not so published
for any day which is a Business Day, the average of quotations for such day on
overnight Federal funds transactions received by Administrative Agent from three
(3) Federal funds brokers of recognized standing selected by it.
FINANCIAL STATEMENTS means the consolidated balance sheet of EDS and
its Subsidiaries and the consolidated statements of income, cash flows, and
shareholders' equity of EDS and its Subsidiaries.
FIXED RATE LOAN means a Bid Rate Loan bearing interest at a fixed
percentage rate per annum specified by the Lender making such Bid Rate Loan in
its offer of Bid Rate Loans.
GAAP means all applicable generally accepted accounting principles of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board which are applicable as
of the date in question.
GUARANTY means that certain Unconditional Guaranty Agreement
substantially in the form of Exhibit D hereto, executed by EDS in favor of the
Lenders, and delivered to the Administrative Agent, as the same may be amended
or restated from time to time.
HIGHEST LAWFUL RATE means the maximum nonusurious interest rate or
amount of interest which, under applicable law, any Lender is allowed to
contract for, charge, take, collect, reserve, or receive.
7
<PAGE>
INDEMNIFIED LIABILITY and INDEMNIFIED LIABILITIES shall have the
meanings assigned to such terms in Section 11.17.
INDICATED RATE means, with respect to any Interest Period, the rate
for deposits in Dollars for a period comparable to the relevant Interest Period
which appears on the Telerate Page 3750 as of 11:00 a.m. London time two (2)
Eurocurrency Business Days preceding the first day of the relevant Interest
Period or, if Telerate Page 3750 is unavailable at such time, the rate which
appears on the Reuters Screen ISDA Page as of such date and time; provided,
however, that if Administrative Agent determines that the relevant foregoing
source is unavailable for any Interest Period, Indicated Rate means the rate of
interest determined by Administrative Agent to be the average (rounded upward,
if necessary, to the nearest 1/10,000th of 1%) of the rates per annum at which
deposits in Dollars in immediately available funds are offered to each of the
Eurodollar Reference Banks two (2) Eurocurrency Business Days preceding the
first day of the relevant Interest Period by prime banks in the London interbank
Eurodollar market as of 11:00 a.m. London time for delivery on the first day of
such Interest Period, for the number of days comprised therein and in an amount
comparable to the amount of the relevant Loan.
INTEREST OPTION shall have the meaning assigned to such term in
Section 2.5(c).
INTEREST PAYMENT DATE means, as to any Base Rate Loan, each Quarterly
Date to occur while such Base Rate Loan is outstanding, and the date such Base
Rate Loan is paid in full.
INTEREST PERIOD means (a) with respect to each Loan consisting of a
Eurodollar Loan or a Bid Rate Loan (other than a Bid Rate Loan which is a Fixed
Rate Loan), the period commencing on the date of such Loan, or on the last day
of the immediately preceding Interest Period in the case of a continuation or
conversion, and ending on the numerically corresponding day in the first,
second, third, or sixth month thereafter, as the applicable Borrower may elect
in the applicable Notice of Advance, Notice of Acceptance, Request for Bids or
Notice of Continuation/Conversion, (b) with respect to each Loan consisting of a
CD Loan, the period commencing on the date of such Loan, or on the last day of
the immediately preceding Interest Period in the case of a continuation or
conversion, and ending 30, 60, 90 or 180 days thereafter as the applicable
Borrower may elect in the applicable Notice of Advance, Notice of Acceptance or
Notice of Continuation/Conversion and (c) with respect to any Bid Rate Loan
which is a Fixed Rate Loan, the period commencing on the date of such Fixed Rate
Loan and ending such number of days thereafter (which shall not be less than
fifteen (15) days or more than one hundred eighty-three (183) days after such
date) as selected by the relevant Borrower in its Notice of Acceptance.
Notwithstanding the above, (x) any Interest Period which would otherwise end on
a day that is not a Business Day, or Eurocurrency Business Day, as appropriate,
shall be extended to the next succeeding Business Day, or Eurocurrency Business
Day, as appropriate, unless, in the case of Eurodollar Loans, such next
succeeding Eurocurrency Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Eurocurrency Business
Day, (y) in the case of Eurodollar Loans, any Interest Period which begins on
the last Eurocurrency Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Eurocurrency Business Day of a
calendar month, and (z) no Interest Period may end later than (i)
8
<PAGE>
the Commitment Termination Date, except an Interest Period for a Committed Loan
that is to be converted to a Term Loan pursuant to a Notice of Term Loan
Conversion, or (ii) for any Term Loan, the Term Loan Maturity Date.
LAW means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any Tribunal and any treaties or
international conventions.
LENDER means a financial institution identified in Schedule 1 or added
pursuant to Section 11.12 hereof, in each case, for the account of the
Applicable Lending Office, and Lenders means all such financial institutions.
LIBOR RATE means, with respect to any Interest Period, an interest
rate per annum (rounded upward, if necessary, to the next higher 1/10,000th of
1%) determined by Administrative Agent two (2) Eurocurrency Business Days prior
to the first day of such Interest Period to be the quotient obtained by dividing
(a) the Indicated Rate for such Interest Period by (b) a percentage equal to
100% minus the Eurocurrency Reserve Percentage, if applicable.
LITIGATION means any proceeding, claim, lawsuit, or investigation
conducted or threatened by or before any Tribunal.
LOAN means any Committed Loan or Term Loan by any Lender to any
Borrower and LOANS shall mean all of such Committed Loans and Term Loans.
LOAN DOCUMENTS means (a) this Agreement, (b) the Notes, (c) the
Guaranty, and (d) any and all other agreements ever delivered pursuant to this
Agreement, as the same may be renewed, extended, restated, amended, or
supplemented from time to time.
MAJORITY LENDERS shall mean, as of any date, Lenders representing at
least 66-2/3% of (a) at any time Lenders are committed to lend hereunder, the
sum of (i) the Aggregate Committed Sum plus (ii) the aggregate unpaid principal
amount of all Term Loans, if any, or (b) at any time after the Commitments shall
have expired or terminated, (i) at any time that Loans are outstanding, the
aggregate unpaid principal amount of the Loans, and (ii) at any time that no
Loans are outstanding, the aggregate unpaid principal amount of the Bid Rate
Loans.
MATERIAL ADVERSE EFFECT means any set of circumstances or events which
would reasonably be expected to (a) have any material adverse effect upon the
validity or enforceability of this Agreement, any Note or the Guaranty, (b) be
material and adverse to the financial condition of EDS and its Subsidiaries
taken as a whole, (c) materially impair the ability of EDS and its Subsidiaries,
taken as a whole, to fulfill their obligations under the terms and conditions of
the Loan Documents, or (d) cause a Default or a Potential Default.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in sections
3(37) or 4001(a)(3) of ERISA or section 414 of the Code to which EDS or any of
its Subsidiaries is making, or has made, or is accruing, or has accrued, an
obligation to make contributions.
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NET INCOME means, with respect to any Person for any period, the net
income or loss of such Person for such period, determined in accordance with
GAAP, except that extraordinary and non-recurring gains and losses as determined
in accordance with GAAP shall be excluded.
NET WORTH means the excess, if any, of (a) the total assets of EDS and
its consolidated Subsidiaries over (b) without duplication, all items of
indebtedness, obligation, or liability which would be classified as liabilities
of EDS and its consolidated Subsidiaries, each to be determined in Dollars in
accordance with GAAP.
NOTES shall have the meaning assigned to such term in Section 3.1 and
NOTE shall mean any of the Notes.
NOTICE OF ACCEPTANCE means a notice by a Borrower to the
Administrative Agent accepting an offer for a Bid Rate Loan.
NOTICE OF ADVANCE means a notice submitted and executed by a Borrower
(and, if such Borrower is not EDS, by such Borrower and EDS), which notice shall
be irrevocable and binding, requesting a Committed Loan, which Notice of Advance
shall be substantially in the form of Exhibit E.
NOTICE OF CONTINUATION/CONVERSION shall have the meaning assigned to
such term in Section 3.4 and shall be substantially in the form of Exhibit H.
NOTICE OF REJECTION means a notice by a Borrower to the Administrative
Agent rejecting an offer for a Bid Rate Loan.
NOTICE OF TERM LOAN CONVERSION shall have the meaning assigned to such
term in Section 2.5.
NOTICE OF TERM LOAN ROLLOVER shall have the meaning assigned to such
term in Section 2.5(c).
OBLIGATION means all present and future indebtedness, obligations and
liabilities, and all renewals, extensions, and modifications thereof, now or
hereafter owed to Lenders by each Borrower arising from, by virtue of, or
pursuant to any Loan Document, together with all interest lawfully accruing
thereon and reasonable costs, reasonable expenses, and reasonable attorneys'
fees incurred in the enforcement or collection thereof.
OFFER OF BID RATE LOANS shall mean a duly completed Offer of Bid Rate
Loans, substantially in the form of Exhibit G, delivered by a Lender to
Administrative Agent in connection with a Bid Rate Loan.
PARTICIPANT shall have the meaning assigned to such term in Section
11.12(b).
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PAYMENT OFFICE means the principal office of Administrative Agent in
New York City, located on the date hereof at 399 Park Avenue, New York, New York
10043, which may be changed by written notice to EDS and the Lenders.
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereto.
PENSION PLAN means an employee pension benefit plan as defined in
section 3(2) of ERISA which is maintained or contributed to by EDS or any
Subsidiary of EDS for employees of EDS or any Subsidiary of EDS, excluding any
Multiemployer Plan.
PERCENTAGE means, at any time, for each Lender, the percentage
obtained by (x) dividing such Lender's Committed Sum by the Aggregate Committed
Sum and (y) multiplying the product so obtained by 100.
PERSON means any individual, entity, or Tribunal.
POTENTIAL DEFAULT means the occurrence of any event specified in
Section 8.1 which, with notice or lapse of time or both, as provided in Section
8.1, could become a Default.
PROCESS AGENT means Prentice Hall Systems, Inc., 15 Columbus Circle,
New York, New York 10073-7773.
PRO RATA means, at any time, for each Lender, the ratio of the unpaid
principal balance of the Loans made by such Lender to the unpaid principal
balance of all Loans.
PURCHASING LENDER shall have the meaning assigned to such term in
Section 2.4.
QUARTERLY DATE means the last Business Day of each December, March,
June and September during the term of this Agreement.
REFERENCE BANKS means the Domestic Reference Banks and the Eurodollar
Reference Banks and REFERENCE BANK means any of them.
REGISTER shall have the meaning assigned to such term in Section
11.12(d).
REPORTABLE EVENT shall have the meaning assigned thereto under Section
4043 of ERISA.
REQUEST FOR BIDS means a duly completed Request for Bids,
substantially in the form of Exhibit F, delivered by a Borrower to
Administrative Agent in connection with a Bid Rate Loan.
RIGHTS means rights, remedies, powers, privileges, and benefits.
SCHEDULE means a schedule attached hereto unless specified otherwise.
SECTION means a section or subsection of this Agreement unless
specified otherwise.
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SUBSIDIARY of a Person means any Person (and Subsidiaries means all of
such Persons), whether or not existing on the date of this Agreement, of which
an aggregate of 50% or more (in number of votes) of the securities having
ordinary voting power for the election of directors (or individuals performing
similar functions), or comparable ownership interest, is owned of record or
beneficially, directly or indirectly, by such Person, by one or more of the
other Subsidiaries of such Person, or by a combination thereof.
TAXES means all taxes, assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time to
time or at any time imposed by any Law or Tribunal.
TERMINATING LENDER shall have the meaning assigned to such term in
Section 2.4.
TERM LOAN and TERM LOANS shall have the meanings assigned to such
terms in Section 2.5.
TERM LOAN MATURITY DATE shall have the meaning assigned to such term
in Section 2.5(b).
TERM NOTE shall have the meaning assigned to such term in Section 2.5
and TERM NOTES shall mean all of the Term Notes.
TRIBUNAL means any (a) local, state, or federal judicial, executive,
or legislative authority, including, without limitation, any governmental agency
or regulatory authority, whether of the United States or any other country, or
(b) private arbitration board or panel.
1.2. Other Definitional Provisions.
(a) Other Agreements. All terms defined in this Agreement shall have
the above-defined meanings when used in the Notes or any Loan Documents,
and any certificate, report or other document made or delivered pursuant to
this Agreement, unless the context therein shall otherwise require.
(b) To/From. Relative to the determination of any period of time,
"from" means "from and including" and "to" or "until" means "to but
excluding".
(c) References to Loan Documents. The words "hereof," "herein,"
"hereunder" and similar terms when used in any Loan Documents shall refer
to such Loan Document as a whole and not to any particular provision
thereof.
(d) Accounting Terms. As used herein and in any certificate or other
document made or delivered pursuant thereto, accounting terms relating to
Borrowers but not defined in Article I and accounting terms partly defined
in Article I shall have the respective meanings given to them under GAAP.
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(e) Include/Including. The term "including" (and with correlative
meaning "include") means including without limiting the generality of any
description preceding such term.
ARTICLE II
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FACILITY
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2.1 Committed Loans. Subject to and in reliance upon the terms,
conditions, representations, and warranties contained in this Agreement, each
Lender, severally, and not jointly, agrees to make Advances in Dollars to EDS
and any of the Designated EDS Affiliates so long as the aggregate principal
amount of the Committed Loans from such Lender outstanding never exceeds such
Lender's Committed Sum; provided that, the aggregate outstanding principal
amount of all Committed Loans and Bid Rate Loans from all Lenders shall not
exceed the Aggregate Committed Sum. Notwithstanding anything to the contrary set
forth herein, any Lender may make and have outstanding one or more Bid Rate
Loans which, when aggregated with the outstanding principal amount of all
Committed Loans from such Lender, would exceed such Lender's Committed Sum.
Administrative Agent shall maintain a record of each Lender's Committed Sum,
Percentage, Committed Loans, Term Loans and Bid Rate Loans. Each Lender's
Commitment shall continue in full force and effect until and expire on, the
applicable Commitment Termination Date, and no Lender shall have any obligation
to make any Committed Loan thereafter; provided that, each Borrower's Obligation
and Lender's Rights under the Loan Documents shall continue in full force and
effect until such Borrower's Obligation is paid and performed in full and
provided, further, that, pursuant to the terms of Section 2.5, Borrowers may
convert the outstanding principal balance of the Committed Loans to Term Loans.
From and after the Availability Date, through and including the final Commitment
Termination Date, EDS and each Designated EDS Affiliate may borrow, repay, and
reborrow Committed Loans and Bid Rate Loans hereunder, subject as respects Bid
Rate Loans to Section 2.3.
2.2 Committed Loan Borrowing Procedure; Disbursement.
(a) Notice of Borrowing of Committed Loans. Each Committed Loan shall
be made following a Borrower's Notice of Advance to Administrative Agent
requesting a Committed Loan on a certain Borrowing Date. Each Notice of
Advance shall be given to Administrative Agent in writing or by telegraph,
telex or telecopy, or by telephonic notice (followed by a written
confirmation) (i) not later than 11:00 a.m., New York, New York time on the
proposed Borrowing Date of each Committed Loan which is a Base Rate Loan,
which proposed Borrowing Date shall be a Business Day, (ii) not later than
11:00 a.m., New York, New York time on the Business Day that is two (2)
Business Days before the proposed Borrowing Date of each Committed Loan
which is a CD Loan, which proposed Borrowing Date shall be a Business Day,
and (iii) not later than 11:00 a.m., New York, New York time on the
Eurocurrency Business Day that is three (3) Eurocurrency Business Days
before the proposed Borrowing Date of each Committed Loan which is a
Eurodollar Loan, which proposed Borrowing Date shall be a Eurocurrency
Business Day.
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Each Committed Loan, except Committed Loans for the remaining unborrowed
Aggregate Committed Sum, shall be in an amount of not less than $15,000,000
or, if greater, an integral multiple of $1,000,000.
(b) Funding of Committed Loans. After receiving a Notice of Advance
in the manner provided herein, Administrative Agent shall promptly notify
each Lender by telephone (confirmed immediately by telex, cable or
telecopy), telecopy, telex or cable of the terms of the Notice of Advance
and such Lender's Percentage of the requested Committed Loan. Each Lender
shall, before 1:00 p.m., New York, New York time on the Borrowing Date
specified in the Notice of Advance, deposit with Administrative Agent at
its Payment Office such Lender's Percentage of such Committed Loan in
immediately available funds. Upon fulfillment of all applicable conditions
set forth herein, including receipt by Administrative Agent of a duly
executed Committed Loan Note for each Lender from the relevant Borrower
(provided, however, that EDS shall be required only to provide to each
Lender a Committed Loan Note in the form of Exhibit A-1 to evidence all
Committed Loans from such Lender to EDS) and after receipt by
Administrative Agent of such funds, Administrative Agent shall pay or
deliver all funds so received to the order of the relevant Borrower to the
account specified in the Notice of Advance.
(c) Failure to Fund Committed Loans. The failure of any Lender to
make any Advance required to be made by it hereunder shall not relieve any
other Lender of its obligation to make its Advance hereunder. If any
Lender fails to provide its Percentage of any Committed Loan and if all
conditions to such Committed Loan have apparently been satisfied,
Administrative Agent will make available to the relevant Borrower the funds
received by it from the other Lenders. Neither Administrative Agent nor
any Lender shall be responsible for the performance by any other Lender of
its obligations hereunder. Upon the failure of a Lender to make an Advance
required to be made by it hereunder, Administrative Agent shall notify EDS,
the relevant Borrower (if other than EDS) and all Lenders, and shall
consult with all Lenders (other than the defaulting Lender) to determine
whether one or more of such Lenders will make an additional Advance to
cover the shortfall created by the defaulting Lender's failure to fund its
Advance. If Lenders decline to cover such shortfall, Administrative Agent
shall use good faith efforts to obtain one or more banks, acceptable to
EDS, to replace the defaulting Lender, but neither Administrative Agent nor
any other Lender shall have any liability or obligation whatsoever as a
result of the failure to obtain a replacement for such Lender.
(d) Funding by Administrative Agent. Unless Administrative Agent
shall have received notice from a Lender prior to the date of any Committed
Loan that such Lender will not make available to Administrative Agent such
Lender's Percentage of such Committed Loan, Administrative Agent may assume
that such Lender has made such amount available to Administrative Agent on
the date of such Committed Loan in accordance with this Section 2.2.
Administrative Agent may, in reliance upon such assumption, make available
a corresponding amount to or on behalf of the relevant Borrower on such
date. If and to the extent any Lender shall not have so made its
Percentage of any Committed Loan available to Administrative Agent, the
relevant
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Borrower shall repay to Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the
date such amount is made available to or on behalf of such Borrower until
the date such amount is repaid to Administrative Agent, at the rate per
annum applicable to the Committed Loan in question. Each Lender shall
record in its records, or at its option on the schedule attached to its
applicable Committed Loan Note, the date and amount of each Committed Loan
made by such Lender thereunder, each repayment or prepayment thereof, and
the dates on which each Interest Period for such Committed Loan shall begin
and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
such Committed Loan Note. The failure to so record or any error in so
recording any such amount shall not, however, limit or otherwise affect the
obligations of any Borrower hereunder or under any Committed Loan Note to
repay the principal amount of each Committed Loan to such Lender together
with all interest accruing thereon.
2.3. Bid Rate Loans. From time to time, each Borrower may request that
Lenders make one or more Advances available to such Borrower under the Facility
for the same purposes expressed herein, at an interest rate and subject to other
terms and conditions to be determined in accordance with this Section 2.3 (each,
a "BID RATE LOAN" and collectively, the "BID RATE LOANS") pursuant to the
procedure described below.
(a) Requests for Bids. Except as otherwise provided herein, each
Borrower may from time to time request that Administrative Agent invite
bids for Bid Rate Loans, which requests shall be made by delivering to
Administrative Agent a completed Request for Bids not later than 11:00
a.m., New York, New York time, (i) on the Eurocurrency Business Day that is
four (4) Eurocurrency Business Days before the proposed Bid Rate Loan
Borrowing Date for a Eurodollar Loan; and (ii) on the Business Day that is
one (1) Business Day before the proposed Bid Rate Loan Borrowing Date for a
Fixed Rate Loan. Each Request For Bids shall be irrevocable and shall
specify (A) the proposed Bid Rate Loan Borrowing Date, which date shall be
a Eurocurrency Business Day, if the requested Bid Rate Loan is a Eurodollar
Loan, or a Business Day in all other cases, (B) the amount which the
Borrower proposes to borrow on such date, which amount shall be not less
than $5,000,000 or, if greater, an integral multiple of $1,000,000, (C)
whether the Lenders should offer to make Eurodollar Loans and/or Fixed Rate
Loans, (D) the Interest Period(s) applicable to such proposed borrowing, if
the proposed Bid Rate Loan is to be a Eurodollar Loan, (E) the term of the
proposed Bid Rate Loan, (F) the account into which the Advance of the Bid
Rate Loan is to be made and (G) such other information as is provided for
in Exhibit F. Administrative Agent, promptly after receipt by it of a
Request For Bids, shall notify each Lender by telecopy of its receipt of a
Request For Bids and the contents thereof and shall invite bids from each
Lender.
(b) Offers by Lenders. Prior to 10:00 a.m., New York, New York time,
(i) on the Eurocurrency Business Day at least three (3) Eurocurrency
Business Days prior to the proposed Bid Rate Loan Borrowing Date, if the
requested Bid Rate Loan is a Eurodollar Loan or (ii) on the proposed Bid
Rate Loan Borrowing Date if the requested Bid Rate
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Loan is a Fixed Rate Loan (the "BID DATE"), each Lender willing to make a
Bid Rate Loan shall provide notice to Administrative Agent of such Lender's
offer to provide a Bid Rate Loan in response to the relevant Borrower's
Request For Bids by delivering to Administrative Agent an Offer of Bid Rate
Loans. Such Offer of Bid Rate Loans shall specify the minimum and maximum
amount of the Bid Rate Loan such Lender would be willing to provide (which
amount may exceed such Lender's Committed Sum), the Interest Period(s)
relative thereto, if the offered Bid Rate Loan is to be a Eurodollar Loan,
the Bid Rate for such Bid Rate Loan, any other information provided for in
Exhibit G and all other terms and conditions required by such Lender. At or
prior to 10:30 a.m. New York, New York time, on the Bid Date,
Administrative Agent shall provide notice to the Borrower having submitted
the relevant Request For Bids of all of the information provided to
Administrative Agent by Lenders in response to such Request For Bids;
provided, however, if Administrative Agent, in its capacity as a Lender,
shall elect to make any such offer, it shall notify the relevant Borrower
of such offer before 9:00 a.m., New York, New York time, on the date on
which notice of such election is to be given to the Administrative Agent by
the other Lenders.
(c) Acceptance of Bids. The Borrower having issued a Request For Bids
shall, not later than 11:00 a.m., New York, New York time, on the relevant
Bid Date, and in its sole discretion, either (i) reject any or all of the
offered Bid Rate Loans by delivering a Notice of Rejection to
Administrative Agent, or (ii) accept any or all of the offered Bid Rate
Loans by delivering a Notice of Acceptance to Administrative Agent;
provided, however, that (A) the aggregate principal amount of each Bid Rate
Loan may not exceed the applicable amount set forth in the related Request
for Bids, and (B) in the event that two (2) or more offers of Bid Rate
Loans have identical terms other than interest rate, acceptance of offers
shall be made on the basis of ascending interest rates. Promptly following
the acceptance of one or more Bid Rate Loans by a Borrower, the
Administrative Agent shall notify each Lender of the ranges of offers
submitted and the highest and lowest offers accepted for each Interest
Period requested by such Borrower, the aggregate amount of the Bid Rate
Loans borrowed pursuant to the related Request for Bids and the consequent
reduction in the availability of the Aggregate Committed Sum. Any Notice
of Acceptance shall specify each Lender whose Bid Rate Loan is accepted,
the amount of the Bid Rate Loans so accepted, which shall not be more than
the maximum amount offered by such Lender nor less than the minimum amount
offered by such Lender, and all other terms and conditions with respect to
which such Lender offered varying options in its notice to Borrower. All
notices by Borrower to Administrative Agent shall be promptly communicated
by Administrative Agent to the relevant Lenders. If Borrower fails to
issue to Administrative Agent either a Notice of Rejection or a Notice of
Acceptance at or prior to 11:00 a.m., New York, New York time, on the Bid
Date indicating its acceptance or rejection of a Lender's offered Bid Rate
Loan, Borrower shall be deemed to have rejected such offered Bid Rate Loan
and Administrative Agent shall so notify such Lender.
(d) Funding of Bid Rate Loans. After receiving a Notice of Acceptance
from Borrower that it wishes to accept an offered Bid Rate Loan,
Administrative Agent shall
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promptly notify the relevant Lender by telephone (confirmed immediately by
telex, cable or telecopy), telecopy, telex or cable of the terms of the
requested Bid Rate Loan, such written confirmation to be in the form of
Exhibit M attached hereto (each, a "BID RATE LOAN CONFIRMATION"). Each such
Lender whose offered Bid Rate Loan was accepted shall, before 12:00 noon,
New York, New York time, on the Bid Rate Loan Borrowing Date, deposit with
Administrative Agent at its Payment Office the amount of such Bid Rate Loan
in immediately available funds. Upon fulfillment of all applicable
conditions set forth herein, including receipt by Administrative Agent of a
duly executed Bid Rate Note for each Lender obligated to fund a Bid Rate
Loan from the relevant Borrower and after receipt by Administrative Agent
of such funds, Administrative Agent shall make such funds available to the
relevant Borrower at the account specified in the Request for Bids and
thereafter deliver a Bid Rate Note to each Lender funding a Bid Rate Loan.
(e) Waivers Permitted. Notwithstanding anything set forth in this
Section 2.3, the required notices and time periods set forth in this
Section 2.3 as to Bid Rate Loans may be waived by agreement of any Borrower
and any affected Lender.
(f) Reliance. The Administrative Agent may rely and act upon notice
given by telephone by individuals reasonably believed by the Administrative
Agent to be those individuals designated to the Administrative Agent by the
Borrower in writing from time to time to possess authority to give such
notice, without waiting for receipt of written confirmation thereof, and
EDS and each other Borrower hereby indemnifies and holds harmless the
Administrative Agent from and against any and all losses, costs, expenses,
damages, claims, actions and other proceedings relating to such reliance,
except for losses, costs, expenses, damages, claims, actions and
proceedings resulting from acts or omissions constituting gross negligence
or willful misconduct on the part of the Administrative Agent. If a written
confirmation differs in any respect from the action taken by the
Administrative Agent, the records of the Administrative Agent shall govern,
absent manifest error.
2.4. Optional Extension of the Commitment Termination Date. At any time
after the sixty-first (61st) day prior to the then current Commitment
Termination Date, EDS may request that the Commitment Termination Date be
extended, effective on the then current Commitment Termination Date, to the date
which is the 364th day after the then current Commitment Termination Date and
Lenders may, at their option, accept or reject such request. To request an
extension, EDS shall notify Administrative Agent of EDS's request to extend the
Commitment Termination Date, and Administrative Agent shall promptly notify the
Lenders of each such request. Each Lender shall notify Administrative Agent in
writing within thirty (30) days after such request, provided, that, no Lender
shall be required to give notice of consent prior to thirty (30) days prior to
the then current Commitment Termination Date (the later of such days shall be
referred to as the "EXTENSION RESPONSE DATE") whether it consents to such
extension. If any Lender shall fail to give such notice to Administrative Agent
by the Extension Response Date, such Lender shall be deemed to have rejected the
requested extension. If all Lenders consent to the requested extension by the
Extension Response Date, the Commitment Termination Date shall be automatically
extended to the date which is the 364th day after the then current Commitment
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Termination Date. If fewer than all Lenders so consent (each Lender rejecting
the requested extension being referred to as a "TERMINATING LENDER"), EDS shall
within five (5) days after the Extension Response Date notify Administrative
Agent (which shall promptly notify each Lender) whether EDS elects to withdraw
its request for an extension of the Commitment Termination Date or to extend the
Commitment Termination Date for all Lenders that have consented to such
extension. If EDS elects to so extend the Commitment Termination Date as to
fewer than all Lenders, Administrative Agent shall promptly notify the non-
Terminating Lenders of EDS's decision, and each Lender which is not a
Terminating Lender shall have the right, but not the obligation, to elect to
increase its respective Committed Sum by an amount not to exceed the aggregate
amount of the Committed Sums of the Terminating Lenders, which election shall be
made by notice from each such non-Terminating Lender to the Administrative Agent
and EDS given not later than five (5) Business Days after the date notified by
Administrative Agent, and specifying the amount of such proposed increase in
such non-Terminating Lender's Committed Sum. If the aggregate amount of the
proposed increases in the Committed Sums of all such non-Terminating Lenders
making such an election is in excess of the aggregate Committed Sums of the
Terminating Lenders, (a) the Committed Sums of the Terminating Lenders shall be
allocated pro rata among such non-Terminating Lenders based on the respective
amounts of the proposed increases to Committed Sums elected by each of such non-
Terminating Lenders, and (b) the respective Committed Sums of such non-
Terminating Lenders shall be increased by the respective amounts allocated
pursuant to clause (a) above so that, after giving effect to such termination
and increases, the amount of the Aggregate Committed Sum will be the same as
prior to such termination.
If the aggregate amount of the proposed increases to Committed Sums of all
non-Terminating Lenders making such an election equals the aggregate Committed
Sums of the Terminating Lenders, the respective Committed Sums of such non-
Terminating Lenders shall be increased by the respective amounts of their
proposed increases, so that after giving effect to such termination and
increases, the amount of the Aggregate Committed Sum will be the same as prior
to such termination. If the aggregate amount of the proposed increases to
Committed Sums of all non-Terminating Lenders making such an election is less
than the aggregate Committed Sums of the Terminating Lenders, (i) the respective
Committed Sums of such non-Terminating Lenders shall be increased by the
respective amounts of their proposed increases and (ii) EDS shall have the right
to add one or more banks or other financial institutions (which are not
Terminating Lenders) as purchasing lenders under this Agreement (in such
capacity, each a "PURCHASING LENDER") to replace such Terminating Lenders, which
Purchasing Lenders shall have aggregate Committed Sums not greater than those of
the Terminating Lenders less the amounts thereof, if any, assumed by the non-
Terminating Lenders pursuant to the above-described increases. The transfer of
Commitments or outstanding Loans from Terminating Lenders to Purchasing Lenders
or non-Terminating Lenders shall take place on the effective date of, and
pursuant to the execution, delivery, acceptance and recording of, an Assignment
and Acceptance in accordance with the procedures set forth in Section 11.12. To
the extent that replacements are not obtained by EDS for any Terminating Lender,
on the Commitment Termination Date applicable to such Terminating Lender, the
Aggregate Committed Sum shall be reduced by the amount of the Committed Sum of
such Terminating Lender and, concurrently with such reduction in the Aggregate
Committed Sum, EDS shall either (1) pay, and cause any other relevant Borrower
to
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pay, the principal amount of the Loans of any such Terminating Lender, all
accrued and unpaid interest thereon, such Terminating Lender's ratable share of
all accrued and unpaid facility fees and any remaining unpaid Obligation owed to
such Terminating Lender in relation to the Facility, in each case to the extent
not assigned and purchased pursuant hereto, and the Commitment of such
Terminating Lender shall thereupon terminate or (2) convert the Committed Loans
of any such Terminating Lender to Term Loans pursuant to Section 2.5, provided,
however, that no Committed Loan made by any Terminating Lender pursuant to a
Notice of Advance sent after Administrative Agent has given notice to EDS that
such Terminating Lender has rejected the requested extension may be converted to
a Term Loan, unless the then Commitment Termination Date is not extended for any
Lender and all, or a Pro Rata Portion of all, Committed Loans outstanding on the
then Commitment Termination Date are converted to Term Loans.
Each Terminating Lender's Commitment shall expire no later than its
Commitment Termination Date and, unless a Terminating Lender's Committed Loans
are converted to Term Loans hereunder, each Terminating Lender shall have no
further rights or obligations under the Facility or Commitment hereunder
following the effective date of the later to occur of (x) the transfer of all
outstanding Loans from such Terminating Lender to Purchasing Lenders or non-
Terminating Lenders, or (y) the payment in full of the Obligation owed to such
Terminating Lender hereunder, other than any rights or obligations as to the
Facility accruing prior to such date under this Agreement as provided herein;
but in no event shall such Terminating Lender have any obligation to make
Advances after its Commitment Termination Date.
2.5. Conversion to Term Loan. So long as Borrowers shall have fulfilled
all the conditions precedent set forth in this Section 2.5, and so long as no
Default or Potential Default exists, on the Commitment Termination Date each
Borrower shall have the option, exercisable upon delivery to Administrative
Agent, on or prior to three (3) Business Days prior to the Commitment
Termination Date, of a notice (a "NOTICE OF TERM LOAN CONVERSION") in the form
of Exhibit I, to convert the outstanding principal balance of any Committed Loan
Note due on such Commitment Termination Date with respect to which such Borrower
is the obligor to a term loan (such Loan made by a Lender herein being called a
"TERM LOAN" and all such Loans being herein collectively called the "TERM
LOANS") on the terms and conditions set forth below, except as limited by
Section 2.4.
(a) Term Notes. The Term Loan of each Lender to a Borrower shall be
evidenced by a promissory note (a "TERM NOTE") executed by such Borrower
which shall (i) be dated as of the Commitment Termination Date, (ii) be in
the unpaid principal balance of the Committed Loan of such Lender as of
such date, (iii) bear interest at a rate selected in accordance with this
Section 2.5, (iv) be payable to the order of such Lender, at the Payment
Office of Administrative Agent, (v) be in renewal and extension of such
Lender's Committed Loan Note and (vi) be in the form of Exhibit B attached
hereto with blanks appropriately completed in conformity herewith. Each
Borrower electing to convert one or more Committed Loans to Term Loans
shall deliver to Administrative Agent a Term Note for each such Term Loan
contemporaneously with the delivery of the Notice of Term Loan Conversion
provided for in Section 2.5, which Term Note shall be delivered by
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Administrative Agent to the relevant Lender in exchange for the related
Committed Loan Note, which shall be delivered to the relevant Borrower.
(b) Principal and Interest Payments on Term Notes. Interest on the
Term Notes shall be payable in accordance with Section 3.3. The unpaid
principal amount of the Term Notes and all accrued but unpaid interest
thereon, shall be payable on the second anniversary of the date thereof
(the "TERM LOAN MATURITY DATE").
(c) Interest Options. Each Borrower of a Term Loan shall have the
option of having all or any portion of the Term Loans bear interest at the
Base Rate, the CD Rate or the Eurodollar Rate (each, an "INTEREST OPTION").
(i) At Time of Borrowing. Each Borrower shall, in its Notice(s)
of Term Loan Conversion , give Administrative Agent notice of the
initial Interest Option and Interest Period selected with respect to
each Loan of such Borrower to be converted into a Term Loan on the
Commitment Termination Date.
(ii) At Expiration of Interest Periods. Prior to the end of
each Interest Period, each Borrower of a Term Loan shall give written
notice (a "NOTICE OF TERM LOAN ROLLOVER") in the form of Exhibit J to
Administrative Agent of the Interest Option which shall be applicable
to such Term Loan upon the expiration of such Interest Period. Such
Term Loan Rollover Notice shall be given to Administrative Agent (1)
not later than 11:00 a.m., New York, New York time on a Business Day
that is at least two (2) Business Days, in the case of a Base Rate or
CD Rate selection or (2) not later than 11:00 a.m., New York, New York
time on a Eurocurrency Business Day that is at least three (3)
Eurocurrency Business Days, in the case of a Eurodollar Rate
selection, prior to the termination of such Interest Period. Such Term
Loan Rollover Notice shall also specify the length of the succeeding
Interest Period (subject to the provisions of the definition of such
term), selected by the relevant Borrower with respect to each Term
Loan. Each Notice of Term Loan Rollover shall be irrevocable and
effective upon notification thereof to Administrative Agent. If the
required Notice of Term Loan Rollover shall not have been timely
received by Administrative Agent in accordance with this Section
2.5(c)(ii), each Borrower not providing such timely notice shall be
deemed to have converted such Loan into a Base Rate Loan on the last
day of the Applicable Interest Period and the Administrative Agent
shall promptly notify the relevant Borrower of such conversion.
2.6 Several Obligations. The failure of any Lender to perform its
obligations under this Agreement shall not affect the obligations of any
Borrower toward any other Lender or the obligations of any other Lender toward
any Borrower, nor shall any other Lender be liable for the failure of such
Lender to perform its obligations under this Agreement.
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ARTICLE III
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TERMS OF PAYMENT
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3.1. Notes. Committed Loans and interest thereon shall be evidenced by
promissory notes substantially in the form and upon the terms of Exhibit A-1 in
the case of EDS or Exhibit A-2 in the case of any other Borrower, respectively,
duly executed by the applicable Borrower (the "COMMITTED LOAN NOTES") and shall
be due and payable in accordance with this Agreement and the terms of such
Committed Loan Notes. Term Loans and interest thereon shall be evidenced by Term
Notes substantially in the form and upon the terms of Exhibit B duly executed by
the applicable Borrower and shall be due and payable in accordance with this
Agreement and the terms of such Term Notes. Bid Rate Loans and interest thereon
shall be evidenced by promissory notes substantially in the form and upon the
terms of Exhibit C duly executed by the applicable Borrower (the "BID RATE
NOTES") and shall be due and payable in accordance with this Agreement and the
terms of such Bid Rate Notes. The Committed Loan Notes, the Term Notes and the
Bid Rate Notes are collectively called the "NOTES".
3.2. Payments on Committed Loan Notes and Bid Rate Notes. The unpaid
principal balance of each Committed Loan Note, and all accrued but unpaid
interest thereon, shall be due and payable on the Commitment Termination Date,
subject to Borrowers' right to convert such Committed Loans to Term Loans. The
unpaid principal balance of each Bid Rate Note, and all accrued and unpaid
interest thereon, shall be due and payable in accordance with the terms of such
Bid Rate Note, provided, however, that interest on any Bid Rate Note that
evidences a Fixed Rate Loan shall be payable at least every ninety (90) days
during the term of such Fixed Rate Loan, and provided, further, that such Bid
Rate Note shall mature not later than the Commitment Termination Date.
Administrative Agent shall deliver to each Borrower and EDS notice of each
payment of interest, principal, facility fee or other payment required to be
made on each Loan and Bid Rate Loan not less than three (3) Business Days or
Eurocurrency Business Days, as applicable, prior to the due date thereof;
provided, however, that failure to provide such notice will not affect any
Borrower's Obligation hereunder. Each payment or prepayment on the Obligation
and payments of fees must be paid at Administrative Agent's Payment Office or
address in London or New York City set forth in Schedule 1 in funds which are or
will be available for immediate use by Administrative Agent at such address on
or before 1:00 p.m., New York, New York time, on the day due. Funds received
after such time shall be deemed to have been received by Administrative Agent on
the next following Business Day (in the case of Base Rate Loans and CD Loans) or
Eurocurrency Business Day (in the case of Eurodollar Loans). Amounts received by
Administrative Agent for the account of another Person shall be promptly
remitted in like funds to such other Person. If, in the case of Base Rate Loans
and/or CD Loans, any action is required or any payment is to be made on a day
which is not a Business Day, then such action or payment shall be delayed until
the next succeeding Business Day. If, in the case of Eurodollar Loans, any
action is required on a day which is not a Eurocurrency Business Day, then such
action or payment shall be delayed until the next Eurocurrency Business Day
unless a payment by a Borrower of a Eurodollar Loan is involved and the next
Eurocurrency Business Day would fall in the succeeding calendar month, in which
event such payment shall be made on the immediately preceding Eurocurrency
Business Day. Any extension of time shall be included in the
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computation of payments of interest. Upon receipt of any payment of principal or
interest from a Borrower hereunder (except payments and/or prepayments on Bid
Rate Notes), Administrative Agent will promptly thereafter cause to be
distributed (x) like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Sections 3.5, 3.9,
3.10, 3.11 or 3.13) to the Lenders for the account of their respective
Applicable Lending Offices and (y) like funds relating to the payment of any
other amount payable to any Lender to such Lender for the account of its
respective Applicable Lending Office, in each case to be applied in accordance
with the terms of this Agreement. Upon any assignment of any Lender's Commitment
pursuant to Section 11.12 and after notification thereof to Administrative
Agent, Administrative Agent shall make all payments hereunder in respect of the
interest assigned thereby to the Assignee.
3.3. Interest. The Loans from day to day shall bear interest on the
outstanding principal balance thereof at a rate per annum equal to the lesser of
(a) the Highest Lawful Rate, or (b) (i) in the case of Base Rate Loans, the Base
Rate, (ii) in the case of CD Loans, the CD Rate, and (iii) in the case of
Eurodollar Loans, the Eurodollar Rate. Bid Rate Loans from day to day shall bear
interest on the outstanding principal balance thereof at a rate per annum equal
to the lesser of (A) the Highest Lawful Rate, or (B) the Bid Rate applicable
thereto. Accrued interest on each Loan is payable in arrears, (x) in the case of
Base Rate Loans, on each Interest Payment Date, and, (y) in the case of CD Loans
and Eurodollar Loans, on the last day of each Interest Period with respect to
such Loan or if occurring earlier in any case, the Commitment Termination Date
(in the case of Committed Loans) or the Term Loan Maturity Date (in the case of
Term Loans); provided, however, as to any Loan having an Interest Period longer
than three (3) months, in the case of Eurodollar Loans, or ninety (90) days, in
the case of CD Loans, interest shall also be payable on each day which is three
(3) months, in the case of Eurodollar Loans, or ninety (90) days, in the case of
CD Loans, after the first day of such Interest Period. Interest accrued on the
principal of each Loan and each Bid Rate Loan after the maturity thereof and, to
the extent permitted by applicable Law, interest on other overdue amounts, shall
be payable on demand. Each determination by Administrative Agent of the rate of
interest applicable to any Loan shall be conclusive in the absence of manifest
error and each change in the Base Rate and Highest Lawful Rate, subject to the
terms hereof, will become effective, without notice to any Borrower, upon the
effective date of such change.
3.4. Continuation/Conversion with Respect to Committed Loans.
(a) Conversion of Loans. Any Borrower may elect at any time to
convert all or any part (but, if less than all, not less than $15,000,000
or any greater integral multiple of $1,000,000) of any outstanding Base
Rate Loan, CD Loan or Eurodollar Loan (other than a Bid Rate Loan) to a
Base Rate Loan, CD Loan or Eurodollar Loan, as the case may be, by giving
Administrative Agent an irrevocable notice of such election, in the form of
Exhibit H hereto (the "NOTICE OF CONTINUATION/CONVERSION") not later than
12:00 noon, New York, New York time on the second (2nd) Business Day before
the date of conversion, in the case of conversion into a Base Rate Loan or
a CD Loan, or 12:00 noon, New York, New York time on the third (3rd)
Eurocurrency Business Day before the date of the conversion, in the case of
conversion into a Eurodollar Loan, specifying the date of
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conversion, the type of Loan into which each such Loan or specified portion
thereof shall be converted and the duration of the Interest Period
applicable thereto. Any conversion pursuant to this clause (a) other than a
conversion from a Base Rate Loan to a CD Loan or a Eurodollar Loan, shall
be made on the last day of an Interest Period.
(b) Continuation of Loans. Any Borrower may elect to continue (on
the last day of the applicable Interest Period) any CD Loan or Eurodollar
Loan (other than a Bid Rate Loan) as the same type of Loan by giving
Administrative Agent an irrevocable Notice of Continuation/Conversion not
later than (i) 12:00 noon, New York, New York time, the second (2nd)
Business Day before the last day of such Interest Period, if continuing a
CD Loan, or (ii) 12:00 noon, New York, New York time, the third (3rd)
Eurocurrency Business Day before the last day of such Interest Period, if
continuing a Eurodollar Loan. The Notice of Continuation/Conversion shall
specify the portion of such Loan that shall be continued and the duration
of the Interest Period applicable thereto.
(c) Coordination with Interest Periods. Notwithstanding anything in
clause (a) and (b) of this Section 3.4 to the contrary, but without
limiting Section 3.5, each Borrower shall use its reasonable efforts to
exercise its options with regard to electing to convert into or continue a
Loan so that, on any date on which the Committed Sum is reduced pursuant to
Section 4.2, it will not be necessary to prepay any Loan that does not have
an Interest Period ending on such date.
(d) Inapplicability of Conditions Precedent. Loans continued or
converted pursuant to this Section 3.4 shall not constitute new Loans for
purposes of Section 5.2 hereof.
(e) Failure to Provide Notice. If no Notice of Continuation/
Conversion is given with respect to any Loan prior to the time specified in
this Section 3.4 or if a Notice of Continuation/Conversion is given, but it
is incomplete, Administrative Agent shall use good faith efforts to contact
the relevant Borrower to obtain a Notice of Continuation/Conversion or to
complete the information required thereby, but if a complete Notice of
Continuation/Conversion is not provided in a timely fashion, the relevant
Borrower shall be deemed to have converted such Loan into a Base Rate Loan
on the last day of the applicable Interest Period and Administrative Agent
shall promptly notify the relevant Borrower of such conversion or
continuation.
(f) Continuation/Conversion in Default Situations. Notwithstanding
anything to the contrary contained in this Section 3.4, no CD Loan or
Eurodollar Loan may be continued as such or converted into another type of
Loan when any Default exists (other than a Default under Section 8.1(d), so
long as EDS is diligently pursuing the cure thereof and the Commitment of
the Lenders have not been terminated), but each such CD Loan or Eurodollar
Loan shall be automatically converted to a Base Rate Loan on the last day
of the applicable Interest Period.
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(g) Continuation/Conversion Not Applicable to Term Loans.
Notwithstanding anything to the contrary contained in this Section 3.4,
this Section 3.4 shall not be applicable to Term Loans.
3.5. Funding Losses. If any Borrower makes any payment of principal with
respect to any Loan or a Bid Rate Loan, other than a Base Rate Loan, on any day
other than the last day of the Interest Period applicable thereto, or if any
Borrower fails to borrow or prepay any Loan or any Bid Rate Loan after the
applicable notice has been given to any Lender by Administrative Agent or if any
Borrower converts a Loan from a CD Loan or a Eurodollar Loan at any time other
than at the end of the relevant Interest Period, such Borrower shall reimburse
each affected Lender, within ten (10) Business Days after demand, for any
resulting loss or expense actually incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating, employing or
redeploying deposits from third parties, for the period after any such payment,
conversion, or failure to borrow, through the end of such Interest Period (the
calculation of such loss or expense shall include a credit (not in excess of
such loss or expense) for the interest that could be earned by such Lender as a
result of redepositing such amount), together with interest thereon at the
Compensation Rate from the date of demand until paid in full; provided that,
Administrative Agent shall have delivered to such Borrower a certificate of each
affected Lender as to the amount of such loss or expense, which certificate
shall be conclusive in the absence of manifest error.
3.6. Default Rates. At Majority Lenders' option and to the extent
permitted by Law, all past-due Obligation and accrued interest thereon and fees
shall bear interest from maturity (stated or by acceleration) at a rate per
annum from day to day equal to the lesser of (i) the Highest Lawful Rate or (ii)
the greater of (x) the interest rate then being charged on such Obligation or
portion thereof hereunder, or (y) the sum of the Base Rate plus one percent (1%)
per annum. Any sum referred to in Section 8.1(a)(ii) not paid when due in
accordance with the terms of the Loan Documents shall bear interest at the
Compensation Rate from the due date thereof until the earlier of (i) the date
such sum is paid in full or (ii) the date any applicable grace period expires.
3.7. Interest and Fee Calculations. All payments of interest and fees
shall be calculated on the basis of actual number of days (including the first
day but excluding the last day) elapsed during the period for which such
interest or fee is payable but computed as if each calendar year consisted of
360 days, provided, however, that the Base Rate shall be computed on the basis
of a calendar year of 365 (or 366, as the case may be) days.
3.8. Voluntary Principal Prepayments. Upon giving Administrative Agent,
in the case of a prepayment of a Committed Loan, or the relevant Lender, in the
case of a Bid Rate Loan, two (2) Business Days' notice, in the case of a
prepayment of a CD Loan or Base Rate Loan, or two (2) Eurocurrency Business
Days' notice, in the case of prepayment of a Eurodollar Loan, each Borrower
shall be entitled to prepay any Committed Loan, Term Loan or Bid Rate Loan from
time to time and at any time, in whole or in part, without premium or penalty
(subject, however, to Borrowers' other obligations hereunder in respect to
funding losses and other matters); provided that (a) each partial prepayment
shall equal or exceed the principal amount of
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(i) $100,000, or any integral multiple thereof, for each Bid Rate Loan or Term
Loan, (ii) $10,000,000, in the aggregate, for Committed Loans, or (iii) the
unpaid principal balance of any Loan or Bid Rate Loan being prepaid in full (b)
a Borrower shall only be entitled to make a prepayment if all accrued interest
on the amount prepaid (including, without limitation, past due interest, if any)
payable to such Lender hereunder shall be paid to the date of such prepayment
and (c) except as otherwise set forth herein, prepayments of CD Loans shall only
be made on a Business Day and prepayments of Eurodollar Loans shall only be made
on a Eurocurrency Business Day. Prior to the Commitment Termination Date, the
Committed Loans prepaid may, subject to the conditions of this Agreement, be
reborrowed hereunder, and this Agreement shall not be deemed to be terminated or
canceled prior to the expiration or termination of Lenders' Commitments solely
because the Obligation may from time to time be paid in full.
3.9. Inadequacy of Eurodollar or CD Loan Pricing. If with respect to any
Interest Period for any Eurodollar Loan (i) Administrative Agent determines
(which determination shall be binding and conclusive on all parties) that by
reason of circumstances affecting the interbank Eurocurrency market generally,
deposits in Dollars (in the applicable amounts) are not being offered to the
relevant Lenders in the interbank Eurocurrency market for such Interest Period
or (ii) Majority Lenders advise Administrative Agent that the Eurodollar Rate
will not adequately and fairly reflect the cost to such Lenders of maintaining
or funding such Eurodollar Loan for such Interest Period, and Administrative
Agent shall forthwith give notice thereof to EDS and all affected Borrowers and
Lenders, whereupon until Administrative Agent notifies EDS and such affected
Borrowers that the circumstances giving rise to such suspension no longer exist,
(A) the obligation of Lenders to make Eurodollar Loans shall be suspended, and
(B) all affected Borrowers shall either (1) repay in full the then outstanding
principal amount of the affected Loans, together with accrued interest thereon,
on the last day of the then-current Interest Period applicable thereto or (2)
convert such affected Loans (if such affected Loans are Eurodollar Loans) to CD
Loans or Base Rate Loans in accordance with Section 3.4 of this Agreement at the
end of the then-current Interest Period applicable to such affected Loans or (3)
exercise the option set forth in Section 3.16(b). If with respect to any
Interest Period for any CD Loan, Majority Lenders advise Administrative Agent
that the CD Rate will not adequately and fairly reflect the cost to such Lenders
of maintaining or funding CD Loans, then Administrative Agent shall forthwith
give notice thereof to all affected Borrowers and Lenders, whereupon, until
Administrative Agent shall notify Borrowers that the circumstances giving rise
to such suspension no longer exist (A) the obligation of Lenders to make CD
Loans shall be suspended and (B) all affected Borrowers shall either (1) repay
in full the then outstanding principal amount of any CD Loans, together with
accrued interest thereon on the last day of the then-current Interest Period(s)
applicable thereto or (2) convert all outstanding CD Loans to Eurodollar Loans
or Base Rate Loans in accordance with Section 3.4 at the end of the then-current
Interest Period applicable to such CD Loans or (3) exercise the option set forth
in Section 3.16(b).
3.10. Illegality. If, after the date of this Agreement, the adoption of
any applicable Law or any change therein, or any change in the interpretation or
administration thereof by any Tribunal charged with the interpretation or
administration thereof, or compliance by any Lender with any request or
directive of any such authority, central bank or comparable agency, shall make
it unlawful or impossible for any Lender to make, maintain or fund its
Eurodollar Loans, and such
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Lender shall so notify Administrative Agent, which shall notify EDS (and, if EDS
shall so request, such Lender shall provide EDS with reasonable evidence of such
illegality or impossibility), then, until such Lender notifies EDS, via
Administrative Agent, that the circumstances giving rise to such suspension no
longer exist, the obligation of such Lender to make Eurodollar Loans or to
convert Base Rate Loans or CD Loans to Eurodollar Loans, shall be suspended.
Subject to the provisions of Section 3.16(a), if such Lender shall determine
that it may not lawfully continue to maintain and fund any of its outstanding
Eurodollar Loans to maturity and shall so specify in such notice, each affected
Borrower shall immediately prepay in full the then outstanding principal amount
of each such Loan or Bid Rate Loan together with accrued interest thereon
without premium or penalty (subject, however, to Borrowers' other obligations
hereunder in respect of funding losses and other matters); provided that,
concurrently with prepaying each such Committed Loan the affected Borrower may
borrow a Base Rate Loan or a CD Loan in an equal principal amount from such
Lender. Any Lender that has given a notice of unlawfulness pursuant to this
Section 3.10 shall rescind such notice promptly upon the cessation of such
unlawfulness by giving notice to the Administrative Agent, EDS and the affected
Borrower(s).
3.11. Increased Cost and Reduced Return.
(a) Increases in Reserve Requirements. If, after the date hereof,
the adoption of any applicable Law or any change therein, or any change in
the interpretation or administration thereof by any Tribunal charged with
the interpretation or administration thereof, or compliance by any Lender
(or its lending office) with any request or directive of general
applicability (whether or not having the force of Law) of any such Tribunal
shall impose, modify or deem applicable any reserve, special deposit or
similar requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but
excluding (A) with respect to any CD Loan or Bid Rate Loan any such
requirement included in an applicable Domestic Reserve Percentage, and (B)
with respect to any Eurodollar Loan or Bid Rate Loan any such requirement
included in an applicable Eurocurrency Reserve Percentage) against assets
of, deposits with or for the account of, or credit extended by such Lender
(or its Applicable Lending Office), or shall impose on such Lender (or its
Applicable Lending Office) or on the United States market for certificates
of deposit or the London interbank market any other condition affecting its
CD Loans, Eurodollar Loans, Bid Rate Loans, its Notes evidencing such Loans
or Bid Rate Loans, or its obligation to make such Loans; and the result of
any of the foregoing is actually to increase the cost to (or to impose a
cost on) such Lender (or its Applicable Lending Office) of making or
maintaining any such Loan or Bid Rate Loan, or to reduce the amount of any
sum received or receivable by such Lender (or its Applicable Lending
Office) under this Agreement or under its Notes with respect thereto by an
amount deemed by such Lender to be material, then, subject to the
provisions of Section 3.16(a), if such Lender is generally imposing
payments for increased costs on its similarly situated customers, within
ten (10) Business Days after demand by such Lender, made via Administrative
Agent, accompanied by the certificate required by Section 3.11(c), any
affected Borrower or EDS shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction
actually incurred by it in connection with this Agreement and EDS may
reduce the Commitment of
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that Lender and prepay (or cause any other Borrower to prepay) Loans from
that Lender without premium or penalty (subject, however, to Borrowers'
other obligations hereunder in respect to funding losses and other
matters).
(b) Capital Adequacy Rules. If, after the date hereof, the adoption
or phase-in of any Law of general applicability regarding capital adequacy,
or any change in existing or future Laws regarding capital adequacy, or any
change in the interpretation or administration of any such Law by any
Tribunal charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office or any
corporation controlling such Lender) with any request or directive of
general applicability regarding capital adequacy (whether or not having the
force of Law) of any such Tribunal, shall, in the reasonable determination
of any Lender, have the effect of reducing the rate of return on such
Lender's capital or on the capital of the corporation controlling such
Lender as a consequence of such Lender's obligations hereunder to a level
below that which such Lender or such corporation could have achieved but
for such adoption, change, or compliance (taking into consideration such
Lender's policies with respect to capital adequacy), then from time to time
if Lender is generally imposing payments for such reduction on its
similarly situated customers, within ten (10) Business Days after demand by
such Lender, made via Administrative Agent, all affected Borrowers or EDS
shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction, net of the savings, if any,
which may be reasonably projected to be associated with any such increased
capital requirement.
(c) Procedure for Claiming Compensation. Any affected Lenders will
promptly notify Borrowers, via Administrative Agent, of any event of which
such Lender has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section 3.11 and will
designate a different lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender. A
certificate of such Lender, delivered via Administrative Agent, claiming
compensation under this Section 3.11 and setting forth the additional
amount or amounts to be paid to it, as well as the manner in which such
amount or amounts were calculated, hereunder shall be conclusive in the
absence of manifest error. In determining such amount, the affected Lender
may use any reasonable averaging and attribution methods.
3.12. Several Obligations. Except as otherwise expressly set forth herein
and in the Guaranty, the obligations of Borrowers hereunder are several and not
joint and each Borrower shall be liable only in respect of Loans and Bid Rate
Loans made to such Borrower and the Obligation of such Borrower related thereto.
3.13. Taxes.
(a) Payments to be Free and Clear. All payments made by any Borrowers
under this Agreement shall be made, in accordance with Sections 3.2 and
3.3, free and clear of and without any deduction or withholding for or on
account of any Tax, by way of
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set-off or otherwise, except as otherwise provided by this Section 3.13 and
by Section 11.16.
(b) Grossing-up of Payments. If any Borrower shall be required by Law
to deduct any Tax (other than an Excluded Tax) from or in respect of any
sum payable hereunder to any Lender or the Administrative Agent:
(i) as soon as such Borrower is aware that any such deduction,
withholding or payment of a Tax (other than an Excluded Tax) is
required, or of any change in any such requirement, it shall notify
Administrative Agent;
(ii) the sum payable by such Borrower shall be increased to the
extent necessary so that, after the Borrower has made all required
deductions (including deductions applicable to additional sums payable
under this Section), such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have
received had no such deductions been made; provided, however, that
such Borrower shall not be required to increase any such sums payable
to any Lender if such Lender fails to comply with the requirements of
Section 3.13(e);
(iii) such Borrower shall make such deductions, or pay such Tax
(other than an Excluded Tax), before any interest or penalty becomes
payable or, if such Tax (other than an Excluded Tax) is paid by the
Administrative Agent or any Lender, shall reimburse the Administrative
Agent or such Lender (as the case may be) on demand for the amount
paid by it;
(iv) such Borrower shall pay the full amount deducted to the
relevant taxing authority or other authority in accordance with
applicable Law; and
(v) within thirty (30) days after paying any such Tax (other than
an Excluded Tax), the relevant Borrower shall deliver to
Administrative Agent, at its address referred to in Section 11.4
satisfactory evidence of that deduction, withholding or payment and
(where remittance is required) of the remittance thereof to the
relevant taxing or other authority.
(c) Stamp and Other Taxes. Each Borrower shall pay any present and
future stamp or documentary taxes or any other excise or property Taxes
which arise from any payment made by such Borrower or by the Administrative
Agent hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement.
(d) Indemnification. Within thirty (30) days from the date of written
demand therefor from any Lender or the Administrative Agent, each Borrower
will indemnify and hold harmless each Lender and the Administrative Agent
from and against the full amount of Taxes (other than Excluded Taxes),
including, without limitation, Taxes imposed by any jurisdiction on amounts
payable under this Section 3.13(d), paid by such Lender or the
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Administrative Agent (as the case may be) and any liability, including
penalties, interest and expenses, arising therefrom or with respect thereto
whether or not such Taxes were correctly or legally asserted by such
jurisdiction, provided, however, that any Lender receiving indemnification
from any Borrower under this Section 3.13(d) shall (i) at the request,
direction and expense of such Borrower challenge and contest the imposition
of such Taxes, if such Lender is the appropriate party in interest to
initiate and pursue such a challenge, or (ii) cooperate fully with and
assist such Borrower in any challenge or contest by such Borrower relating
to such Taxes, if such Borrower is the appropriate party in interest to
initiate and pursue such a challenge, which challenge shall be pursued at
such Borrower's expense, except that in either case, Borrowers have no
right hereunder to participate in the internal tax affairs of any Lender.
(e) Tax Certificates.
(i) In the event a Borrower is incorporated under the laws of the
United States or a state or jurisdiction thereof, then each Lender
that is not incorporated under the laws of the United States or a
state thereof shall so long as it is lawfully able to do so:
(A) deliver to the relevant Borrower and Administrative
Agent (A) two (2) duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form,
as the case may be, and (B) one (1) duly completed copy of
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(B) deliver to the relevant Borrower and Administrative
Agent two (2) further copies of any such form or certification on
or before the date that any such form or certification expires or
becomes obsolete and after the occurrence of any event requiring
a change in the most recent form previously delivered by it to
the applicable Borrower; and
(C) obtain such extensions of time for filing and completing
such forms or certifications as may reasonably be requested by
the relevant Borrower or Administrative Agent.
Such Lender shall certify (I) in the case of a Form 1001 or 4224, that
it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal or state income
taxes and (II) in the case of a Form W-8 or W-9, that it is entitled
to an exemption from United States backup withholding tax. Each
Person not incorporated under the laws of the United States or a state
thereof that is an Assignee hereunder pursuant to Section 11.12 shall,
upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this Section
3.13.
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(ii) In the event a Borrower is not incorporated under the laws
of the United States of America or a state thereof, then each Lender
(and any Assignee hereunder pursuant to Section 11.12) shall deliver
any statements, declarations, certifications, or other documentation
that may be reasonably requested by such Borrower in accordance with
Section 3.13(f).
(f) Statements and other Documentation. Each Lender shall honor all
reasonable requests from any Borrower to file or to provide such Borrower
with such statements, declarations, certifications or other documentation
as shall enable such Borrower to claim on behalf of such Lender a reduced
rate of Tax or exemption from any Taxes, provided that no Lender shall be
required to file or provide any such statement, declaration, certification
or other documentation unless (i) such Borrower shall have provided to such
Lender, within a reasonable time prior to the date such Borrower wishes to
receive or have such Lender file such statement or other documentation, a
written request describing such statement or other documentation and, if
available, a blank copy thereof with instructions for completion thereof
and (ii) the information necessary for completion of such statement or
other documentation is within the control of such Lender; provided,
further, that any Borrower receiving any information or documentation
pursuant to this Section 3.14 shall keep such information and documentation
confidential and disclose the same only to appropriate Tribunals in
furtherance of the purposes of this Section 3.13.
3.14. Application of Principal Payments.
(a) Payment of Committed Loans. Each repayment or prepayment of the
principal of Committed Loans by any Borrower shall be applied (except as
EDS may otherwise specify by notice to the Administrative Agent when no
Default shall be continuing), to the extent of such payment, pro rata to
the Committed Loans:
(i) first, to the Committed Loans of such Borrower having an
Interest Period ending on the date of such payment,
(ii) second, to any outstanding Base Rate Loans to such
Borrower,
(iii) third, to any outstanding CD Loans to such Borrower, and
(iv) fourth, to any outstanding Eurodollar Loans to such
Borrower.
Notwithstanding the foregoing or any other provision of this Agreement, no
Eurodollar Loans shall be prepaid on any day other than the last day of the
Interest Period therefor except pursuant to the provisions of Sections 3.5,
3.8, 3.9, 3.10, 3.11 or 3.13, or upon acceleration pursuant to this
Agreement.
(b) Payment of Term Loans. Each repayment or prepayment of the
principal of Term Loans by any Borrower shall be applied (except as EDS may
otherwise specify by
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notice to the Administrative Agent when no Default shall be continuing), to
the extent of such payment, pro rata to the Term Loans:
(i) first, to the Term Loans of such Borrower having an
Interest Period ending on the date of such payment,
(ii) second, to any outstanding Base Rate Loans to such
Borrower,
(iii) third, to any outstanding CD Loans to such Borrower, and
(iv) fourth, to any outstanding Eurodollar Loans to such
Borrower.
Notwithstanding the foregoing or any other provision of this Agreement, no
Eurodollar Loans shall be prepaid on any day other than the last day of the
Interest Period therefor except pursuant to the provisions of Sections 3.5,
3.8, 3.9, 3.10, 3.11 or 3.13 or upon acceleration pursuant to this
Agreement.
(c) Payment of Bid Rate Loans. Each repayment or prepayment of the
principal of Bid Rate Loans by any Borrower shall be applied (except as EDS
may otherwise specify by notice to the relevant Lender when no Default
shall be continuing), to the extent of such payment, to the Bid Rate Loans
made by the Lender receiving such payment having an Interest Period ending
on the date of such payment.
Notwithstanding the foregoing or any other provision of this Agreement, no
Bid Rate Loans which are Eurodollar Loans shall be prepaid on any day other
than the last day of the Interest Period therefor except pursuant to the
provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11 or 3.13, or upon
acceleration pursuant to this Agreement.
3.15. Payments, Computations, Judgments, etc. All payments by any
Borrower pursuant to this Agreement or any other Loan Document, whether in
respect of principal or interest or otherwise, shall be made by such Borrower in
Dollars.
3.16. Mitigation of Circumstances; Replacement of Affected Lenders, etc.
(a) Mitigation of Circumstances. Each Lender agrees to use reasonable
efforts to mitigate or avoid (i) an obligation by any Borrower to withhold
or deduct any Taxes pursuant to Section 3.13, or pay any costs pursuant to
Section 3.11 or (ii) the occurrence of any circumstances of the nature
described in Section 3.9 or Section 3.10 (including by changing the office
through which it has booked or funded its Commitment or any Loan or Bid
Rate Loan or by making any other mechanical change in funding Loans or Bid
Rate Loans), in each case prior, if possible, to the occurrence of such
circumstances or the incurrence of any obligation of any Borrower to
compensate such Lender for amounts payable pursuant to any such Section;
provided, however, that, in the reasonable judgment of such Lender, such
efforts are consistent with legal and regulatory restrictions and are not
materially disadvantageous to such Lender.
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(b) Replacement of Affected Lenders. At any time any Lender is
affected by any condition or circumstance set forth in Sections 3.9, 3.10,
3.11 or 3.13, and so long as no Default or Potential Default exists, (i)
EDS may replace such affected Lender as a party to this Agreement with one
or more other bank(s) or financial institution(s), (and upon notice from
EDS such affected Lender shall assign, pursuant to Section 11.12, without
recourse or warranty, its Commitment, its Loans and Bid Rate Loans, its
Note(s) and all of its other rights and obligations hereunder to such
replacement bank(s) or other financial institution(s) for a purchase price
equal to the sum of the principal amount of the Loans and Bid Rate Loans so
assigned, all accrued and unpaid interest thereon, its ratable share of all
accrued and unpaid facility fees and its ratable share of any remaining
unpaid Obligation owed to such affected Lender) and/or (ii) EDS may (and,
if EDS replaces any affected Lender in part as provided in clause (i)
above, concurrently with such replacement EDS shall) cause such affected
Lender to cease to be a party hereto by terminating the Commitment of such
Lender (whereupon the Aggregate Committed Sum shall be reduced by the
amount of such affected Lender's Committed Sum less any portion thereof
assigned pursuant to clause (i) above) by paying, and causing any other
relevant Borrower to pay, the principal amount of such affected Lender's
Loans and Bid Rate Loans, all accrued and unpaid interest thereon, all
accrued and unpaid commitment fees owed to such affected Lender and any
remaining unpaid Obligation owed to such affected Lender, in each case to
the extent not assigned and purchased pursuant to clause (i) above, and
such affected Lender shall thereupon cease to be a party hereto.
Notwithstanding anything to the contrary set forth in this Section 3.16,
EDS may not require any assignment or effect the termination of any
Lender's Commitment pursuant to this Section 3.16 if such assignment or
termination would conflict with any applicable Law.
3.17. Notwithstanding anything to the contrary set forth herein, the
failure of any Borrower to pay any amount demanded by any Lender pursuant to
Sections 3.5, 3.9, 3.10, 3.11, 3.13, or 11.17 shall not be deemed to constitute
a Default hereunder to the extent that such Borrower is contesting in good faith
its obligations to pay such amount by ongoing discussions diligently pursued
with such Lender or by appropriate proceedings; provided, however, that under no
circumstances shall any such failure to pay continue for more than forty (40)
days from the date on which the related amount is demanded consistent with the
terms of this Agreement, at which date such failure to pay shall become a
Default.
ARTICLE IV
----------
FEES; MODIFICATION OF COMMITMENTS
---------------------------------
4.1 Facility Fee. EDS will pay Administrative Agent, for the account of
each Lender, in Dollars, a facility fee on the average daily Committed Sum of
such Lender, or the unpaid principal balance of the Term Loan owing to such
Lender, as the case may be, from the Availability Date through and including the
Commitment Termination Date or Term Loan Maturity Date, as the case may be, at a
rate of 0.05 percent per annum, computed on a daily basis for the actual number
of days elapsed over a year of 360 days, including the first day but
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excluding the last day. The facility fee will be payable quarterly in arrears on
each Quarterly Date, Commitment Termination Date and Term Loan Maturity Date and
the Administrative Agent shall notify EDS, not less than ten (10) days prior to
each such date, of the amount of the facility fee then payable.
4.2. Reduction or Cancellation of Commitments. In addition to its rights
under Section 2.4, upon three (3) Business Days' prior written and irrevocable
notice to Administrative Agent, EDS may from time to time permanently reduce in
whole or in part the Aggregate Committed Sum, provided that, any reduction in
part must be in the amount of at least $10,000,000 or a greater integral
multiple of $10,000,000 and, provided, further, that no such notice may be given
or become effective at any time when a Notice of Advance or a Request for Bids
is outstanding and, provided, further, that no such reduction shall cause the
Aggregate Committed Sum to be less than the total principal amount of all
Committed Loans plus all Bid Rate Loans then outstanding. Any such reduction
shall be effective as of the date set forth in the notice and shall reduce the
Committed Sum of each Lender in proportion to each Lender's Percentage unless
such reduction shall be made (i) because one or more Lenders has declined to
extend the Commitment Termination Date pursuant to Section 2.4, in which case
the Committed Sum of such Terminating Lender(s) may be eliminated by EDS on such
Terminating Lender's Commitment Termination Date, or (ii) pursuant to Section
3.16. EDS may, in its sole discretion, replace any Lender at any time upon three
(3) Business Days' prior notice to Administrative Agent and such Lender, which
notice shall be irrevocable, provided, however, that no such notice may be given
or become effective at any time when a Notice of Advance or a Request for Bids
is outstanding, and, provided, further, that such Lender's Commitment is
assigned to another bank effective as of the date of such replacement pursuant
to Section 11.12 and any amounts due to such Lender as a result of such
termination have been paid in full. Any reduction in the Aggregate Committed Sum
and any replacement of any Lender shall have no effect upon any Loans then
outstanding hereunder, except as otherwise provided in Section 2.4.
ARTICLE V
---------
CONDITIONS PRECEDENT
--------------------
5.1 Initial Availability. Lenders will not be obligated to make any Loan
hereunder unless, on or before the date of such Loan, Administrative Agent has
received, in addition to this Agreement, executed by EDS, all of the items
described below in form and substance reasonably satisfactory to Administrative
Agent:
(a) Note(s). The applicable Note(s) executed by EDS.
(b) Guaranty. The Guaranty executed by EDS.
(c) Articles of Incorporation. A recent copy of the articles or
certificate of incorporation, and all amendments thereto, of EDS certified
by the Secretary of State of Texas.
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(d) Good Standing. A recent certificate of existence and good
standing for EDS from appropriate officials of the State of Texas.
(e) Officers' Certificate. An Officers' Certificate certifying as to
(i) bylaws, (ii) resolutions and (iii) incumbency of all officers of EDS
who will be authorized to execute or attest to any Loan Document
substantially in the form of Exhibit N. The Administrative Agent may
conclusively rely on such certificate until it shall receive a further
certificate canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(f) Opinion of Counsel. An opinion of Hughes & Luce, L.L.P., or
Counsel - Corporate Acquisitions and Finance, EDS, substantially in the
form attached hereto as Exhibit L, and an opinion of special New York
counsel to EDS regarding the enforceability under New York law of the Loan
Documents executed on or before the Availability Date by EDS.
5.2 Each Advance. In addition, Lenders will not be obligated to make any
Loan or Bid Rate Loan unless (a) each statement or certification made by the
relevant Borrower in its Notice of Advance shall be true and correct in all
material respects on the Borrowing Date; (b) at the time of each Loan or Bid
Rate Loan no Default or Potential Default shall exist; (c) the Administrative
Agent shall have received a Notice of Advance or a Request for Bids and a Notice
of Acceptance related thereto, as applicable, and each statement or
certification made therein shall be true and correct in all material respects on
the Borrowing Date; (d) the Administrative Agent shall have received a Note duly
executed by the relevant Borrower (other than EDS) complying with the terms and
provisions hereof; and (e) no event or circumstance, analogous or similar to any
of the events or circumstances described in Sections 8.1(e) and/or (f) shall
have occurred and be continuing with respect to the relevant Borrower.
5.3 Waiver of Conditions to Bid Rate Loans. Any Lender may, at its
election, waive any condition to the making of its Bid Rate Loan (except the
existence of a Default), but no such waiver shall be deemed to be a waiver of
the requirement that each such condition precedent be satisfied as a
prerequisite for any subsequent Bid Rate Loan or any Loan.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
6.1. EDS Representations and Warranties. To induce Lenders to enter into
this Agreement and make Loans and Bid Rate Loans hereunder, EDS represents and
warrants to Lenders as follows:
(a) Corporate Existence and Authority. Each Borrower (i) is duly
organized, validly existing, and in good standing under the Laws of its
jurisdiction of organization, (ii) is duly qualified to transact business
and is in good standing in each jurisdiction where the failure to do so
would have a Material Adverse Effect, and (iii) has all requisite power
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and authority (x) to own its assets and to carry on the business in which
it is engaged, (y) to execute, deliver and perform its obligations under
each Loan Document to which it is a party, and (z) to issue the Notes to
which it is a party in the manner and for the purpose contemplated by this
Agreement.
(b) Binding Obligations. The execution and delivery of the Loan
Documents have been duly authorized and approved by all necessary corporate
or partnership action and the Loan Documents constitute the legal, valid,
and binding obligations of each Borrower having executed the Loan Documents
enforceable against it in accordance with their respective terms except as
the enforceability thereof may be limited by applicable Debtor Relief Laws.
(c) Compliance with Laws and Documents. Each Borrower is not, nor
will the execution, delivery, and the performance of and compliance with
the terms of the Loan Documents cause any Borrower to be, in violation of
(i) any Laws, other than such violations which could not, individually or
collectively, cause a Material Adverse Effect, or (ii) its organizational
documents, including, where relevant, its bylaws or articles or certificate
of incorporation (as amended), other than such violations which could not,
individually or collectively, cause a Material Adverse Effect. The
execution, delivery, and the performance of and compliance with the terms
of the Loan Documents are not inconsistent with, and will not conflict with
or result in any breach of, or constitute a default (excluding breaches and
defaults which individually or collectively could not have a Material
Adverse Effect) under, or result in the creation or imposition of any lien
upon any of the material property or assets of any Borrower pursuant to the
terms of its organizational documents, any material indenture, mortgage,
lease, deed of trust, agreement, contract, or instrument to which any
Borrower is a party or by which any Borrower or its property or assets is
bound or to which it is subject. No Default or Potential Default has
occurred and is continuing.
(d) Financial Statements. EDS has delivered to Administrative Agent a
copy of the Financial Statements as of the period ended December 31, 1994.
Such Financial Statements were prepared in accordance with GAAP and present
fairly the financial condition and the results of operations of EDS and its
consolidated Subsidiaries as of, and for the portion of the fiscal year
ending on, the date or dates thereof. All material liabilities (direct or
indirect, fixed or contingent) of EDS and its consolidated Subsidiaries as
of the date or dates of such Financial Statements are reflected therein or
in the notes thereto. Between the date or dates of such Financial
Statements and the date hereof, there has been no material adverse change
in the financial condition of EDS and its consolidated Subsidiaries.
(e) Litigation. Except for the Litigation described on Schedule 6.1,
EDS and its Subsidiaries are not involved in, nor, to the best of EDS's
knowledge, are they aware of, any Litigation which could, collectively or
individually, have a Material Adverse Effect, if determined adversely to
EDS and its Subsidiaries, nor are there any outstanding or
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unpaid judgments against EDS or its Subsidiaries in excess of $25,000,000,
in the aggregate.
(f) Taxes. All tax returns and reports of EDS required by Law to be
filed have been filed, and all Taxes imposed upon EDS which are due and
payable have been paid, other than Taxes being contested in good faith and
for which reserves have been established to the extent required by GAAP.
(g) Guaranty Authorization. All requisite corporate action has been
taken by EDS to authorize the Guaranty.
(h) No Approvals, etc. No authorization, consent, approval, license
or formal exemption from, nor any filing, declaration or registration with,
any Tribunal, including the Securities and Exchange Commission or any
securities exchange, is required in connection with the execution, delivery
or performance by EDS of any Loan Document.
(i) Investment Company. Neither EDS nor any other Borrower is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
(j) ERISA Compliance. EDS is in compliance with all material
provisions of ERISA except to the extent that all failures to be in
compliance could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
ARTICLE VII
-----------
COVENANTS
---------
So long as Lenders have any commitment to make Loans under this Agreement
and thereafter until the Obligation is paid and performed in full, unless
Majority Lenders shall otherwise consent in writing:
7.1. Use of Proceeds. EDS covenants and agrees that it shall, and shall
cause each Borrower to, and each Borrower covenants and agrees to, use the
proceeds of Loans for general corporate or partnership purposes and working
capital needs, including, without limitation, capital expenditures, purchase of
capital stock and support of EDS's or such Borrower's commercial paper
facilities (or any commercial paper facilities of any EDS Affiliate guaranteed
by EDS).
7.2. Accounting Books and Financial Records; Inspections. EDS covenants
and agrees that it shall (a) keep, in accordance with GAAP, proper and complete
accounting books and financial records and permit Lenders to inspect the same
during reasonable business hours, (b) allow Lenders to inspect any of its
properties during reasonable business hours and (c) allow Lenders to discuss its
affairs, condition, and finances with its directors or officers from time to
time during reasonable business hours; provided, that all information obtained
pursuant to this Section 7.2 shall be kept confidential.
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7.3 Items to be Furnished. EDS covenants and agrees that it shall cause to
be furnished to Administrative Agent, with a copy for each Lender, each of the
following:
(a) Annual Financial Statements. As soon as available, but no later
than one hundred twenty (120) days after the last day of each fiscal year
of EDS, audited Financial Statements as of, and for the year ended on, such
last day, in each case setting forth, in comparative form, the
corresponding figures for the previous fiscal year, accompanied by the
opinion of independent certified public accountants, without qualification,
that such Financial Statements were prepared in accordance with GAAP and
present fairly the financial condition and results of operations of EDS and
its consolidated Subsidiaries, accompanied by a certificate signed by the
Treasurer or the Chief Financial Officer of EDS, which certificate shall
state that to the best of his or her knowledge, EDS has fulfilled all its
obligations under the Loan Documents and, at the end of such fiscal period,
no Default or Potential Default exists, and further sets forth the then-
current calculation of the covenant contained in Section 7.8.
(b) Quarterly Financial Statements. As soon as available, but no
later than sixty (60) days after the last day of each of the first three
fiscal quarters of EDS, Financial Statements showing the financial
condition and result of operations of EDS and its consolidated Subsidiaries
as of, and for the period from the beginning of the current fiscal year to,
such last day, setting forth in comparative form the corresponding figures
for the corresponding dates and periods of the preceding fiscal year,
accompanied by a certificate signed by the Treasurer or the Chief Financial
Officer of EDS, which certificate shall state that, to the best of his or
her knowledge, at the end of such fiscal period, no Default or Potential
Default exists, and further sets forth the then-current calculation of the
covenant contained in Section 7.8.
(c) SEC Filings. In the event that EDS shall be required to file
reports with the Securities and Exchange Commission pursuant to Sections 13
or 15(d) of the Securities Exchange Act of 1934, promptly upon transmission
thereof, copies of all such financial statements, proxy statements, notices
and reports as it shall send to its public stockholders generally and
copies of all registration statements (without exhibits) and all reports
which it files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the Securities
and Exchange Commission), but excluding any filings relating to shelf
registrations or Debt issuances.
(d) Notices of Significant Events. Notice, promptly after EDS knows
or has reason to know, of (i) the commencement or the change in status of
any Litigation with respect to EDS which could have a Material Adverse
Effect, (ii) any change in any material fact or circumstance represented or
warranted in any Loan Document, (iii) a Default or Potential Default,
specifying the nature thereof and what action EDS has taken, is taking, or
proposes to take with respect thereto.
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7.4 Taxes. EDS covenants and agrees that it shall promptly pay when due
any and all Taxes due, except Taxes being contested in good faith by appropriate
proceedings so long as reserves have been established to the extent required by
GAAP.
7.5 Maintenance of Corporate Existence, Assets, Business and Insurance.
EDS covenants and agrees that it (or any successor corporation of EDS permitted
by Section 7.9) shall at all times: maintain its corporate existence and
authority to transact business and good standing in its jurisdiction of
incorporation and all other jurisdictions where the failure to do so might have
a Material Adverse Effect; maintain all licenses, permits, and franchises
necessary for its businesses and where the failure to do so might have a
Material Adverse Effect; maintain, preserve and keep all of its assets which are
useful in and necessary to its businesses in good working order and condition
and from time to time make all necessary and proper repairs, replacements, and
renewals thereto and replacements thereof where the failure to do so might have
a Material Adverse Effect; and maintain insurance with financially sound and
reputable insurance companies or associations or self-insure as deemed
appropriate in the reasonable judgment of EDS, in such amounts and covering such
risks as are usual to companies with comparable assets engaged in similar
businesses and owning properties in the same general areas in which EDS
operates, and where the failure to do so might have a Material Adverse Effect.
7.6 Compliance with Laws and Documents. EDS covenants and agrees that it
will not, directly or indirectly, violate the provisions of any material Laws,
its articles or certificate of incorporation or bylaws or any material
agreements if such violation alone, or when aggregated with all other such
violations, could cause a Material Adverse Effect.
7.7. Regulation U. EDS covenants and agrees that neither the making of any
Advance hereunder, nor the use of the proceeds thereof, will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect.
7.8 Net Worth. EDS covenants and agrees that, at all times, the Net Worth
of EDS and its consolidated Subsidiaries shall exceed the sum of (a)
$3,070,050,000 plus (b) fifty percent (50%) of the Net Income of EDS and its
consolidated Subsidiaries for each fiscal quarter commencing on or after June
30, 1995.
7.9. Mergers; Consolidations; Transfers of Assets. EDS covenants and
agrees that it shall not consolidate with, or sell or convey all or
substantially all of its assets to, or merge with or into any other Person or
Persons, in a single transaction or a series of transactions, unless (a) either
EDS is the continuing corporation, or the successor corporation(s) is(are)
organized under the laws of the United States or a state thereof and the
successor corporation(s) expressly assume(s) all obligations of EDS under the
Facility and the due and punctual performance and observance of all of the
covenants and conditions of EDS under the Facility; and (b) EDS or the successor
corporation(s), as the case may be, will not, immediately after the merger,
consolidation, sale or conveyance, be in Default under the Facility and no
Potential Default under the Facility will have occurred and be continuing.
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7.10. Pari Passu. EDS covenants and agrees that all obligations of EDS
under this Agreement shall rank at least pari passu with all other unsecured
Debt of EDS.
7.11. ERISA. EDS covenants and agrees that if, at any time when there
shall exist a deficiency in excess of $25,000,000 in the assets of any Pension
Plan which are available to satisfy the benefits guaranteeable under ERISA with
respect to such Pension Plan, (i) the PBGC institutes proceedings to terminate
such Pension Plan or notice of intent to terminate such Pension Plan is filed
under Title IV of ERISA by EDS or any Subsidiary having liability with respect
thereto, or (ii) any Reportable Event for which the PBGC has not waived the 30-
day notice requirement shall occur with respect to such Pension Plan and such
Reportable Event shall present a material risk of termination with respect to
such Pension Plan, EDS shall (A) give Administrative Agent prompt written notice
thereof, (B) within fifteen (15) days after the date of such event, propose to
Administrative Agent a plan for bringing such Pension Plan into compliance with
ERISA or reducing such deficiency to $25,000,000 or less and (C) within thirty
(30) days after the date of such event, cause such deficiency to be reduced to
$25,000,000 or less, or cause such Pension Plan to be brought into compliance
with ERISA.
ARTICLE VIII
------------
DEFAULT
-------
8.1. Default. A "DEFAULT" shall exist if any one or more of the following
events shall occur and be continuing:
(a) Payment of Obligation. (i) The failure or refusal of any Borrower
to pay any principal installment when due in accordance with the terms of
the Loan Documents, or (ii) the failure or refusal of any Borrower to pay
any interest installment, any fee or any other sum (other than principal)
payable hereunder to any Lender or the Administrative Agent when due in
accordance with the terms of the Loan Documents, and such failure or
refusal continues for a period of five (5) Business Days.
(b) Representations and Warranties. Any representation or warranty
made by a Borrower is untrue in any material respect on the date as of
which made or deemed to be made.
(c) Certain Covenants. The failure or refusal of EDS punctually and
properly to perform, observe, and comply with Sections 7.9, 7.10 or 7.11 or
to maintain its corporate existence, except as the result of an action
permitted by Section 7.9.
(d) Other Covenants. The failure or refusal of any Borrower
punctually and properly to perform, observe, and comply with any covenant,
agreement, or condition contained in any of the Loan Documents, other than
the agreements described in Sections 8.1(a) or 8.1(c), and such failure or
refusal continues for a period of thirty (30) days (or, in the case of
Section 7.8, twenty (20) days) after the earlier of (i) EDS's having
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knowledge thereof, or (ii) written notice thereof is given by
Administrative Agent or any Lender to such Borrower and EDS.
(e) Voluntary Debtor Relief. EDS shall (i) execute an assignment for
the benefit of creditors, (ii) admit in writing its inability to, or
generally fail to, pay its debts generally as they become due, (iii)
voluntarily seek the benefits of any Debtor Relief Law which could suspend
or otherwise affect any of Lender's Rights under any of the Loan Documents,
or (iv) take any action to authorize any of the foregoing.
(f) Involuntary Proceedings. An order, judgment or decree shall be
entered against EDS by any Tribunal pursuant to any Debtor Relief Law, the
effect of which could be to suspend or otherwise affect any Lenders' Rights
under any of the Loan Documents or a petition shall be filed against EDS
seeking the benefit or benefits provided for by any Debtor Relief Law, the
effect of which could be to suspend or otherwise affect any of Lenders'
Rights under any of the Loan Documents, and such order, judgment, decree,
or petition is not discharged within ninety (90) days after the entry or
filing thereof.
(g) Payment of Judgments. EDS shall fail to pay any money judgment in
excess of $25,000,000 against it or its assets at least ten (10) days prior
to the date on which its assets may be sold lawfully to satisfy such
judgment.
(h) Default Under Other Debt. EDS shall default in the due and
punctual payment of the principal of or the interest on any Debt, which
Debt is in excess of $25,000,000 in aggregate principal amount, secured or
unsecured, or in the due performance or observance of any covenant or
condition of any indenture or other agreement executed in connection
therewith, and as a consequence thereof such Debt shall be declared to be
due and payable or required to be repaid prior to its stated maturity
(other than by a regularly scheduled required prepayment).
(i) Change of Control. A Change of Control shall occur, provided,
however, that such a Change of Control shall not constitute a Default if
immediately thereafter, the long-term indebtedness of EDS is rated at least
BBB- or the equivalent thereof by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or Baa3 or the equivalent thereof by Moody's
Investors Services, Inc., or if such rating is not made, then the
commercial paper of EDS is rated at least A-2 or the equivalent thereof by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or P-2 or
the equivalent thereof by Moody's Investors Service, Inc.
8.2 Default Under Certain Other Debt. A Default, as defined therein,
shall exist under that certain Multi-Currency Revolving Credit Agreement, dated
as of October 4, 1995, among EDS, Citibank, N.A., as administrative agent, and
the lenders named therein, as hereafter amended or extended, from time to time.
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ARTICLE IX
----------
RIGHTS AND REMEDIES UPON DEFAULT
--------------------------------
9.1 Remedies Upon Default. Should a Default exist, Majority Lenders
may, at their election, do any one or more of the following without notice of
any kind, including, without limitation, notice of acceleration or of intention
to accelerate, presentment and demand or protest, all of which are hereby
expressly waived by each Borrower: (a) declare the entire unpaid balance of the
Obligation, or any part thereof, immediately due and payable, whereupon it shall
be due and payable (provided that, upon the occurrence of a Default under
Section 8.1(e) or (f), the entire Obligation shall automatically become due and
payable without notice or other action of any kind whatsoever); (b) terminate
all or any portion of their Commitments hereunder; (c) reduce any claim to
judgment; (d) exercise the Rights of offset or banker's lien against the
interest of each Borrower in and to every account and other property of Borrower
which are in the possession of any Lender to the extent of the full amount of
the Obligation; and (e) exercise any and all other legal or equitable Rights
afforded by the Loan Documents or applicable Laws, as Majority Lenders shall
deem appropriate.
9.2 Waivers by Borrower and Others. Each Borrower and each surety,
endorser, guarantor, and other party ever liable for payment of any of the
Obligation jointly and severally waive notice, presentment, demand for payment,
protest, notice of intention to accelerate, notice of acceleration, and notice
of protest and nonpayment, and agree that their liability with respect to the
Obligation, or any part thereof, shall not be affected by any renewal or
extension in the time of payment of the Obligation, by any indulgence, or by any
release or change in any security for the payment of the Obligation, and hereby
consent to any and all renewals, extensions, indulgences, releases, or changes,
regardless of the number thereof.
9.3 Delegation of Duties and Rights. Each Lender may perform any of
its duties or exercise any of its Rights under the Loan Documents by or through
its officers, directors, employees, attorneys, agents, or other representatives.
9.4 Lenders Not in Control. None of the covenants or other provisions
contained in this Agreement shall, or shall be deemed to, give Lenders the Right
or power to exercise control over the affairs or management of any Borrower, the
power of Lenders being limited to the Rights of creditors generally and the
Right to exercise the remedies provided in this Article IX.
9.5 Cumulative Remedies. The Rights provided for in this Agreement
and the other Loan Documents are cumulative and not intended to be exclusive of
any other Right given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise.
9.6 Expenditures by Lenders. Following any Default hereunder, all
court costs, reasonable attorneys' fees, other costs of collection, and other
sums spent by Lenders pursuant to the exercise of any Right (including, without
limitation, any effort to collect or enforce the Notes) provided herein shall be
payable by Borrowers to Lenders on demand, shall become part of the
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Obligation, and shall bear interest at a rate per annum that is one percent (1%)
above the Base Rate from the date spent until the date repaid.
9.7. Performance by Administrative Agent. Should EDS or any other
Borrower fail to perform any covenant, duty, or agreement contained herein or in
any of the Loan Documents, the Administrative Agent, after giving ten (10) days'
notice to EDS and such Borrower, may, but shall not be obligated to, perform or
attempt to perform such covenant, duty, or agreement on behalf of such Borrower.
In such event, such Borrower shall, at the request of the Administrative Agent
promptly pay any amount expended by the Administrative Agent in such performance
or attempted performance to the Administrative Agent at the Payment Office,
together with interest thereon at the default rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly
understood that neither Administrative Agent nor Lenders assume any liability or
responsibility for the performance of any duties of any Borrower hereunder or
under any of the Loan Documents or other control over the management and affairs
of any Borrower, nor by any such action shall the Administrative Agent or the
Lenders be deemed to create a partnership arrangement with any Borrower.
ARTICLE X
---------
THE ADMINISTRATIVE AGENT
------------------------
10.1. Appointment and Authorization. Each Lender hereby irrevocably
appoints and authorizes Administrative Agent to take such action on its behalf
and to exercise such powers under the Loan Documents as are delegated to
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto. With respect to its Committed Sum, the Committed
Loans, Term Loans and Bid Rate Loans made by it and the Notes issued to it,
Administrative Agent shall have the same rights and powers under this Agreement
as any other Lender and may exercise the same as though it were not
Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include the Administrative Agent in its capacity as a
Lender. Administrative Agent and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, any of Borrowers, and any Person which may do business with
any of Borrowers, all as if Administrative Agent were not Administrative Agent
hereunder and without any duty to account therefor to Lenders.
10.2. Note Holders. Administrative Agent may treat the payee of any
Note as the holder thereof until written notice of transfer shall have been
filed with it signed by such payee and in form satisfactory to Administrative
Agent.
10.3. Consultation with Counsel. Lenders agree that Administrative
Agent may retain legal counsel, accountants and other professionals and may
consult with such professionals selected by it and shall not be liable for any
action taken or suffered in good faith by it in accordance with the advice of
such professionals.
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10.4. Documents. Administrative Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, enforceability, genuineness or
value of any of the Loan Documents or any other instrument or document furnished
pursuant thereto or in connection therewith, and Administrative Agent shall be
entitled to assume that the same are valid, effective, enforceable and genuine
and what they purport to be.
10.5. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by giving thirty (30) days'
prior written notice thereof to Lenders, EDS and Borrowers and the
Administrative Agent may be removed at any time with or without cause by EDS.
Upon any such resignation or removal, EDS shall appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Article X
shall continue in effect for its benefit in respect to any actions taken or
omitted to be taken by it while it was acting as Administrative Agent.
10.6. Responsibility of Administrative Agent. It is expressly
understood and agreed that the obligations of Administrative Agent under the
Loan Documents are only those expressly set forth in the Loan Documents and that
Administrative Agent shall be entitled to assume that no Default exists, unless
Administrative Agent has actual knowledge of such fact or has received notice
from a Lender that such Lender considers that a Default exists and specifying
the nature thereof. Lenders recognize and agree that Administrative Agent has no
responsibility for confirming the accuracy of any statements made by Borrowers,
or to inspect the property, including the books and financial records of any
Borrower, and in disbursing funds to Borrowers, Administrative Agent may rely
fully upon statements contained in the relevant Notice of Advance. Neither
Administrative Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it under or in connection
with the Loan Documents, except for its own gross negligence or willful
misconduct. In the absence of gross negligence or willful misconduct,
Administrative Agent shall incur no liability under or in respect of any of the
Loan Documents by acting upon any notice, consent, certificate, warranty or
other paper or instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything which it may
do or refrain from doing in the reasonable exercise of its judgment, or which
may seem to it to be necessary or desirable in the premises.
Administrative Agent shall not be responsible to Lenders for any
recitals, statements, representations or warranties contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by any Lender under, this Agreement, or for the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any document referred to or provided for herein or for any failure by Borrowers
to perform any of their obligations hereunder. Administrative Agent may employ
agents and attorneys-in-fact and shall not be answerable, except as to money or
securities received by it or its authorized agents,
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for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
The relationship between Administrative Agent and each of the Lenders
is only that of agent and principal and has no fiduciary aspects, and
Administrative Agent's duties hereunder are acknowledged to be only ministerial
and not involving the exercise of discretion on its part. Nothing in this
Agreement or elsewhere contained shall be construed to impose on Administrative
Agent any duties or responsibilities other than those for which express
provision is herein made. In performing its duties and functions hereunder,
Administrative Agent does not assume and shall not be deemed to have assumed,
and hereby expressly disclaims, any obligation or responsibility toward or any
relationship of agency or trust with or for Borrowers. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of Majority Lenders and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that Administrative Agent shall not be required to take any
action which exposes Administrative Agent to personal liability or which is
contrary to this Agreement or applicable law.
10.7. Notices of Default. In the event that Administrative Agent
shall have acquired actual knowledge of any Default or any Potential Default,
Administrative Agent shall promptly give notice thereof to Lenders.
10.8. Independent Investigation. Each of Lenders severally represents
and warrants to Administrative Agent that it has made its own independent
investigation and assessment of the financial condition and affairs of EDS in
connection with the making and continuation of its participation in the Loans
hereunder and has not relied exclusively on any information provided to such
Lender by Administrative Agent in connection herewith, and each Lender
represents, warrants and undertakes to Administrative Agent that it shall
continue to make its own independent appraisal of the creditworthiness of EDS
while the Loans are outstanding or while it has any obligation to make Loans
hereunder to Borrowers.
10.9. Indemnification of Administrative Agent. Lenders agree to
indemnify Administrative Agent (to the extent not reimbursed by Borrowers), Pro
Rata, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against Administrative Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by Administrative Agent under the Loan
Documents, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Administrative Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent, on a Pro Rata basis,
promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations,
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legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrowers.
10.10. Arrangers and Managers. None of the Lenders identified on the
cover page or signature pages of this Agreement as an "arranger" or "manager"
shall have any right, power, obligation, liability, responsibility or duty,
including, without limitation, any fiduciary duty, under this Agreement other
than those applicable to all Lenders as such. Each Lender acknowledges that it
has not relied, and will not rely, on any of the Lenders so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.
10.11. Benefit of Article X. The agreements contained in this Article
X are solely for the benefit of Administrative Agent and Lenders, and are not
for the benefit of, or to be relied upon by, Borrowers or any third party .
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1. Number and Gender of Words. Whenever in any Loan Document the
singular number is used, the same shall include the plural where appropriate,
and vice versa; and words of any gender in any Loan Document shall include each
other gender where appropriate.
11.2. Headings. The headings, captions, and arrangements used in any
of the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify, or modify the terms of the Loan
Documents, nor affect the meaning thereof.
11.3. Exhibits. If any Exhibit which is to be executed and delivered
contains blanks, the same shall be completed correctly and in accordance with
the terms and provisions contained and as contemplated herein prior to, at the
time of, or after the execution and delivery thereof.
11.4. Communications. Unless specifically otherwise provided,
whenever any Loan Document requires or permits any consent, approval, notice,
request, or demand from one party to another, such communication must be in
writing (which may be by telecopier) to be effective and shall be deemed to have
been given on the day actually delivered or telecopied, or, if mailed, on the
third Business Day after it is enclosed in an envelope, addressed to the party
to be notified at the address stated below, properly stamped for first class
delivery, sealed, and deposited in the appropriate official postal service.
Until changed by notice pursuant hereto (any party being entitled to change its
address for purposes of this Section 11.4 by notice to all other parties
hereto), the address and telecopy number for each party for purposes hereof are
as follows:
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BORROWERS: Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Attention: Manager, Corporate Finance
Telecopy No.: (214) 605-3005
Telephone No.: (214) 605-3002
COPY TO: Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Attention: General Counsel
Telecopy No.: (214) 605-5613
Telephone No.: (214) 605-5500
LENDERS: See Schedule 1
ADMINISTRATIVE
AGENT: FOR NOTICES UNDER ARTICLES II AND III AND SECTION 4.2:
Citibank, N.A.
Bank Loan Syndications
One Court Square, 7th Floor
Long Island City, NY 11120
Attention: Mr. Phil Green
Telecopy No.: (718) 248-4844/45
Telephone No.: (718) 248-4529
IN ALL CASES WITH A HARD COPY TO:
Citibank, N.A.
Central Customer Service
One Court Square, 7th Floor
Long Island City, NY 11120
Attention: Ms. Angela Valentin
FOR ALL OTHER NOTICES:
Citibank, N.A.
399 Park Avenue
8th Floor, Zone 12
New York, NY 10043
Telecopy No.: (212) 826-2375
Telephone No.: (212) 559-8851
Attention: Mr. William G. McKnight, III
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PROCESS Prentice Hall Systems, Inc.
AGENT: 15 Columbus Circle
New York, New York 10023-7773
COPY TO: Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Attention: General Counsel
Telecopy No.: (214) 605-5613
11.5. Exceptions to Covenants. No Borrower shall take any action or fail
to take any action which is permitted as an exception to any of the covenants
contained in any of the Loan Documents if such action or omission would result
in the breach of any other covenant contained in any of the Loan Documents.
11.6. Survival. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents shall survive all closings
under the Loan Documents and, except as otherwise indicated, shall not be
affected by any investigation made by any party.
11.7. GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK (OTHER THAN THE CONFLICT OF LAWS PROVISIONS THEREOF), EXCEPT
TO THE EXTENT THAT FEDERAL LAWS MAY APPLY.
11.8. Maximum Interest Rate. Regardless of any provision contained in any
of the Loan Documents, no Lender shall ever be entitled to contract for, charge,
take, reserve, receive, or apply, as interest on the Obligation, or any part
thereof, any amount in excess of the Highest Lawful Rate, and, in the event any
Lender ever contracts for, charges, takes, reserves, receives, or applies as
interest any such excess, it shall be deemed a partial prepayment of principal
and treated hereunder as such and any remaining excess shall be refunded to the
relevant Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Highest Lawful Rate, Borrowers and
Lenders shall, to the maximum extent permitted under applicable Law, (a) treat
all Advances as but a single extension of credit (and Lenders and Borrowers
agree that such is the case and that provision herein for multiple Advances and
for one or more Notes is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (c)
exclude voluntary prepayments and the effects thereof, and (d) "spread" the
total amount of interest throughout the entire contemplated term of the
Obligation; provided that, if the Obligation is paid and performed in full prior
to the end of the full contemplated term thereof, and if the interest received
for the actual period of existence thereof exceeds the Highest Lawful Rate, any
Lender receiving such excess interest shall refund such excess, and, in such
event, such Lender shall not be subject to any penalties provided by any Laws
for contracting for, charging, taking, reserving, or receiving interest in
excess of the Highest Lawful Rate. To the extent the Laws of the State of Texas
are applicable for purposes of
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determining the "Highest Lawful Rate," such term shall mean the "indicated rate
ceiling" from time to time in effect under Article 1.04, Title 79, Revised Civil
Statutes of Texas, as amended.
11.9. ENTIRETY AND AMENDMENTS. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement and the other Loan Documents embody the entire agreement between
Borrowers and Lenders and supersedes all prior proposals, agreements and
understandings relating to the subject matter hereof. Borrowers certify that
they are relying on no representation, warranty, covenant or agreement except
for those set forth herein and the other Loan Documents of even date herewith.
This Agreement and the other Loan Documents may be amended, or the provisions
hereof waived, only by an instrument in writing executed jointly by an
authorized officer of EDS and Administrative Agent, acting on behalf of Majority
Lenders, and supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof. Notwithstanding anything to the
contrary set forth herein, no change in the Loan Documents or waiver of the
provisions thereof which has the effect of (a) extending the maturity or
decreasing the amount of any payment on any Notes or payment of any fee, (b)
decreasing any rate or amount of interest or other sums payable to any Lender
under the Loan Documents, (c) changing the definition of the term "Majority
Lenders", (d) amending or waiving Sections 5.2 (except with respect to a Bid
Rate Loan as set forth in Section 5.3), 7.8, 11.9 or 11.12 or (e) discharging
any guarantor shall be effective absent the concurrence of all Lenders. No
increase to the Committed Sum of any Lender, no extension of the Commitment
Termination Date of any Lender, and no imposition of any additional obligations
upon any Lender, except as expressly provided herein, shall be effective without
the consent of such Lender. Notwithstanding the foregoing, EDS or any other
Borrower and any Lender of a Bid Rate Loan may, from time to time, and at any
time, enter into an amendment of such Bid Rate Loan and the Bid Rate Note
related thereto. EDS and Administrative Agent may, from time to time and at any
time, enter into an amendment hereof, for the purpose of adding as a Lender
hereunder any commercial lending institution.
11.10. Waivers. The acceptance by Lenders at any time and from time to
time of partial payment on the Obligation shall not be deemed to be a waiver of
any Default or Potential Default then existing. No failure to exercise and no
delay on the part of Lenders or their respective officers, directors, employees,
agents, representatives or attorneys in exercising any Right under this
Agreement or any of the Loan Documents shall operate as a waiver thereof, nor
shall any single or partial exercise of any Right under this Agreement preclude
any other or further exercise thereof or the exercise of any other Right. Any
waiver or consent allowed hereunder and in conformity with the provisions hereof
shall be effective only in the specific instance to which it relates and for the
purpose for which it is given.
11.11. Multiple Counterparts. This Agreement may be executed in any
number of identical counterparts, and by different parties hereto on separate
counterparts, each of which shall be deemed an original for all purposes and all
of which constitute, collectively, one
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Agreement; but, in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
11.12. Parties Bound; Participations and Assignments.
(a) Successors and Assigns. This Agreement is binding upon, and
inures to the benefit of, each Lender, each Borrower, and their respective
successors and assigns; provided that, unless otherwise permitted by this
Section 11.12, no Lender may transfer, pledge, assign, sell participations
in or otherwise encumber its Commitment or Loans hereunder; and provided
further, except as otherwise expressly provided herein, the Borrowers shall
not have any right to assign their rights or obligations hereunder or any
interest herein without the prior written consent of the Lenders.
(b) Participations. Any Lender may in accordance with applicable Law,
at any time sell to one or more banks or other entities (each, a
"PARTICIPANT") participating interests in any Loan owing to such Lender,
any Commitment of such Lender or any other interest of such Lender
hereunder; provided that such Lender shall have given prior written notice
to EDS of the identity of each such Participant, and provided, further,
that no Lender shall transfer, grant or assign any participation under
which any Participant shall have rights to approve any amendment,
supplement or modification to or waiver of this Agreement except to the
extent such amendment, supplement, modification or waiver would (i)
increase the amount of the Participant's funding obligations in respect of
such Lender's Commitment, (ii) reduce the principal of, or interest on, any
of the Participant's interest in such Lender's Notes or any fees or other
amounts payable to such Lender hereunder (to the extent an interest therein
has been sold to the Participant) or (iii) postpone the date fixed for any
payment of principal of, or interest on, any of such Lender's Notes or any
fees or other amounts payable to such Lender hereunder (to the extent an
interest therein has been sold to the Participant). In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of any obligation owing to it hereunder for all purposes under this
Agreement, and Borrowers and the Administrative Agent shall continue to be
entitled to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Borrowers hereby
agree that each Participant shall be entitled to the benefits of Sections
3.5, 3.9, 3.10, 3.11 and 3.13 with respect to its participation in the
Commitment and the Loans outstanding from time to time as if it were a
Lender; provided that no Participant shall be entitled to receive any
greater amount pursuant to any such Section than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had
no such transfer occurred.
(c) Assignments. Any Lender may, in the ordinary course of its
commercial lending business and in accordance with applicable Law, at any
time and from time to time, assign to any Lender or any Affiliate thereof
or, with the prior written consent of
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EDS (which consent shall not be unreasonably withheld), to an additional
bank or financial institution (each such Lender, Affiliate, bank or
financial institution, an "ASSIGNEE") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit K, executed by such Assignee, such
assigning Lender and EDS and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that, unless EDS
otherwise consents, any such assignment to any Assignee that is not a
Lender or an Affiliate of a Lender shall be an undivided share of the
assigning Lender's Committed Sum and Loans, in a minimum amount of
$17,500,000 and shall not exceed fifty percent (50%) of the assigning
Lender's Committed Sum as of the date such Lender became a Lender
hereunder, and provided, further, that no Assignee shall be entitled to
receive any greater amount pursuant to Sections 3.11(a) or 3.13 than the
assignor Lender would have been entitled to receive in respect of the
amount of the Loan(s) assigned had no such assignment occurred. Upon such
execution, delivery, acceptance and recording from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of (and be)
a Lender hereunder with a Commitment as set forth therein, and (y) the
assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement. Notwithstanding anything to the contrary contained herein, any
Lender may sell, transfer, assign or grant participations in all or any
part of the Bid Rate Loans made by it to any Assignee without requirement
of notice or consent and without limitation of any kind; provided, that no
Assignee of any Bid Rate Loans shall be entitled to receive any greater
amount pursuant to Sections 3.11(a) or 3.13 than the assignor Lender would
have been entitled to receive in respect of the amount of the Bid Rate
Loan(s) assigned had no such assignment occurred.
(d) Maintenance of Register. The Administrative Agent shall maintain
at its address referred to in Section 11.4 a copy of each Assignment and
Acceptance delivered to it and a register (the "REGISTER") for the
recordation of the name and address of each of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from
time to time. The entries in the Register shall be prima facie evidence of
the existence and amounts of the obligations of Borrowers therein recorded,
and Borrowers, Administrative Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection and copying by Borrowers or any Lender at any reasonable time
and from time to time upon reasonable prior notice. The Administrative
Agent shall provide a copy of the Register to EDS on a monthly basis.
(e) Payment of Costs. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender, an Assignee, Administrative
Agent and EDS, and payment by the assigning Lender to Administrative Agent
and EDS of all of their reasonable costs in connection with such
assignment, including, without limitation, a processing and recordation fee
of $3,000 to Administrative Agent, Administrative Agent shall (i) promptly
accept such Assignment and Acceptance and (ii) on the effective date
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<PAGE>
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the
assigning Lender, its Assignee and EDS.
(f) Delivery of Notes. Within five (5) Business Days after its
receipt of an Assignment and Acceptance, together with an execution copy of
each replacement Note, the applicable Borrower shall execute and deliver to
the Administrative Agent in exchange for the surrendered Note or Notes such
replacement Note or Notes, duly executed, and payable to the order of such
Assignee in an amount equal to the amount assigned to it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a
portion of the Obligation hereunder, a replacement Note or Notes to the
order of the assigning Lender in an amount equal to the portion retained by
it hereunder. Such replacement Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form
of the surrendered Note or Notes.
(g) Disclosure of Borrower Information. Borrowers authorize each
Lender to disclose to any prospective Participant, any Participant or any
prospective Assignee (each, a "TRANSFEREE") any and all financial
information in such Lender's possession concerning Borrowers which has been
delivered to such Lender by or on behalf of Borrowers pursuant to this
Agreement or which has been delivered to all Lenders by or on behalf of
Borrowers in connection with their respective credit evaluations of
Borrowers prior to becoming a party to this Agreement; provided that each
Lender disclosing such information notifies EDS in advance that it is doing
so, and, prior to any such disclosure, the Transferee shall agree to
preserve the confidentiality of any information relating to Borrowers
received from such Lender. Nothing contained in this Section 11.12(f)
shall be deemed to prohibit the delivery to any Transferee of any financial
information which is otherwise publicly available or to subject the
delivery of any such publicly available information to the notice and
consent procedures hereinabove set forth.
(h) Pledges and Assignments to Federal Reserve Banks. Nothing herein
shall prohibit any Lender from pledging or assigning all or any portion of
its Loans or Bid Rate Loans to any Federal Reserve Bank in accordance with
applicable Law but such Lender shall remain liable for performance of its
obligations hereunder.
11.13. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWERS HEREBY
AGREE THAT ANY SUIT, ACTION OR PROCEEDING AGAINST BORROWERS WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF,
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR
IN THE UNITED STATES COURTS LOCATED IN THE STATE OF NEW YORK, BOROUGH OF
MANHATTAN, AS MAJORITY LENDERS IN THEIR SOLE DISCRETION MAY ELECT AND THE
BORROWERS HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE
PURPOSE OF
51
<PAGE>
ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWERS HEREBY AGREE THAT SERVICE OF ALL
WRITS, PROCESS AND SUMMONSES IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
THE STATE OF NEW YORK MAY BE MADE UPON PROCESS AGENT AT ITS ADDRESS AS SET FORTH
IN SECTION 11.4 (AS SUCH ADDRESS MAY BE CHANGED FROM TIME TO TIME) AND EACH OF
THE BORROWERS HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS TRUE AND LAWFUL
ATTORNEY-IN-FACT IN THE NAME, PLACE AND STEAD OF SUCH BORROWER TO ACCEPT SUCH
SERVICE OF ANY AND ALL SUCH WRITS, PROCESS AND SUMMONSES, AND AGREE THAT THE
FAILURE OF THE PROCESS AGENT TO GIVE ANY NOTICE OF SUCH SERVICE OF PROCESS TO IT
SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED
THEREON. BORROWERS HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING IN SAID COURTS BY THE MAILING THEREOF BY
ADMINISTRATIVE AGENT OR ANY LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO BORROWERS' ADDRESS SET FORTH IN SECTION 11.4 HEREOF. EACH BORROWER
HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY NOTE BROUGHT IN THE COURTS LOCATED IN THE STATE OF NEW
YORK, BOROUGH OF MANHATTAN, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES
OR ANY OF THE OTHER LOAN DOCUMENTS, WHICH WAIVER IS INFORMED AND VOLUNTARY.
11.14. Payment of Expenses. EDS agrees to pay (a) all costs and expenses
of Lenders, including attorneys' fees and expenses, incurred by Lenders in
connection with the preservation and enforcement of Lenders' rights under this
Agreement, the Notes and/or the other Loan Documents and (b) the legal fees and
expenses of Haynes and Boone, L.L.P., in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Notes and the other
Loan Documents.
11.15. Invalid Provisions. If any provision of any of the Loan Documents
is held to be illegal, invalid or unenforceable under present or future laws
during the term of this Agreement, such provision shall be fully severable; such
Loan Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document; and
the remaining provisions of such Loan Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Loan Document a provision mutually agreeable to Borrowers,
Administrative Agent and Majority Lenders as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
52
<PAGE>
In the event Borrowers, Administrative Agent and Majority Lenders are unable to
agree upon a provision to be added to the Loan Document in question within a
period of ten (10) Business Days after a provision of any Loan Document is held
to be illegal, invalid or unenforceable, then a provision acceptable to
Administrative Agent and Majority Lenders as similar in terms to the illegal,
invalid or unenforceable provision as is possible and be legal, valid and
enforceable shall be added automatically to such Loan Document. In either case,
the effective date of the added provision shall be the date upon which the prior
provision was held effectively to be illegal, invalid or unenforceable.
11.16. Borrowers' Right of Offset.
(a) Offset Against Accounts. Each of Lenders and the Borrowers
hereby agree, with respect to the Obligation, that, automatically and
without any action by or notice to the Borrowers, upon the occurrence of
the appointment of a conservator or receiver for a Lender or, if a Lender's
deposits are insured by the Federal Deposit Insurance Corporation on the
date of an Advance by such Lender, the termination of federal deposit
insurance of such Lender's deposits by the Federal Deposit Insurance
Corporation, or any successor thereto, each Borrower's unpaid payment
obligations under the Obligation, including any unpaid principal and
interest thereunder, shall be offset, Dollar for Dollar, against any and
all funds of such Borrower on deposit with such Lender in any and all
accounts which such Borrower maintains at such Lender in the name of such
Borrower, whether individually, or jointly with any of its Affiliates, and
which have not been previously pledged to a party other than such Lender
(the "ACCOUNTS"). The Accounts shall in such circumstance be applied
against the Obligation in such order as each Borrower elects or, if no such
election is made, in such order as the Lender or the entity applying such
Accounts elects.
(b) Lender Representations. Each Lender whose deposits are insured
by the Federal Deposit Insurance Corporation represents and warrants that
the execution of this Agreement by such Lender and the obligations herein
undertaken by it have been approved in compliance with applicable
regulations of the Federal Deposit Insurance Corporation.
11.17 Indemnification of Lenders. EDS agrees to indemnify and hold
Administrative Agent and each Lender and their respective directors, officers,
shareholders, employees, attorneys and agents, and Affiliates (each, an
"INDEMNITEE") harmless from and against any and all liabilities, obligations,
losses, actions, judgments, suits, disbursements, penalties, damages (other than
consequential damages) and related expenses, including attorneys' fees and
expenses, with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes, and the other Loan Documents
(collectively, the "INDEMNIFIED LIABILITIES" and, individually, an "INDEMNIFIED
LIABILITY"), provided, however, that EDS and the Borrowers shall have no
obligation hereunder to any Indemnitee with respect to Indemnified Liabilities
arising from (a) the gross negligence or willful misconduct of any Indemnitee,
(b) any legal proceedings commenced against any Indemnitee by any other
Indemnitee or by any Participant or Assignee, (c) any violation or claimed
violation by any Indemnitee of any material banking Law of the jurisdiction of
its or its related Lender's Applicable Lending Office, or (d) any
53
<PAGE>
action by Administrative Agent or any Lender not required or contemplated by the
Agreement or the Loan Documents or necessary for the performance of
Administrative Agent's or any Lender's obligations, Administrative Agent's or
any Lender's duties or enforcement of Administrative Agent's or any Lender's
rights thereunder. The provisions of this Section 11.17 shall remain operative
and in full force and effect regardless of the termination of the Commitments,
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the occurrence of the Commitment Termination Date, the invalidity,
illegality, or unenforceability of any term or provision of this Agreement or
any other Loan Document, or any investigation made by or on behalf of
Administrative Agent or the other Lenders. All amounts due under this Section
11.17 shall be payable within ten (10) days after written demand therefor,
delivered to EDS and the relevant Borrower (if other than EDS) through the
Administrative Agent as promptly as practical after the Indemnitee in question
obtains knowledge of any Indemnified Liability, which notice shall be certified
by an authorized officer of Administrative Agent or Lender (if Administrative
Agent or such Lender is the Indemnitee making such claim) and shall reasonably
identify the basis upon which such claim is made.
11.18. Designation of EDS Affiliates as Borrowers. EDS may, at any time,
or from time to time, supplement or amend Schedule 2 hereto to add an EDS
Affiliate or delete a Designated EDS Affiliate by delivering to Administrative
Agent a revised Schedule 2 together, in the case of an addition of an EDS
Affiliate, with a certificate executed by the Treasurer, Assistant Treasurer or
Chief Financial Officer of EDS stating that the guaranty by EDS of the
obligations of such EDS Affiliate may reasonably be expected to benefit,
directly or indirectly, EDS.
11.19 Lenders' Right of Setoff; Payments Set Aside; Sharing of Payments.
(a) Right of Setoff. Should a Default exist, each Lender is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of a Borrower against any and all of the obligations of such
Borrower now or hereafter existing under this Agreement and the Notes,
irrespective of whether or not demand shall have been made under this
Agreement or any such Note and although such obligations may be unmatured.
Each Lender agrees promptly to notify any affected Borrower after any such
setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition
to other rights and remedies (including, without limitation, other rights
of setoff) which such Lender may have.
(b) Payments Set Aside. To the extent that EDS or any other
Borrower makes a payment or payments to a Lender or a Lender exercises its
right of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other Person under any Debtor Relief
Law or equitable cause, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all
rights and remedies therefor, shall be revived and
54
<PAGE>
shall continue in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
(c) Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Loans made by it (other than costs
or losses paid pursuant to Sections 3.5, 3.9 or 3.11) in excess of its
ratable share of payments on account of the Loans obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Loans made by them as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of
them, provided, however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to
the proportion of (i) the amount of such Lender's required repayment to
(ii) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. EDS and each Borrower agrees that
any Lender so purchasing a participation from another Lender pursuant to
this Section 11.19(c) may, to the fullest extent permitted by law, exercise
all its rights of payment (including the right of setoff) with respect to
such participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation.
[The remainder of this page is intentionally left blank.]
55
<PAGE>
EXECUTED as of the day and year first above written.
BORROWER:
ELECTRONIC DATA SYSTEMS
CORPORATION
By:______________________________________
Name:____________________________________
Title:___________________________________
ADMINISTRATIVE AGENT:
CITIBANK, N.A., in its individual capacity
as a Lender and as Administrative Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
ARRANGERS/LENDERS:
BANCO SANTANDER - NEW YORK
BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
56
<PAGE>
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
CHEMICAL BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:______________________________________
Name:____________________________________
Title:___________________________________
NATIONSBANK OF TEXAS, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
57
<PAGE>
MANAGERS/LENDERS:
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
CIBC INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
PNC BANK, NATIONAL ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
TORONTO DOMINION (TEXAS), INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
WACHOVIA BANK OF GEORGIA, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
58
<PAGE>
LENDERS:
THE DAI-ICHI KANGYO BANK, LTD.
By:______________________________________
Name:____________________________________
Title:___________________________________
SOCIETE GENERALE, SOUTHWEST
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
THE SANWA BANK, LIMITED, DALLAS
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
THE BANK OF TOKYO TRUST
COMPANY
By:______________________________________
Name:____________________________________
Title:___________________________________
59
<PAGE>
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
THE FUJI BANK, LIMITED - HOUSTON
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
THE SUMITOMO BANK, LIMITED,
HOUSTON AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
COMMERZBANK
AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
60
<PAGE>
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN
BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
FIRST FIDELITY BANK, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.P.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
61
<PAGE>
BANCA DI ROMA - HOUSTON
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
COMERICA BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
KREDIETBANK N.V.
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
NATIONAL WESTMINSTER BANK Plc
By:______________________________________
Name:____________________________________
Title:___________________________________
THE ROYAL BANK OF SCOTLAND plc
By:______________________________________
Name:____________________________________
Title:___________________________________
THE SAKURA BANK, LIMITED,
HOUSTON AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
SUNBANK, NATIONAL ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
UNITED STATES NATIONAL BANK OF
OREGON
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
CAYMAN ISLANDS BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
BANK OF MONTREAL
By:______________________________________
Name:____________________________________
Title:___________________________________
CREDIT SUISSE
By:______________________________________
Name:____________________________________
Title:___________________________________
FIRST INTERSTATE BANK OF
CALIFORNIA
By:______________________________________
Name:____________________________________
Title:___________________________________
THE FIRST NATIONAL BANK OF
BOSTON
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
THE FIRST NATIONAL BANK OF MARYLAND
By:______________________________________
Name:____________________________________
Title:___________________________________
MELLON BANK, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
STANDARD CHARTERED BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
65
<PAGE>
EXHIBIT 10(I)
================================================================================
$1,250,000,000
ELECTRONIC DATA SYSTEMS CORPORATION
================================================================================
MULTI-CURRENCY REVOLVING CREDIT AGREEMENT
DATED AS OF
OCTOBER 4, 1995
CITIBANK, N.A.,
as Administrative Agent
and
BANCO SANTANDER - NEW YORK BRANCH,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
CHEMICAL BANK,
CITIBANK, N.A.,
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
and NATIONSBANK OF TEXAS, N.A.,
as Arrangers
and
BANQUE NATIONALE DE PARIS,
CIBC INC.,
PNC BANK, NATIONAL ASSOCIATION,
TORONTO DOMINION (TEXAS), INC., and
WACHOVIA BANK OF GEORGIA, N.A.,
as Managers
and
the other lenders named herein, as LENDERS
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I DEFINITION OF TERMS
1.1 Definitions................................................ 1
1.2 Other Definitional Provisions.............................. 14
ARTICLE II FACILITY
2.1 Committed Loans............................................ 15
2.2 Committed Loan Borrowing Procedure; Disbursement........... 15
2.3 Bid Rate Loans............................................. 17
2.4 Optional Extension of the Commitment Termination Date...... 21
2.5 Several Obligations........................................ 22
2.6 Determination of Availability.............................. 22
ARTICLE III TERMS OF PAYMENT
3.1 Notes...................................................... 23
3.2 Payments on Committed Loan Notes and Bid Rate Notes........ 23
3.3 Interest................................................... 24
3.4 Continuation/Conversion with Respect to Committed
Loans.................................................... 24
3.5 Funding Losses............................................. 26
3.6 Default Rates.............................................. 26
3.7 Interest and Fee Calculations.............................. 26
3.8 Mandatory Principal Prepayments............................ 27
3.9 Voluntary Principal Prepayments............................ 27
3.10 Inadequacy of Eurodollar, Eurocurrency or CD Loan
Pricing.................................................. 27
3.11 Illegality................................................. 28
3.12 Increased Cost and Reduced Return.......................... 29
3.13 Several Obligations........................................ 30
3.14 Taxes...................................................... 30
3.15 Application of Principal Payments.......................... 33
3.16 Payments, Computations, Judgments, etc..................... 34
3.17 Mitigation of Circumstances; Replacement of
Affected Lenders......................................... 34
3.18 Failure to Pay Additional Amounts.......................... 35
ARTICLE IV FEES; MODIFICATION OF COMMITMENTS
4.1 Facility Fee............................................... 36
4.2 Reduction or Cancellation of Commitments................... 36
ARTICLE V CONDITIONS PRECEDENT
5.1 Initial Availability....................................... 36
5.2 Each Advance............................................... 37
5.3 Waiver of Conditions to Bid Rate Loans..................... 37
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.1 EDS Representations and Warranties......................... 38
ARTICLE VII COVENANTS
7.1 Use of Proceeds............................................ 40
7.2 Accounting Books and Financial Records; Inspections........ 40
7.3 Items to be Furnished...................................... 40
7.4 Taxes...................................................... 41
7.5 Maintenance of Corporate Existence, Assets, Business
and Insurance............................................ 41
7.6 Compliance with Laws and Documents......................... 41
7.7 Regulation U............................................... 41
7.8 Net Worth.................................................. 41
7.9 Mergers; Consolidations; Transfers of Assets............... 42
7.10 Pari Passu................................................. 42
7.11 ERISA...................................................... 42
ARTICLE VIII DEFAULT
8.1 Default.................................................... 42
ARTICLE IX RIGHTS AND REMEDIES UPON DEFAULT
9.1 Remedies Upon Default...................................... 44
9.2 Waivers by Borrower and Others............................. 44
9.3 Delegation of Duties and Rights............................ 45
9.4 Lenders Not in Control..................................... 45
9.5 Cumulative Remedies........................................ 45
9.6 Expenditures by Lenders.................................... 45
9.7 Performance by Administrative Agent........................ 45
ARTICLE X THE ADMINISTRATIVE AGENT
10.1 Appointment and Authorization.............................. 45
10.2 Note Holders............................................... 46
10.3 Consultation with Counsel.................................. 46
10.4 Documents.................................................. 46
10.5 Resignation or Removal of Administrative Agent............. 46
10.6 Responsibility of Administrative Agent..................... 46
10.7 Notices of Default......................................... 47
10.8 Independent Investigation.................................. 47
10.9 Indemnification of Administrative Agent.................... 48
10.10 Arrangers and Managers..................................... 48
10.11 Benefit of Article X....................................... 48
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE XI MISCELLANEOUS
11.1 Number and Gender of Words................................ 48
11.2 Headings.................................................. 48
11.3 Exhibits.................................................. 49
11.4 Communications............................................ 49
11.5 Exceptions to Covenants................................... 50
11.6 Survival.................................................. 50
11.7 Governing Law............................................. 50
11.8 Maximum Interest Rate..................................... 51
11.9 Entirety and Amendments................................... 51
11.10 Waivers................................................... 52
11.11 Multiple Counterparts..................................... 52
11.12 Parties Bound; Participations and Assignments............. 52
11.13 Consent to Jurisdiction; Waiver of Jury Trial............. 55
11.14 Payment of Expenses....................................... 56
11.15 Invalid Provisions........................................ 56
11.16 Borrowers' Right of Offset................................ 56
11.17 Indemnification of Lenders................................ 57
11.18 Designation of EDS Affiliates as Borrowers................ 57
11.19 Judgment Currency......................................... 58
11.20 Lenders' Right of Set-off; Payments Set Aside;
Sharing of Payments..................................... 58
</TABLE>
iii
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Form of EDS Committed Loan Note
Exhibit B Form of Committed Loan Note for Borrowers other than EDS
Exhibit C Form of Bid Rate Note
Exhibit D Form of Unconditional Guaranty Agreement
Exhibit E Form of Notice of Advance
Exhibit F Form of Request for Bids
Exhibit G Form of Offer of Bid Rate Loans
Exhibit H Form of Notice of Continuation/Conversion
Exhibit I Form of Assignment and Acceptance
Exhibit J Form of Opinion of Counsel
Exhibit K Form of Bid Rate Loan Confirmation
Exhibit L Form of Officers' Certificate
Schedule 1 Lender Information
Schedule 2 Designated EDS Affiliates
Schedule 6.1 Litigation
iv
<PAGE>
MULTI-CURRENCY REVOLVING CREDIT AGREEMENT
-----------------------------------------
This Multi-Currency Revolving Credit Agreement (the "AGREEMENT") is
entered into as of the 4th day of October, 1995, by and among Electronic Data
Systems Corporation, a Texas corporation (hereinafter called "EDS"), the
financial institutions listed on the signature pages of this Agreement under the
heading "LENDERS", and which hereafter become parties hereto pursuant to Section
11.12 hereof, including BANCO SANTANDER - NEW YORK BRANCH, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, CHEMICAL BANK, CITIBANK, N.A., CREDIT
LYONNAIS CAYMAN ISLAND BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK and
NATIONSBANK OF TEXAS, N.A., as Arrangers and CITIBANK, N.A., as Administrative
Agent for such lenders to the extent and in the manner provided in Article X
below ("ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, EDS has requested that Lenders (as hereinafter defined)
provide EDS and certain EDS Affiliates (as hereinafter defined) with a multi-
currency revolving credit facility and Lenders are willing to provide such a
facility to EDS and such EDS Affiliates upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
ARTICLE I
---------
DEFINITION OF TERMS
-------------------
1.1. Definitions. As used herein, the following terms have the meanings
assigned to them in this Article I or in the section or recital referred to
below:
ACCOUNTS shall have the meaning assigned to such term in Section 11.16.
ADJUSTED CD RATE means, for any day, a rate per annum determined pursuant
to the following formula:
ACDR (% [CDBR ]* + AR
-----------
per annum) = [1.00 -DRP]
where CDBR equals the CD Base Rate in effect on such day (expressed as
a decimal), DRP equals the Domestic Reserve Percentage in effect on such day and
AR equals the Assessment Rate in effect on such day (expressed as a decimal).
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/10,000th of 1%.
<PAGE>
ADMINISTRATIVE AGENT shall have the meaning assigned to such term in
the preamble hereof.
ADVANCE means an amount loaned to one or more Borrowers by any Lender
pursuant to this Agreement.
AFFILIATE of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person if such
Person possesses, directly or indirectly, power to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
AGGREGATE COMMITTED SUM means, as of any date, the aggregate of the
Committed Sums of all Lenders in effect on such date.
AGREEMENT means this Multi-Currency Revolving Credit Agreement,
including the Schedules and Exhibits hereto, as the same may be renewed,
extended, amended, supplemented, or modified from time to time.
ALTERNATIVE CURRENCY means any Primary Currency other than Dollars.
APPLICABLE LENDING OFFICE means, with respect to each Lender, such
Lender's Eurocurrency Lending Office for Eurocurrency Loans, such Lender's
Domestic Lending Office for all Loans other than Eurocurrency Loans and the
office of such Lender notified by such Lender to the Administrative Agent as its
Applicable Lending Office with respect to Bid Rate Loans.
APPLICABLE MARGIN, with respect to the calculation of the CD Rate, the
Eurocurrency Rate or the Eurodollar Rate, means the applicable percentage amount
set forth in the table below:
Committed Loans:
Eurodollar Loans and
Eurocurrency Loans: 0.145%
CD Loans: 0.270%
ASSESSMENT RATE means, for any day, the lowest net annual assessment
rate (rounded upward, if necessary, to the next higher 1/10,000th of 1%)
determined by the Administrative Agent to be generally applicable to member
banks of the Federal Reserve System in New York City with deposits exceeding Two
Hundred Fifty Million Dollars ($250,000,000), and which meet the highest minimum
capitalization ratios and supervisory subgroup designations specified by
applicable Tribunals for qualification for the lowest assessment rate as of the
date of such determination.
ASSIGNEE shall have the meaning assigned to such term in Section
11.12(c).
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AVAILABILITY DATE means the later of (a) the date when sufficient
Lenders have executed this Agreement so that the Aggregate Committed Sum is
equal to or greater than $1,250,000,000 or (b) the date when all of the
conditions precedent set forth in Section 5.1 have been satisfied in full or
waived.
BASE RATE, with respect to any day, means the greater of (a) the
average of the rates of interest publicly announced by each Domestic Reference
Bank as its Dollar prime rate, base lending rate or reference rate as in effect
for that day or (b) the Federal Funds Rate plus 0.50% per annum, all as
determined by Administrative Agent and notified to EDS. Each change in the
prime rate or base lending rate so announced by such Domestic Reference Bank
will be effective as of the effective date of the announcement or, if no
effective date is specified, as of the date of the announcement. Such rate is a
reference rate only and is not intended to be the lowest rate of interest
charged by Lenders in connection with extensions of credit to debtors.
BASE RATE LOAN means any Loan or Bid Rate Loan hereunder bearing
interest at a rate that is calculated by reference to the Base Rate.
BELGIAN FRANCS and the abbreviation BFR mean lawful money of the
Kingdom of Belgium.
BID DATE shall have the meaning assigned to such term in Section
2.3(b).
BID RATE means, with respect to each Lender, the rate of interest bid
by such Lender with respect to a Bid Rate Loan in response to a Request for
Bids.
BID RATE LOAN and BID RATE LOANS shall have the meaning assigned to
such terms in Section 2.3.
BID RATE LOAN BORROWING DATE means the proposed date of availability
of a Bid Rate Loan requested by a Borrower in its Request for Bids at the office
where the Lenders are to deliver such funds to Administrative Agent.
BID RATE LOAN CONFIRMATION shall have the meaning assigned to such
term in Section 2.3(d).
BID RATE NOTES shall have the meaning assigned to such term in Section
3.1 and BID RATE NOTE shall mean any of the Bid Rate Notes.
BORROWER means EDS and any Designated EDS Affiliate if, at the time in
question, such Designated EDS Affiliate has an outstanding request for a Loan or
a Bid Rate Loan or is obligated for payment of one or more Loans or Bid Rate
Loans outstanding hereunder, and BORROWERS means all of the Persons that meet
the foregoing criteria, in each case as designated in the applicable Notice(s)
of Advance, Request(s) for Bids or Notice(s) of Continuation/Conversion.
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<PAGE>
BORROWING DATE means the date requested by a Borrower on which a Loan
is to be advanced.
BUSINESS DAY means any day, other than a Saturday or Sunday, on which
commercial banks generally are open for business in Dallas, Texas and New York,
New York, and in each other location of a Lender's Applicable Lending Office.
CANADIAN DOLLARS and the abbreviation and symbol CAN $ mean lawful
money of the Dominion of Canada.
CD BASE RATE means, with respect to any Interest Period, the rate of
interest determined by Administrative Agent to be the arithmetic average
(rounded upward, if necessary, to the next higher 1/10,000th of 1%) of the
prevailing rates per annum bid at 9:00 a.m. (New York time) (or as soon
thereafter as practicable) on the first day of such Interest Period by two (2)
or more New York certificate of deposit dealers of recognized standing for the
purchase at face value from each Domestic Reference Bank of its certificates of
deposit in an amount comparable to the unpaid principal amount of the CD Loan of
Lenders to which such Interest Period applies and having a maturity equal to
such Interest Period.
CD LOAN means any Loan hereunder bearing interest at a rate that is
calculated by reference to the CD Base Rate.
CD RATE means the Adjusted CD Rate plus the Applicable Margin.
CHANGE OF CONTROL means the acquisition by any Person or any
combination of a Person and its Affiliates, of an aggregate of more than fifty
percent (50%) of the total issued and outstanding shares of the voting stock of
EDS.
CODE means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated and rulings issued thereunder.
COMMITMENT means the obligation of each Lender to make Advances to
Borrowers under this Agreement.
COMMITMENT TERMINATION DATE means 12:00 noon (New York, New York time)
on the date which is five (5) years after the Availability Date, or such later
date as may be accepted by Lenders pursuant to Section 2.4, provided, however,
as to any Lender which does not agree to a requested extension of the Commitment
Termination Date, the Commitment Termination Date for such Lender shall continue
to be the date so scheduled prior to EDS's request that such Lender extend the
Commitment Termination Date.
COMMITTED LOAN means any Advance by any Lender to any Borrower
pursuant to such Lender's Commitment and COMMITTED LOANS shall mean all of such
Loans.
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<PAGE>
COMMITTED LOAN NOTES shall have the meaning assigned to such term in
Section 3.1, and COMMITTED LOAN NOTE shall mean any of the Committed Loan Notes.
COMMITTED SUM means, for each Lender, the maximum aggregate principal
sum which such Lender has committed to lend to Borrowers as set forth in
Schedule 1 opposite to such Lender's name and the caption "Committed Sum",
subject, however, to any increases or reductions in such Lender's Committed Sum
during the term of the Facility.
COMPENSATION RATE means (a) for any sum payable in Dollars, for any
day, the Federal Funds Rate for such day, (b) for any sum payable in any
Alternative Currency, for any day, the Indicated Rate with respect to such
Alternative Currency for such day, and (c) for any Secondary Currency, for any
day, the relevant Lender's cost of funds with respect to such Secondary Currency
for such day.
DEBT of any Person means all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon such Person's balance
sheet as liabilities, but in any event including liabilities secured by any lien
or encumbrance existing on property owned or acquired by such Person or a
Subsidiary thereof (whether or not the liability secured thereby shall have been
assumed), obligations which have been or under GAAP should be capitalized for
financial reporting purposes, obligations under acceptance facilities and
reimbursement obligations and all guaranties, endorsements, and other contingent
obligations with respect to Debt of others, including, but not limited to, any
obligations to acquire any such Debt, to purchase, sell, or furnish property or
services primarily for the purpose of enabling such other Person to make payment
of any of such Debt, or to otherwise assure the owner of any of such Debt
against loss with respect thereto.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable domestic or foreign liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, fraudulent transfer or conveyance Laws, suspension
of payments, or similar Laws from time to time in effect affecting the Rights of
creditors generally.
DEFAULT shall have the meaning assigned to such term in Article VIII.
DESIGNATED EDS AFFILIATE means any EDS Affiliate if, at the time in
question, such EDS Affiliate is named on Schedule 2 hereto, as such Schedule is
supplemented or amended pursuant to Section 11.18.
DEUTSCHE MARK and the abbreviation DM mean lawful money of the Federal
Republic of Germany.
DOLLAR EQUIVALENT VALUE means, at any time, with respect to an amount
of any Primary Currency (other than Dollars) or any Secondary Currency, an
amount of Dollars into which Administrative Agent determines that it could, in
accordance with its practice from time to time in the interbank foreign exchange
market, convert such amount of Primary Currency or Secondary
5
<PAGE>
Currency at its spot rate of exchange in effect at or about 11:00 a.m., London,
England time, on the day on which such calculation is made.
DOLLARS and the symbol $ mean lawful money of the United States of
America.
DOMESTIC LENDING OFFICE means, as to each Lender, its office or branch
identified in Schedule 1 as its Domestic Lending Office or such other office or
branch of such Lender in the United States as such Lender may from time to time
specify to EDS and the Administrative Agent.
DOMESTIC REFERENCE BANKS means Citibank, N.A., Bank of America
National Trust and Savings Association, and NationsBank of Texas, N.A., and
DOMESTIC REFERENCE BANK means each of them; provided that if any Domestic
Reference Bank regularly fails to provide quotations to the Administrative Agent
or regularly provides quotations that in the judgment of EDS are not
representative of the rates at which deposits are generally available to Lenders
in the relevant currencies, EDS may request (by notice to the Administrative
Agent, which shall promptly notify the other parties hereto) that such bank be
replaced as a Domestic Reference Bank by another Lender. In the event that only
two (2) Domestic Reference Banks shall so provide quotations to the
Administrative Agent, the Administrative Agent shall make the calculations
required hereunder using such quotations.
DOMESTIC RESERVE PERCENTAGE means, for any day, that percentage
(expressed as a decimal) which Administrative Agent determines is in effect on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including
without limitation, any basic, supplemental, marginal and emergency reserves)
for a member bank of the Federal Reserve System in New York City with deposits
exceeding Two Hundred Fifty Million Dollars ($250,000,000) in respect of new
non-personal time deposits in Dollars in New York City having a maturity equal
to the related Interest Period and in an amount of $100,000 or more.
DUTCH GUILDERS and the abbreviation DFL mean lawful money of the
Kingdom of The Netherlands.
EDS shall have the meaning assigned to such term in the preamble
hereof.
EDS AFFILIATE means any Person which is, directly or indirectly,
wholly or partially owned by EDS.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
EUROCURRENCY BUSINESS DAY means a Business Day other than a legal
holiday on which banks are authorized or required to be closed in London,
England, or (a) with respect only to any Yen-Denominated Loan, Hong Kong or
Tokyo, Japan, or (b) with respect to any Eurocurrency
6
<PAGE>
Loan other than a Yen-Denominated Loan, the city in which the principal
interbank foreign exchange market is made for the currency in which such
Eurocurrency Loan is denominated.
EUROCURRENCY LENDING OFFICE means, as to each Lender, its office or
branch in London or New York City identified in Schedule 1 as its Eurocurrency
Lending Office or such other office or branch of such Lender as such Lender may
hereafter designate by notice to EDS and the Administrative Agent, but no such
designation shall be effective if EDS notifies such Lender and the
Administrative Agent promptly thereafter that, in EDS's reasonable
determination, such designation would have adverse consequences to EDS or any
Borrower to a material extent.
EUROCURRENCY LOAN means any Loan or Bid Rate Loan hereunder, made in a
currency other than Dollars.
EUROCURRENCY RATE means (a) for Primary Currencies other than Dollars,
the LIBOR Rate related to such Primary Currency plus the Applicable Margin, and
(b) for Secondary Currencies, the Bid Rate.
EUROCURRENCY REFERENCE BANKS means Citibank, N.A., Bank of America
National Trust and Savings Association and Credit Lyonnais Cayman Island Branch,
and EUROCURRENCY REFERENCE BANK means each of them; provided that if any
Eurocurrency Reference Bank regularly fails to provide quotations to the
Administrative Agent or regularly provides quotations that in the judgment of
EDS are not representative of the rates at which deposits are generally
available to Lenders in the relevant currencies, EDS may request (by notice to
the Administrative Agent, which shall promptly notify the other parties hereto)
that such Eurocurrency Reference Bank be replaced as a Eurocurrency Reference
Bank by another Lender. In the event that only two (2) Eurocurrency Reference
Banks shall so provide quotations to the Administrative Agent, the
Administrative Agent shall make the calculations required hereunder using such
quotations.
EUROCURRENCY RESERVE PERCENTAGE means, for any day, that percentage
(expressed as a decimal) which Administrative Agent determines is in effect on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor), at which reserves (including without limitation any basic,
supplemental, marginal and emergency reserves) are imposed by the Board of
Governors of the Federal Reserve System in respect of "eurocurrency
liabilities," as defined under Regulation D of the Board of Governors of the
Federal Reserve System (or any applicable regulation which may be substituted
for Regulation D).
EURODOLLAR LOAN means any Loan or Bid Rate Loan hereunder bearing
interest at a rate that is calculated by reference to the LIBOR Rate.
EURODOLLAR RATE means the LIBOR Rate for Dollars plus the Applicable
Margin.
EXCLUDED TAX means any, and EXCLUDED TAXES means all, Taxes imposed on
or measured by the net income of any Lender or the Administrative Agent, and
franchise taxes imposed on any of them, by the jurisdiction under the laws of
which such Lender or the Administrative Agent (as the case may be) is organized
or any political subdivision thereof and, in the case of each Lender,
7
<PAGE>
Taxes imposed on its net income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof.
EXHIBIT means an exhibit attached hereto unless otherwise specified.
EXTENSION RESPONSE DATE shall have the meaning assigned to such term
in Section 2.4.
FACILITY means the credit facility provided for in this Agreement.
FEDERAL FUNDS RATE for any day means the rate set forth for such day
(or, if such day is not a Business Day the next preceding Business Day) opposite
the caption "Federal Funds (Effective)" in the weekly statistical release
designated as "H.15(519)", or any successor publication, published by the Board
of Governors of the Federal Reserve System or, if such rate is not so published
for any day which is a Business Day, the average of quotations for such day on
overnight Federal funds transactions received by Administrative Agent from three
(3) Federal funds brokers of recognized standing selected by it.
FINANCIAL STATEMENTS means the consolidated balance sheet of EDS and
its Subsidiaries and the consolidated statements of income, cash flows, and
shareholders' equity of EDS and its Subsidiaries.
FIXED RATE LOAN means a Bid Rate Loan bearing interest at a fixed
percentage rate per annum specified by the Lender making such Bid Rate Loan in
its offer of Bid Rate Loans.
FRENCH FRANCS and the abbreviation FFR mean lawful money of the
Republic of France.
GAAP means all applicable generally accepted accounting principles of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board which are applicable as
of the date in question.
GUARANTY means that certain Unconditional Guaranty Agreement
substantially in the form of Exhibit D hereto, executed by EDS in favor of the
Lenders, and delivered to the Administrative Agent, as the same may be amended
or restated from time to time.
HIGHEST LAWFUL RATE means the maximum nonusurious interest rate or
amount of interest which, under applicable law, any Lender is allowed to
contract for, charge, take, collect, reserve, or receive.
HONG KONG BUSINESS DAY means any day, other than a Saturday or Sunday,
on which commercial banks generally are open for business in Hong Kong.
INDEMNIFIED LIABILITY AND INDEMNIFIED LIABILITIES shall have the
meanings assigned to such terms in Section 11.17.
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INDICATED RATE means, with respect to any Interest Period, (a) in the
case of Dollars, Yen, Swiss Francs and Deutsche Marks, the rate for deposits in
the relevant currency for a period comparable to the relevant Interest Period
which appears on the Telerate Page 3750 as of 11:00 a.m. London time two (2)
London Business Days (which, in the case of Dollars, shall also be Business
Days, and in the case of Yen, shall also be Hong Kong Business Days) preceding
the first day of the relevant Interest Period or, if Telerate Page 3750 is
unavailable at such time, the rate which appears on the Reuters Screen ISDA Page
as of such date and time, (b) in the case of Pounds Sterling, the rate for
deposits in Pounds Sterling for a period comparable to the relevant Interest
Period which appears on the Reuters Screen RPMA Page as of 11:00 a.m. London
time two (2) London Business Days preceding the first day of the relevant
Interest Period, (c) in the case of Belgian Francs, the rate for deposits in
Belgian Francs for a period comparable to the relevant Interest Period which
appears on the Reuters ISDB Page as of 11:00 a.m. London time two (2) London
Business Days preceding the first day of the relevant Interest Period, (d) in
the case of French Francs and Dutch Guilders, the rate for deposits in the
relevant currency for a period comparable to the relevant Interest Period which
appears on the Telerate Page 3740 as of 11:00 a.m. London time two (2) London
Business Days preceding the first day of the relevant Interest Period or, if
Telerate Page 3740 is unavailable at such time, the rate which appears on the
Reuters ISDB Page as of such date and time, and (e) in the case of Canadian
Dollars, Italian Lire and Spanish Pesetas, the rate for deposits in the relevant
currency for a period comparable to the relevant Interest Period which appears
on the Reuters Screen EFX= Page as of 11:00 a.m. London time two (2) London
Business Days preceding the first day of the relevant Interest Period; provided,
however, that if Administrative Agent determines that the relevant foregoing
source is unavailable for any Interest Period, Indicated Rate means the rate of
interest determined by Administrative Agent to be the average (rounded upward,
if necessary, to the nearest 1/10,000th of 1%) of the rates per annum at which
deposits in the relevant currency in immediately available funds are offered to
each of the Eurocurrency Reference Banks two (2) London Business Days (which, in
the case of Dollars, shall also be Business Days, and in the case of Yen, shall
also be Hong Kong Business Days) preceding the first day of the relevant
Interest Period by prime banks in the London interbank Eurocurrency market as of
11:00 a.m. London time for delivery on the first day of such Interest Period,
for the number of days comprised therein and in an amount comparable to the
amount of the relevant Loan.
INTEREST PAYMENT DATE means, as to any Base Rate Loan, each Quarterly
Date to occur while such Base Rate Loan is outstanding, and the date such Base
Rate Loan is paid in full.
INTEREST PERIOD means (a) with respect to each Loan consisting of a
Eurodollar Loan, a Eurocurrency Loan, or a Bid Rate Loan (other than a Bid Rate
Loan which is a Fixed Rate Loan), the period commencing on the date of such
Loan, or on the last day of the immediately preceding Interest Period in the
case of a continuation or conversion, and ending on the numerically
corresponding day in the first, second, third, or sixth month thereafter, as the
applicable Borrower may elect in the applicable Notice of Advance, Notice of
Acceptance or Notice of Continuation/Conversion, (b) with respect to each Loan
consisting of a CD Loan, the period commencing on the date of such Loan, or on
the last day of the immediately preceding Interest Period in the case of a
continuation or conversion, and ending 30, 60, 90 or 180 days thereafter as the
applicable Borrower may elect in the applicable Notice of Advance, Notice of
Acceptance or
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Notice of Continuation/Conversion and (c) with respect to any Bid Rate Loan
which is a Fixed Rate Loan, the period commencing on the date of such Fixed Rate
Loan and ending such number of days thereafter (which shall not be less than
fifteen (15) days or more than one hundred eighty-three (183) days after such
date) as selected by the relevant Borrower in its Notice of Acceptance.
Notwithstanding the above, (x) any Interest Period which would otherwise end on
a day that is not a Business Day, or Eurocurrency Business Day, as appropriate,
shall be extended to the next succeeding Business Day, or Eurocurrency Business
Day, as appropriate, unless, in the case of Eurodollar Loans and Eurocurrency
Loans, such next succeeding Eurocurrency Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Eurocurrency Business Day, (y) in the case of Eurodollar Loans and Eurocurrency
Loans, any Interest Period which begins on the last Eurocurrency Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on the
last Eurocurrency Business Day of a calendar month and (z) no Interest Period
may end later than the Commitment Termination Date.
ITALIAN LIRE and the symbol LIT mean lawful money of the Republic of
Italy.
LAW means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any Tribunal and any treaties or
international conventions.
LENDER means a financial institution identified in Schedule 1 or added
pursuant to Section 11.12 hereof, in each case, for the account of the
applicable lending office, and LENDERS means all such financial institutions.
LIBOR RATE means, with respect to any Interest Period, an interest
rate per annum (rounded upward, if necessary, to the next higher 1/10,000th of
1%) determined by Administrative Agent two (2) London Business Days (which, in
the case of Dollars, shall also be Business Days, and in the case of Yen, shall
also be Hong Kong Business Days) prior to the first day of such Interest Period
to be the quotient obtained by dividing (a) the Indicated Rate for such Interest
Period for the currency in question by (b) a percentage equal to 100% minus the
Eurocurrency Reserve Percentage, if applicable.
LITIGATION means any proceeding, claim, lawsuit, or investigation
conducted or threatened by or before any Tribunal.
LOAN means any Advance by any Lender to any Borrower pursuant to such
Lender's Commitment and LOANS shall mean all of such Loans.
LOAN DOCUMENTS means (a) this Agreement, (b) the Notes, (c) the
Guaranty, and (d) any and all other agreements ever delivered pursuant to this
Agreement, as the same may be renewed, extended, restated, amended or
supplemented from time to time.
LONDON BUSINESS DAY means any day, other than a Saturday or Sunday, on
which commercial banks generally are open for business in London, England.
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MAJORITY LENDERS shall mean, as of any date, Lenders representing at
least 66-2/3% of (a) at any time Lenders are committed to lend hereunder, the
Aggregate Committed Sum, or (b) at any time after the Commitments shall have
expired or terminated, (i) at any time that Loans are outstanding, the aggregate
unpaid principal amount of the Loans, and (ii) at any time that no Loans are
outstanding, the aggregate unpaid principal amount of the Bid Rate Loans.
MATERIAL ADVERSE EFFECT means any set of circumstances or events which
would reasonably be expected to (a) have any material adverse effect upon the
validity or enforceability of this Agreement, any Note or the Guaranty, (b) be
material and adverse to the financial condition of EDS and its Subsidiaries
taken as a whole, (c) materially impair the ability of EDS and its Subsidiaries,
taken as a whole, to fulfill their obligations under the terms and conditions of
the Loan Documents, or (d) cause a Default or a Potential Default.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in sections
3(37) or 4001(a)(3) of ERISA or section 414 of the Code to which EDS or any of
its Subsidiaries is making, or has made, or is accruing, or has accrued, an
obligation to make contributions.
NET INCOME means, with respect to any Person for any period, the net
income or loss of such Person for such period, determined in accordance with
GAAP, except that extraordinary and non-recurring gains and losses as determined
in accordance with GAAP shall be excluded.
NET WORTH means the excess, if any, of (a) the total assets of EDS and
its consolidated Subsidiaries over (b) without duplication, all items of
indebtedness, obligation, or liability which would be classified as liabilities
of EDS and its consolidated Subsidiaries, each to be determined in Dollars in
accordance with GAAP.
NOTES shall have the meaning assigned to such term in Section 3.1 and
NOTE shall mean any of the Notes.
NOTICE OF ACCEPTANCE means a notice by a Borrower to the
Administrative Agent accepting an offer for a Bid Rate Loan.
NOTICE OF ADVANCE means a notice submitted and executed by a Borrower
(and, if such Borrower is not EDS, by such Borrower and EDS), which notice shall
be irrevocable and binding, requesting a Committed Loan, which Notice of Advance
shall be substantially in the form of Exhibit E.
NOTICE OF CONTINUATION/CONVERSION shall have the meaning assigned to
such term in Section 3.4 and shall be substantially in the form of Exhibit H.
NOTICE OF REJECTION means a notice by a Borrower to the Administrative
Agent rejecting an offer for a Bid Rate Loan.
OBLIGATION means all present and future indebtedness, obligations and
liabilities, and all renewals, extensions, and modifications thereof, now or
hereafter owed to Lenders by each
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Borrower arising from, by virtue of, or pursuant to any Loan Document, together
with all interest lawfully accruing thereon and reasonable costs, reasonable
expenses, and reasonable attorneys' fees incurred in the enforcement or
collection thereof.
ORIGINAL CURRENCY shall have the meaning assigned to such term in
Section 11.19.
OTHER CURRENCY shall have the meaning assigned to such term in Section
11.19.
OFFER OF BID RATE LOANS shall mean a duly completed Offer of Bid Rate
Loans, substantially in the form of Exhibit G, delivered by a Lender to
Administrative Agent in connection with a Bid Rate Loan.
PARTICIPANT shall have the meaning assigned to such term in Section
11.12(b).
PAYMENT OFFICE FOR ALTERNATIVE CURRENCIES means the office of
Administrative Agent in London, England, at Citibank London, Citibank
International PLC, 336 Strand, London, England WC2R 1LS, Attention: Cliff
Posner, telecopy number: 011-44-81-852-7007, telephone number: 011-44-81-297-
4247, which office may be changed to another office in London by written notice
to EDS and the Lenders.
PAYMENT OFFICE FOR DOLLARS means the principal office of
Administrative Agent in New York City, located on the date hereof at 399 Park
Avenue, New York, New York 10043, which office may be changed to another
location in New York City by written notice to EDS and the Lenders.
PAYMENT OFFICE FOR YEN means the office of Administrative Agent in
Hong Kong at Citicorp International Limited, 47/F Citibank Tower, Citibank
Plaza, 3 Garden Road, Central, Hong Kong, Attention: Charles K.M. Liu, telecopy
number: 011-852-877-2591, telephone number: 011-852-868-6666, which office may
be changed to another office in Hong Kong by written notice to EDS and the
Lenders.
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereto.
PENSION PLAN means an employee pension benefit plan as defined in
section 3(2) of ERISA which is maintained or contributed to by EDS or any
Subsidiary of EDS for employees of EDS or any Subsidiary of EDS, excluding any
Multiemployer Plan.
PERCENTAGE means, at any time, for each Lender, the percentage
obtained by (x) dividing such Lender's Committed Sum by the Aggregate Committed
Sum and (y) multiplying the product so obtained by 100.
PERSON means any individual, entity, or Tribunal.
POTENTIAL DEFAULT means the occurrence of any event specified in
Section 8.1 which, with notice or lapse of time or both, as provided in Section
8.1, could become a Default.
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POUNDS STERLING and the sign (Pounds) mean lawful money of the United
Kingdom.
PRIMARY CURRENCY means Dollars or one of the following freely
transferable and convertible eurocurrencies: French Francs, Pounds Sterling,
Swiss Francs, Yen, Deutsche Marks, Belgian Francs, Dutch Guilders, Canadian
Dollars, Italian Lire and Spanish Pesetas.
PROCESS AGENT means Prentice Hall Systems, Inc., 15 Columbus Circle,
New York, New York 10023-7773.
PRO RATA means, at any time, for each Lender, the ratio of the unpaid
principal balance of the Loans made by such Lender to the unpaid principal
balance of all Loans.
PURCHASING LENDER shall have the meaning assigned to such term in
Section 2.4.
QUARTERLY DATE means the last Business Day of each December, March,
June and September during the term of this Agreement.
REFERENCE BANKS means the Domestic Reference Banks and the
Eurocurrency Reference Banks and REFERENCE BANK means any of them.
REGISTER shall have the meaning assigned to such term in Section
11.12(d).
REPORTABLE EVENT shall have the meaning assigned thereto under Section
4043 of ERISA.
REQUEST FOR BIDS means a duly completed Request for Bids,
substantially in the form of Exhibit F, delivered by a Borrower to
Administrative Agent in connection with a Bid Rate Loan.
REQUIRED CURRENCY shall have the meaning assigned to such term in
Section 3.16.
RIGHTS means rights, remedies, powers, privileges, and benefits.
SCHEDULE means a schedule attached hereto unless specified otherwise.
SECONDARY CURRENCY means any currency other than a Primary Currency.
SECTION means a section or subsection of this Agreement unless
specified otherwise.
SPANISH PESETAS and the abbreviation PTAS. mean lawful money of the
Kingdom of Spain.
SUBSIDIARY of a Person means any Person (and SUBSIDIARIES means all of
such Persons), whether or not existing on the date of this Agreement, of which
an aggregate of 50% or more (in number of votes) of the securities having
ordinary voting power for the election of directors (or individuals performing
similar functions) or comparable ownership interest is owned of record or
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beneficially, directly or indirectly, by such Person, by one or more of the
other Subsidiaries of such Person, or by a combination thereof.
SWISS FRANC and the abbreviation SFR mean lawful money of Switzerland.
TAXES means all taxes, assessments, fees, levies, imposts, duties,
deductions, withholdings, or other charges of any nature whatsoever from time to
time or at any time imposed by any Law or Tribunal.
TERMINATING LENDER shall have the meaning assigned to such term in
Section 2.4.
TRIBUNAL means any (a) local, state, or federal judicial, executive,
or legislative authority, including, without limitation, any governmental agency
or regulatory authority, whether of the United States or any other country, or
(b) private arbitration board or panel.
YEN and the symbol (Yen) mean lawful money of Japan.
YEN-DENOMINATED LOAN means a Loan or Bid Rate Loan hereunder, made in
Yen.
1.2. Other Definitional Provisions.
(a) Other Agreements. All terms defined in this Agreement shall have
the above-defined meanings when used in the Notes or any Loan Documents,
and any certificate, report or other document made or delivered pursuant to
this Agreement, unless the context therein shall otherwise require.
(b) To/From. Relative to the determination of any period of time,
"from" means "from and including" and "to" or "until" means "to but
excluding".
(c) References to Loan Documents. The words "hereof," "herein,"
"hereunder" and similar terms when used in any Loan Document shall refer to
such Loan Document as a whole and not to any particular provision thereof.
(d) Accounting Terms. As used herein and in any certificate or other
document made or delivered pursuant thereto, accounting terms relating to
Borrowers but not defined in Article I and accounting terms partly defined
in Article I shall have the respective meanings given to them under GAAP.
(e) Include/Including. The term "including" (and with correlative
meaning "include") means including without limiting the generality of any
description preceding such term.
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ARTICLE II
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FACILITY
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2.1. Committed Loans. Subject to and in reliance upon the terms,
conditions, representations, and warranties contained in this Agreement, each
Lender, severally, and not jointly, agrees to make Advances in Primary
Currencies to EDS and any of the Designated EDS Affiliates, provided that no
Lender shall be obligated to make an Advance which, when added to the aggregate
principal amount of the outstanding Committed Loans (in the case of Committed
Loans denominated in Alternative Currencies, calculated, as of the date of such
Advance, by reference to the Dollar Equivalent Value of such Committed Loans)
from such Lender outstanding would exceed such Lender's Committed Sum; provided
further that, no Lender shall be obligated to make an Advance which, when added
to the aggregate outstanding principal amount of all Committed Loans and Bid
Rate Loans (calculated, as of the date of such Advance, by reference to the
Dollar Equivalent Value of Committed Loans and Bid Rate Loans denominated in
currencies other than Dollars) from all Lenders would exceed the Aggregate
Committed Sum. Notwithstanding anything to the contrary set forth herein, any
Lender may make and have outstanding one or more Bid Rate Loans which, when
aggregated with the outstanding principal amount of all Committed Loans from
such Lender, would exceed such Lender's Committed Sum. Administrative Agent
shall maintain a record of each Lender's Committed Sum, Percentage, Committed
Loans, and Bid Rate Loans. Each Lender's Commitment shall continue in full force
and effect until and expire on, the applicable Commitment Termination Date, and
no Lender shall have any obligation to make any Committed Loan thereafter;
provided that, each Borrower's Obligation and Lender's Rights under the Loan
Documents shall continue in full force and effect until such Borrower's
Obligation is paid and performed in full. From and after the Availability Date,
through and including the final Commitment Termination Date, EDS and each
Designated EDS Affiliate may borrow, repay, and reborrow Committed Loans and Bid
Rate Loans hereunder, subject as respects Bid Rate Loans to Section 2.3.
2.2. Committed Loan Borrowing Procedure; Disbursement.
(a) Notice of Borrowing of Committed Loans. Each Committed Loan
shall be made following a Borrower's Notice of Advance to Administrative
Agent requesting a Committed Loan on a certain Borrowing Date. Each Notice
of Advance shall be given to Administrative Agent in writing or by
telegraph, telex or telecopy, or by telephonic notice (followed by a written
confirmation) (i) not later than 11:00 a.m., New York, New York time on the
proposed Borrowing Date of each Committed Loan which is a Base Rate Loan,
which proposed Borrowing Date shall be a Business Day, (ii) not later than
11:00 a.m., New York, New York time on the Business Day that is two (2)
Business Days before the proposed Borrowing Date of each Committed Loan
which is a CD Loan, which proposed Borrowing Date shall be a Business Day,
(iii) not later than 11:00 a.m., New York, New York time on the Eurocurrency
Business Day that is three (3) Eurocurrency Business Days before the
proposed Borrowing Date of each Committed Loan which is a Eurodollar Loan,
which proposed Borrowing Date shall be a Eurocurrency Business Day,
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(iv) not later than 10:00 a.m., New York, New York time on the Eurocurrency
Business Day that is three (3) Eurocurrency Business Days before the
proposed Borrowing Date of each Committed Loan which is to be a Eurocurrency
Loan other than a Yen-Denominated Loan, which proposed Borrowing Date shall
be a Eurocurrency Business Day and (v) not later than 4:00 p.m. New York,
New York time on the Eurocurrency Business Day that is four (4) Eurocurrency
Business Days before the proposed Borrowing Date of each Committed Loan
which is a Yen-Denominated Loan, which proposed Borrowing Date shall be a
Eurocurrency Business Day. Each Committed Loan, except Committed Loans for
the remaining unborrowed Aggregate Committed Sum, shall be in an amount of
not less than $15,000,000 or, if greater, an integral multiple of $1,000,000
(or, if advanced in an Alternative Currency, in an amount of such currency
having a Dollar Equivalent Value, on the Borrowing Date, substantially equal
to $15,000,000 or a greater integral multiple of $1,000,000).
(b) Funding of Committed Loans. After receiving a Notice of Advance
in the manner provided herein, Administrative Agent shall promptly notify
each Lender by telephone (confirmed immediately by telex, cable or
telecopy), telecopy, telex or cable of the terms of the Notice of Advance
and such Lender's Percentage of the requested Committed Loan. Each Lender
shall, (i) before 1:00 p.m., New York, New York time on the Borrowing Date
specified in the Notice of Advance, deposit with Administrative Agent at its
Payment Office for Dollars, and, in same day funds, for any Committed Loan
denominated in Dollars, such Lender's Percentage of such Committed Loan,
(ii) before 12:00 noon, London, England time on the Borrowing Date specified
in the Notice of Advance, deposit with Administrative Agent at its Payment
Office for Alternative Currencies, and in same day funds, for any Committed
Loan denominated in any Alternative Currency other than Yen, such Lender's
Percentage of such Committed Loan, and (iii) before 11:00 a.m., Hong Kong
time on the Borrowing Date specified in the Notice of Advance, deposit with
Administrative Agent at its Payment Office for Yen, and in same day funds,
for any Committed Loan denominated in Yen, such Lender's Percentage of such
Committed Loan. Upon fulfillment of all applicable conditions set forth
herein, including receipt by Administrative Agent of a duly executed
Committed Loan Note for each Lender from the relevant Borrower (provided,
however, that EDS shall be required only to provide to each Lender a
Committed Loan Note in the form of Exhibit A to evidence all Committed Loans
from such Lender to EDS) and after receipt by Administrative Agent of such
funds, Administrative Agent shall pay or deliver all funds so received to
the order of the relevant Borrower to the account specified in the Notice of
Advance.
(c) Failure to Fund Committed Loans. The failure of any Lender to
make any Advance required to be made by it hereunder shall not relieve any
other Lender of its obligation to make its Advance hereunder. If any Lender
fails to provide its Percentage of any Committed Loan and if all conditions
to such Committed Loan have apparently been satisfied, Administrative Agent
will make available to the relevant Borrower the funds received by it from
the other Lenders. Neither Administrative Agent nor any Lender shall be
responsible for the performance by any other Lender of its obligations
hereunder.
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Upon the failure of a Lender to make an Advance required to be made by it
hereunder, Administrative Agent shall notify EDS, the relevant Borrower (if
other than EDS) and all Lenders, and shall consult with all Lenders (other
than the defaulting Lender) to determine whether one or more of such Lenders
will make an additional Advance to cover the shortfall created by the
defaulting Lender's failure to fund its Advance. If Lenders decline to cover
such shortfall, Administrative Agent shall use good faith efforts to obtain
one or more banks, acceptable to EDS, to replace the defaulting Lender, but
neither Administrative Agent nor any other Lender shall have any liability
or obligation whatsoever as a result of the failure to obtain a replacement
for such Lender.
(d) Funding by Administrative Agent. Unless Administrative Agent
shall have received notice from a Lender prior to the date of any Committed
Loan that such Lender will not make available to Administrative Agent such
Lender's Percentage of such Committed Loan, Administrative Agent may assume
that such Lender has made such amount available to Administrative Agent on
the date of such Committed Loan in accordance with this Section 2.2.
Administrative Agent may, in reliance upon such assumption, make available a
corresponding amount to or on behalf of the relevant Borrower on such date.
If and to the extent any Lender shall not have so made its Percentage of any
Committed Loan available to Administrative Agent, the relevant Borrower
shall repay to Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such
amount is made available to or on behalf of such Borrower until the date
such amount is repaid to Administrative Agent, at the rate per annum
applicable to the Committed Loan in question. Each Lender shall record in
its records, or at its option on the schedule attached to its applicable
Committed Loan Note, the date, amount and currency of each Committed Loan
made by such Lender thereunder, each repayment or prepayment thereof, and
the dates on which each Interest Period for such Committed Loan shall begin
and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
such Committed Loan Note. The failure to so record or any error in so
recording any such amount shall not, however, limit or otherwise affect the
obligations of any Borrower hereunder or under any Committed Loan Note to
repay the principal amount of each Committed Loan to such Lender together
with all interest accruing thereon.
2.3. Bid Rate Loans. From time to time, each Borrower may request that
Lenders make one or more Advances available to such Borrower under the Facility
for the same purposes expressed herein, at an interest rate, in a currency, and
subject to other terms and conditions to be determined in accordance with this
Section 2.3 (each, a "BID RATE LOAN" and collectively, the "BID RATE LOANS")
pursuant to the procedure described below. Bid Rate Loans may be requested in
any Primary Currency or Secondary Currency.
(a) Requests for Bids. Except as otherwise provided herein, each
Borrower may from time to time request that Administrative Agent invite bids
for Bid Rate Loans, which requests shall be made by delivering to
Administrative Agent a completed Request for Bids (i) not later than 11:01
a.m., New York, New York time, on the Eurocurrency
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Business Day that is six (6) Eurocurrency Business Days before the proposed
Bid Rate Loan Borrowing Date (i.e., approximately 12:01 a.m., Hong Kong
time, on the Eurocurrency Business Day that is five (5) Eurocurrency
Business Days before the proposed Bid Rate Loan Borrowing Date) for a Yen-
Denominated Loan, (ii) not later than 10:00 a.m., New York, New York time,
on the Eurocurrency Business Day that is five (5) Eurocurrency Business Days
before the proposed Bid Rate Loan Borrowing Date for a Eurocurrency Loan
other than a Yen-Denominated Loan, (iii) not later than 11:00 a.m., New
York, New York time, on the Eurocurrency Business Day that is four (4)
Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date
for a Eurodollar Loan, and (iv) not later than 11:00 a.m., New York, New
York time, on the Business Day that is one (1) Business Day before the
proposed Bid Rate Loan Borrowing Date for a Fixed Rate Loan. Each Request
For Bids shall be irrevocable and shall specify (A) the proposed Bid Rate
Loan Borrowing Date, which date shall be a Eurocurrency Business Day if the
requested Bid Rate Loan is a Eurodollar Loan or a Eurocurrency Loan, or a
Business Day in all other cases, (B) the amount which the Borrower proposes
to borrow on such date and the currency of such proposed borrowing, which
amount shall be not less than $5,000,000 (or, if such Bid Rate Loan is to be
made in a currency other than Dollars, in an amount of such currency
substantially equivalent, on the date of such Request for Bids, to
$5,000,000), or, if greater, an integral multiple of $1,000,000, (C) whether
the Lenders should offer to make Eurocurrency Loans, Eurodollar Loans,
and/or Fixed Rate Loans, (D) if the proposed Bid Rate Loan is to be a
Eurodollar Loan or a Eurocurrency Loan, the Interest Period(s) applicable to
such proposed borrowing, (E) the term of the proposed Bid Rate Loan, (F) the
account into which the Advance of the Bid Rate Loan is to be made and (G)
such other information as is provided for in Exhibit F. Administrative
Agent, promptly after receipt by it of a Request For Bids, shall notify each
Lender by telecopy of its receipt of a Request For Bids and the contents
thereof and shall invite bids from each Lender.
(b) Offers by Lenders. Each Lender willing to make a Bid Rate Loan
shall provide notice to Administrative Agent of such Lender's offer to
provide a Bid Rate Loan (i) prior to 2:00 p.m. Hong Kong time, on the
Eurocurrency Business Day at least four (4) Eurocurrency Business Days prior
to the proposed Bid Rate Loan Borrowing Date, if the proposed Bid Rate Loan
is a Yen-Denominated Loan, (ii) prior to 12:00 noon, London, England time,
on the Eurocurrency Business Day at least three (3) Eurocurrency Business
Days prior to the proposed Bid Rate Loan Borrowing Date, if the proposed Bid
Rate Loan is a Eurocurrency Loan other than a Yen-Denominated Loan, (iii)
prior to 10:00 a.m., New York, New York time, on the Eurocurrency Business
Day at least three (3) Eurocurrency Business Days prior to the proposed Bid
Rate Loan Borrowing Date, if the requested Bid Rate Loan is a Eurodollar
Loan or (iv) prior to 10:00 a.m., New York, New York time, on the proposed
Bid Rate Loan Borrowing Date if the requested Bid Rate Loan is a Fixed Rate
Loan (the "Bid Date"), which notice shall be irrevocable and shall be made
by delivering to Administrative Agent an Offer of Bid Rate Loans. Such Offer
of Bid Rate Loans shall specify the minimum and maximum amount of the Bid
Rate Loan such Lender would be willing to provide (which amount may exceed
such Lender's Committed Sum), the Interest Period(s) relative thereto, if
the offered Bid Rate Loan is to
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be a Eurodollar Loan or a Eurocurrency Loan, the Bid Rate for such Bid Rate
Loan, any other information provided for in Exhibit G and all other terms
and conditions required by such Lender. At or prior to (i) 3:00 p.m., Hong
Kong time, on the Eurocurrency Business Day that is four (4) Eurocurrency
Business Days before the proposed Bid Rate Loan Borrowing Date, in the case
of Yen-Denominated Loans, (ii) 1:00 p.m., London, England time, on the
Eurocurrency Business Day that is three (3) Eurocurrency Business Days
before the proposed Bid Rate Loan Borrowing Date, in the case of
Eurocurrency Loans, other than Yen-Denominated Loans, (iii) 10:30 a.m., New
York, New York time, on the Eurocurrency Business Day that is three (3)
Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date,
in the case of Eurodollar Loans, and (iv) 10:30 a.m., New York, New York
time, on the proposed Bid Rate Loan Borrowing Date, in the case of Fixed
Rate Loans, Administrative Agent shall provide notice to the Borrower having
submitted the relevant Request For Bids of all of the information provided
to Administrative Agent by Lenders in response to such Request For Bids;
provided, however, if Administrative Agent, in its capacity as a Lender,
shall elect to make any such offer, it shall notify the relevant Borrower of
such offer not less than one (1) hour before the time required for receipt
by Administrative Agent of each offer of Bid Rate Loans, on the date on
which notice of such election is to be given to the Administrative Agent by
the other Lenders.
(c) Acceptance of Bids. The Borrower having issued the relevant
Request For Bids shall, not later than (i) 4:00 p.m., New York, New York
time, on the Eurocurrency Business Day that is four (4) Eurocurrency
Business Days before the proposed Bid Rate Loan Borrowing Date (i.e.,
approximately 5:00 a.m., Hong Kong time, on the Eurocurrency Business Day
that is three (3) Eurocurrency Business Days before the proposed Bid Rate
Loan Borrowing Date), in the case of Yen-Denominated Loans, (ii) 3:00 p.m.,
London, England time, on the Eurocurrency Business Day that is three (3)
Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date,
in the case of Eurocurrency Loans other than Yen-Denominated Loans, (iii)
11:00 a.m., New York, New York time, on the Eurocurrency Business Day that
is three (3) Eurocurrency Business Days before the proposed Bid Rate Loan
Borrowing Date, in the case of Eurodollar Loans, and (iv) 11:00 a.m. New
York, New York time, on the proposed Bid Rate Loan Borrowing Date, in the
case of Fixed Rate Loans, and in its sole discretion, either (A) reject any
or all of the offered Bid Rate Loans by delivering a Notice of Rejection to
Administrative Agent, or (B) accept any or all of the offered Bid Rate Loans
by delivering a Notice of Acceptance to Administrative Agent; provided,
however, that (1) the aggregate principal amount of each Bid Rate Loan may
not exceed the applicable amount set forth in the related Request for Bids
and (2) in the event that two (2) or more offers of Bid Rate Loans have
identical terms other than interest rate, acceptance of offers shall be made
on the basis of ascending interest rates. Promptly following the acceptance
of one or more Bid Rate Loans by a Borrower, Administrative Agent shall
notify each Lender of the ranges of offers submitted and the highest and
lowest offers accepted for each Interest Period requested by such Borrower,
the aggregate amount of the Bid Rate Loans borrowed pursuant to the related
Request for Bids and the consequent reduction in the availability of the
Aggregate Committed Sum. Any Notice of Acceptance shall specify
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each Lender whose Bid Rate Loan is accepted, the amount of the Bid Rate
Loans so accepted, which shall not be more than the maximum amount offered
by such Lender nor less than the minimum amount offered by such Lender, and
all other terms and conditions with respect to which such Lender offered
varying options in its notice to Borrower. All notices by Borrower to
Administrative Agent shall be promptly communicated by Administrative Agent
to the relevant Lenders. If Borrower fails to issue to Administrative Agent
either a Notice of Rejection or a Notice of Acceptance at or prior to the
time prescribed in the first sentence of this Section 2.3(c) indicating its
acceptance or rejection of a Lender's offered Bid Rate Loan, Borrower shall
be deemed to have rejected such offered Bid Rate Loan and Administrative
Agent shall so notify such Lender.
(d) Funding of Bid Rate Loans. After receiving a Notice of
Acceptance from Borrower that it wishes to accept an offered Bid Rate Loan,
Administrative Agent shall promptly notify the relevant Lender by telephone
(confirmed immediately by telex, cable or telecopy), telecopy, telex or
cable of the terms of the requested Bid Rate Loan, such written confirmation
to be in the form of Exhibit K hereto (each, a "Bid Rate Loan
Confirmation"). Each such Lender whose offered Bid Rate Loan was accepted
shall, before (i) 12:00 noon, Hong Kong time, in the case of a Bid Rate Loan
which is to be a Yen-Denominated Loan, (ii) 12:00 noon, London, England
time, in the case of a Bid Rate Loan which is to be a Eurocurrency Loan
other than a Yen-Denominated Loan, and, (iii) in all other cases, 12:00
noon, New York, New York time, on the Bid Rate Loan Borrowing Date, deposit
with Administrative Agent (A) at its Payment Office for Dollars, and in
immediately available funds, for any Bid Rate Loan denominated in Dollars,
(B) at its Payment Office for Alternative Currencies, and in same day funds,
for any Bid Rate Loan denominated in any currency other than Yen, and (C) at
its Payment Office for Yen, and in same day funds, for any Bid Rate Loan
which is a Yen-Denominated Loan, the amount of such Bid Rate Loan. Upon
fulfillment of all applicable conditions set forth herein, including receipt
by Administrative Agent of a duly executed Bid Rate Note for each Lender
obligated to fund a Bid Rate Loan from the relevant Borrower and after
receipt by Administrative Agent of such funds, Administrative Agent shall
make such funds available to the relevant Borrower at the account specified
in the Request for Bids and thereafter deliver a Bid Rate Note to each
Lender funding a Bid Rate Loan.
(e) Waivers Permitted. Notwithstanding anything set forth in this
Section 2.3, the required notices and time periods set forth in this Section
2.3 as to Bid Rate Loans may be waived by agreement of any Borrower and any
affected Lender.
(f) Reliance. The Administrative Agent may rely and act upon notice
given by telephone by individuals reasonably believed by the Administrative
Agent to be those individuals designated to the Administrative Agent by the
Borrower in writing from time to time to possess authority to give such
notice, without waiting for receipt of written confirmation thereof, and EDS
and each other Borrower hereby indemnifies and holds harmless the
Administrative Agent from and against any and all losses, costs, expenses,
damages, claims, actions and other proceedings relating to such reliance,
except for losses, costs, expenses, damages, claims, actions and proceedings
resulting from acts or omissions
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constituting negligence, gross negligence or willful misconduct on the part
of the Administrative Agent. If a written confirmation differs in any
respect from the action taken by the Administrative Agent, the records of
the Administrative Agent shall govern absent manifest error.
2.4. Optional Extension of the Commitment Termination Date. At any time
after the date which is sixty-one (61) days prior to each anniversary of the
date of this Agreement, EDS may request that the Commitment Termination Date be
extended for one (1) calendar year and Lenders may, at their option, accept or
reject such request. To request an extension, EDS shall notify Administrative
Agent of EDS's request to extend the Commitment Termination Date, and
Administrative Agent shall promptly notify the Lenders of each such request.
Each Lender shall notify Administrative Agent in writing within thirty (30) days
after such request (the "EXTENSION RESPONSE DATE") whether it consents to such
extension. If any Lender shall fail to give such notice to Administrative Agent
by the Extension Response Date, such Lender shall be deemed to have rejected the
requested extension. If all Lenders consent to the requested extension by the
Extension Response Date, the Commitment Termination Date shall be automatically
extended for one (1) year. If fewer than all Lenders so consent (each Lender not
consenting being referred to as a "TERMINATING LENDER"), EDS shall within five
(5) days after the Extension Response Date notify Administrative Agent (which
shall promptly notify each Lender) whether EDS elects to withdraw its request
for an extension of the Commitment Termination Date or to extend the Commitment
Termination Date for all Lenders that have consented to such extension. If EDS
elects to extend the Commitment Termination Date as to fewer than all Lenders,
Administrative Agent shall promptly notify the non-Terminating Lenders of EDS'
decision, and each Lender which is not a Terminating Lender shall have the
right, but not the obligation, to elect to increase its respective Committed Sum
by an amount not to exceed the aggregate amount of the Committed Sums of the
Terminating Lenders, which election shall be made by notice from each such non-
Terminating Lender to the Administrative Agent and EDS given not later than five
(5) Business Days after the date notified by Administrative Agent, and
specifying the amount of such proposed increase in such non-Terminating Lender's
Committed Sum. If the aggregate amount of the proposed increases in the
Committed Sums of all such non-Terminating Lenders making such an election is in
excess of the aggregate Committed Sums of the Terminating Lenders, (a) the
Committed Sums of the Terminating Lenders shall be allocated pro rata among such
non-Terminating lenders based on the respective amounts of the proposed
increases to Committed Sums elected by each of such non-Terminating Lenders, and
(b) the respective Committed Sums of such non-Terminating Lenders shall be
increased by the respective amounts allocated pursuant to clause (a) above so
that, after giving effect to such termination and increases, the amount of the
Aggregate Committed Sum will be the same as prior to such termination.
If the aggregate amount of the proposed increases to Committed Sums of all
non-Terminating Lenders making such an election equals the aggregate Committed
Sums of the Terminating Lenders, the respective Committed Sums of such non-
Terminating Lenders shall be increased by the respective amounts of their
proposed increases, so that after giving effect to such termination and
increases, the amount of the Aggregate Committed Sum will be the same as prior
to such termination. If the aggregate amount of the proposed increases to the
Committed Sums of all non-Terminating Lenders making such an election is less
than the aggregate Committed
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Sums of the Terminating Lenders, (i) the respective Committed Sums of such non-
Terminating Lenders shall be increased by the respective amounts of their
proposed increases and (ii) EDS shall have the right to add one or more banks or
other financial institutions (which are not Terminating Lenders) as purchasing
lenders under this Agreement (in such capacity, each a "PURCHASING LENDER") to
replace such Terminating Lenders, which Purchasing Lenders shall have aggregate
Committed Sums not greater than those of the Terminating Lenders less the
amounts thereof, if any, assumed by the non-Terminating Lenders pursuant to the
above-described increases. The transfer of Committed Sums or outstanding Loans
from Terminating Lenders to Purchasing Lenders or non-Terminating Lenders shall
take place on the effective date of, and pursuant to the execution, delivery,
acceptance and recording of, an Assignment and Acceptance in accordance with the
procedures set forth in Section 11.12. To the extent that replacements are not
obtained by EDS for any Terminating Lender, on the Commitment Termination Date
applicable to such Terminating Lender, the Aggregate Committed Sum shall be
reduced by the amount of the Committed Sum of such Terminating Lender and,
concurrently with such reduction in the Aggregate Committed Sum, EDS shall pay,
and cause any other relevant Borrower to pay, the principal amount of such
Terminating Lender's Loans, all accrued and unpaid interest thereon, such
Terminating Lender's ratable share of all accrued and unpaid facility fees
relative to the Facility and any remaining Obligation owed to such Terminating
Lender in relation to the Facility, in each case to the extent not assigned and
purchased pursuant hereto, and the Commitment of such Terminating Lender shall
thereupon terminate.
Each Terminating Lender's Commitment shall expire no later than its
Commitment Termination Date and each such Terminating Lender shall have no
further rights or obligations under the Facility or Commitment hereunder
following the effective date of the later to occur of (1) the transfer of all
outstanding Loans from such Terminating Lender to Purchasing Lenders or non-
Terminating Lenders, or (2) the payment in full of the Obligation owed to such
Terminating Lender hereunder, other than any rights or obligations as to the
Facility accruing prior to such date under this Agreement as provided herein,
but in no event shall any such Terminating Lender have any obligation to make
Advances after its Commitment Termination Date.
2.5 Several Obligations. The failure of any Lender to perform its
obligations under this Agreement shall not affect the obligations of any
Borrower toward any other Lender or the obligations of any Lender toward any
Borrower, nor shall any other Lender be liable for the failure of such Lender to
perform its obligations under this Agreement.
2.6 Determination of Availability. At or before thirty (30) minutes after
the time for delivery of a Notice of Advance pursuant to Section 2.2(a) or a
Request for Bids pursuant to Section 2.3(a), Administrative Agent will make a
determination of the Dollar Equivalent Value of the outstanding Loans and Bid
Rate Loans for purposes of calculating whether the making of the requested Loan
or Bid Rate Loan would cause the aggregate outstanding amount of the Loans and
the Bid Rate Loans, including the requested Loan or Bid Rate Loan, to exceed the
Aggregate Committed Sum.
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ARTICLE III
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TERMS OF PAYMENT
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3.1. Notes. Committed Loans and interest thereon shall be evidenced by
promissory notes substantially in the form and upon the terms of Exhibit A in
the case of EDS or Exhibit B in the case of any other Borrower, respectively,
duly executed by the applicable Borrower (the "COMMITTED LOAN NOTES") and shall
be due and payable in accordance with this Agreement and the terms of such
Committed Loan Notes. Bid Rate Loans and interest thereon shall be evidenced by
promissory notes substantially in the form and upon the terms of Exhibit C duly
executed by the applicable Borrower (the "BID RATE NOTES") and shall be due and
payable in accordance with this Agreement and the terms of such Bid Rate Notes.
The Committed Loan Notes and the Bid Rate Notes are collectively called the
"NOTES".
3.2. Payments on Committed Loan Notes and Bid Rate Notes. The unpaid
principal balance of each Committed Loan Note, and all accrued but unpaid
interest thereon, shall be due and payable on the Commitment Termination Date,
in the case of Committed Loans. The unpaid principal balance of each Bid Rate
Note, and all accrued and unpaid interest thereon, shall be due and payable in
accordance with the terms of such Bid Rate Note, provided, however, that
interest on any Bid Rate Note that evidences a Fixed Rate Loan shall be payable
at least every ninety (90) days during the term of such Fixed Rate Loan and,
provided, further, that such Bid Rate Note shall mature not later than the
Commitment Termination Date. Administrative Agent shall deliver to each Borrower
and EDS notice of each payment of interest, principal, facility fee or other
payment required to be made on each Loan and Bid Rate Loan not less than three
(3) Business Days or Eurocurrency Business Days, as applicable, prior to the due
date thereof; provided, however, that failure to provide such notice will not
affect any Borrower's Obligation hereunder. Each payment or prepayment on the
Obligation and payments of fees must be paid at (i) Administrative Agent's
Payment Office for Dollars, if the payment is due in Dollars, (ii)
Administrative Agent's Payment Office for Alternative Currencies, if the payment
is due in any currency other than Dollars or Yen, and (iii) at Administrative
Agent's Payment Office for Yen, if the payment is due in Yen, in funds which are
or will be available for immediate use by Administrative Agent at such address
on or before (1) 1:00 p.m., New York, New York time, on the day due, in the case
of Base Rate Loans, CD Loans and Eurodollar Loans, (2) 12:00 noon, London,
England time, on the day due in the case of Eurocurrency Loans other than Yen-
Denominated Loans, and (3) 12:00 noon, Tokyo, Japan time, on the day due in the
case of Yen-Denominated Loans. Funds received after such time shall be deemed to
have been received by Administrative Agent on the next following Business Day
(in the case of Base Rate Loans and CD Loans) or Eurocurrency Business Day (in
the case of Eurodollar Loans or Eurocurrency Loans). Amounts received by
Administrative Agent for the account of another Person shall be promptly
remitted in like funds to such other Person. If, in the case of Base Rate Loans
and/or CD Loans, any action is required or any payment is to be made on a day
which is not a Business Day, then such action or payment shall be delayed until
the next succeeding Business Day. If, in the case of Eurodollar Loans or
Eurocurrency Loans, any action is required on a day which is not a Eurocurrency
Business Day, then such action or payment shall be delayed until the next
Eurocurrency Business Day unless a payment by a Borrower of a Eurodollar Loan or
a
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Eurocurrency Loan is involved and the next Eurocurrency Business Day would fall
in the succeeding calendar month, in which event such payment shall be made on
the immediately preceding Eurocurrency Business Day. Any extension of time shall
be included in the computation of payments of interest. Upon receipt of any
payment of principal or interest from a Borrower hereunder (except payments
and/or prepayments on Bid Rate Notes), Administrative Agent will promptly
thereafter cause to be distributed (x) like funds relating to the payment of
principal or interest or facility fees ratably (other than amounts payable
pursuant to Sections 3.5, 3.8 (relative to Bid Rate Loans), 3.10, 3.11, 3.12 or
3.14) to the Lenders for the account of their respective Applicable Lending
Offices and (y) like funds relating to the payment of any other amount payable
to any Lender to such Lender for the account of its Applicable Lending Office,
in each case to be applied in accordance with the terms of this Agreement. Upon
any assignment of any Lender's Commitment pursuant to Section 11.12 and after
notification thereof to Administrative Agent, Administrative Agent shall make
all payments hereunder in respect of the interest assigned thereby to the
Assignee.
3.3. Interest. The Loans from day to day shall bear interest on the
outstanding principal balance thereof at a rate per annum equal to the lesser of
(a) the Highest Lawful Rate, or (b) (i) in the case of Base Rate Loans, the Base
Rate, (ii) in the case of CD Loans, the CD Rate, (iii) in the case of Eurodollar
Loans, the Eurodollar Rate and (iv) in the case of Eurocurrency Loans, the
Eurocurrency Rate. Bid Rate Loans from day to day shall bear interest on the
outstanding principal balance thereof at a rate per annum equal to the lesser of
(A) the Highest Lawful Rate, or (B) the Bid Rate applicable thereto. Accrued
interest on each Loan is payable in arrears, (x) in the case of Base Rate Loans,
on each Interest Payment Date, and, (y) in the case of CD Loans, Eurodollar
Loans and Eurocurrency Loans, on the last day of each Interest Period with
respect to such Loan or if occurring earlier in any case, the Commitment
Termination Date, provided, however, as to any Loan having an Interest Period
longer than three (3) months, in the case of Eurodollar or Eurocurrency Loans,
or ninety (90) days, in the case of CD Loans, interest shall also be payable on
each day which is three (3) months, in the case of Eurodollar or Eurocurrency
Loans, or ninety (90) days, in the case of CD Loans after the first day of such
Interest Period. Interest accrued on the principal of each Loan and each Bid
Rate Loan after the maturity thereof and, to the extent permitted by applicable
Law, interest on other overdue amounts, shall be payable on demand. Each
determination by Administrative Agent of the rate of interest applicable to any
Loan shall be conclusive in the absence of manifest error and each change in the
Base Rate and Highest Lawful Rate, subject to the terms hereof, will become
effective, without notice to any Borrower, upon the effective date of such
change.
3.4. Continuation/Conversion with Respect to Committed Loans.
(a) Conversion of Loans. Any Borrower may elect at any time to
convert all or any part (but, if less than all, not less than $15,000,000 or
any greater integral multiple of $1,000,000) of any outstanding Base Rate
Loan, CD Loan or Eurodollar Loan (other than a Bid Rate Loan) to a Base Rate
Loan, CD Loan or Eurodollar Loan, as the case may be, by giving
Administrative Agent an irrevocable notice of such election, in the form of
Exhibit H hereto (the "NOTICE OF CONTINUATION/CONVERSION") not later than
12:00 noon, New York, New York time, on the second (2nd) Business Day before
the date of
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conversion, in the case of conversion into a Base Rate Loan or a CD Loan, or
12:00 noon, New York, New York time on the third (3rd) Eurocurrency Business
Day before the date of the conversion, in the case of conversion into a
Eurodollar Loan, specifying the date of conversion, the type of Loan into
which each such Loan or specified portion thereof shall be converted and the
duration of the Interest Period applicable thereto. Any conversion pursuant
to this clause (a) other than a conversion from a Base Rate Loan to a CD
Loan or a Eurodollar Loan, shall be made on the last day of an Interest
Period.
(b) Continuation of Loans. Any Borrower may elect to continue (on
the last day of the applicable Interest Period) any CD Loan, Eurodollar
Loan, or Eurocurrency Loan (other than a Bid Rate Loan) as the same type of
Loan by giving Administrative Agent an irrevocable Notice of Continuation/
Conversion not later than (i) 12:00 noon, New York, New York time, the
second (2nd) Business Day before the last day of such Interest Period, if
continuing a CD Loan, (ii) 12:00 noon, New York, New York time, the third
(3rd) Eurocurrency Business Day before the last day of such Interest Period,
if continuing a Eurodollar Loan or Eurocurrency Loan, other than a Yen-
Denominated Loan, or (iii) 12:00 noon, Hong Kong time, the third (3rd)
Eurocurrency Business Day (in Hong Kong) before the last day of such
Interest Period, if continuing a Yen-Denominated Loan. The Notice of
Continuation/Conversion shall specify the portion of such Loan that shall be
continued and the duration of the Interest Period applicable thereto.
(c) Coordination with Interest Periods. Notwithstanding anything in
clause (a) and (b) of this Section 3.4 to the contrary, but without limiting
Section 3.5, each Borrower shall use its reasonable efforts to exercise its
options with regard to electing to convert into or continue a Loan so that,
on any date on which the Committed Sum is reduced pursuant to Section 4.2,
it will not be necessary to prepay any Loan that does not have an Interest
Period ending on such date.
(d) Inapplicability of Conditions Precedent. Loans continued or
converted pursuant to this Section 3.4 shall not constitute new Loans for
purposes of Section 5.2 hereof.
(e) Failure to Provide Notice. If no Notice of Continuation/
Conversion is given with respect to any Loan prior to the time specified in
this Section 3.4 or if a Notice of Continuation/Conversion is given, but it
is incomplete, Administrative Agent shall use good faith efforts to contact
the relevant Borrower to obtain a Notice of Continuation/Conversion or to
complete the information required thereby, but if a complete Notice of
Continuation/Conversion is not provided in a timely fashion, the relevant
Borrower shall be deemed to have converted such Loan, if denominated in
Dollars, into a Base Rate Loan or, if a Eurocurrency Loan, to have continued
such Loan as a Eurocurrency Loan having an Interest Period equivalent to the
Interest Period then ending, on the last day of the applicable Interest
Period and Administrative Agent shall promptly notify the relevant Borrower
of such conversion or continuation.
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(f) Continuation/Conversion in Default Situations. Notwithstanding
anything to the contrary contained in this Section 3.4, no CD Loan,
Eurodollar Loan or Eurocurrency Loan may be continued as such or converted
into another type of Loan when any Default exists (other than a Default
under Section 8.1(d) so long as EDS is diligently pursuing the cure thereof
and the Commitments of the Lenders have not been terminated), but on the
last day of the applicable Interest Period (i) each such CD Loan or
Eurodollar Loan shall be automatically converted to a Base Rate Loan and
(ii) each such Eurocurrency Loan shall be due and payable.
3.5. Funding Losses. If any Borrower makes any payment of principal with
respect to any Loan or a Bid Rate Loan, other than a Base Rate Loan, on any day
other than the last day of the Interest Period applicable thereto, or if any
Borrower fails to borrow or prepay any Loan or any Bid Rate Loan after the
applicable notice has been given to any Lender by Administrative Agent or if any
Borrower converts a Loan from a CD Loan or a Eurodollar Loan at any time other
than at the end of the relevant Interest Period, such Borrower shall reimburse
each affected Lender, within ten (10) Business Days after demand, for any
resulting loss or expense actually incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating, employing or
redeploying deposits or foreign currencies from third parties, for the period
after any such payment, conversion, or failure to borrow, through the end of
such Interest Period (the calculation of such loss or expense shall include a
credit (not in excess of such loss or expense) for the interest that could be
earned by such Lender as a result of redepositing such amount), together with
interest thereon at the Compensation Rate from the date of demand until paid in
full; provided that, Administrative Agent shall have delivered to such Borrower
a certificate of each affected Lender as to the amount of such loss or expense,
which certificate shall be conclusive in the absence of manifest error.
3.6 Default Rates. At Majority Lenders' option and to the extent
permitted by Law, all of the past-due Obligation and accrued interest thereon
and fees shall bear interest from maturity (stated or by acceleration) at a rate
per annum from day to day equal to the lesser of (i) the Highest Lawful Rate or
(ii) the greater of (x) the interest rate then being charged on such Obligation
or portion thereof hereunder or (y) the sum of the Base Rate plus one percent
(1%) per annum. Any sum referred to in Section 8.1(a)(ii) not paid when due in
accordance with the terms of the Loan Documents shall bear interest at the
Compensation Rate from the due date thereof until the earlier of (i) the date
such sum is paid in full, or (ii) the date any applicable grace period expires.
3.7 Interest and Fee Calculations. All payments of interest and fees
shall be calculated on the basis of actual number of days (including the first
day but excluding the last day) elapsed during the period for which such
interest or fee is payable but computed as if each calendar year consisted of
360 days, provided, however, that the Base Rate shall be computed on the basis
of a calendar year of 365 (or 366, as the case may be) days.
3.8 Mandatory Principal Prepayments. If Administrative Agent determines
that, as a result of fluctuations in exchange rates the Dollar Equivalent Value
of the outstanding principal amount of (a) the Committed Loans of any Lender
ever exceeds 105% of the Committed Sum of
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such Lender, as reduced pursuant to Section 4.2, or (b) the aggregate
outstanding principal amount of the Loans and the Bid Rate Loans exceeds 105% of
the Aggregate Committed Sum, as reduced pursuant to Section 4.2, Administrative
Agent shall provide notice thereof to EDS and EDS (or, if no Committed Loans or
Bid Rate Loans are then outstanding to EDS, any other Borrower) shall make a
mandatory principal prepayment, in Dollars (or if such determination has been
made pursuant to clause (a) above, in any other Primary Currency then owing by
EDS or any other Borrower to such Lender), of the amount of such excess within
ten (10) Eurocurrency Business Days after notice from Administrative Agent
requesting such prepayment. Any Lender may request at any time or from time to
time that Administrative Agent determine the Dollar Equivalent Value of the
principal amount of all outstanding Committed Loans made by such Lender for
purposes of evaluating whether the Dollar Equivalent Value of the outstanding
principal amount of all outstanding Committed Loans of such Lender exceeds the
Committed Sum of such Lender. Administrative Agent shall notify such Lender and
EDS of its conclusion.
3.9. Voluntary Principal Prepayments. Upon giving Administrative Agent, in
the case of a prepayment of a Committed Loan, or the relevant Lender, in the
case of a Bid Rate Loan, two (2) Business Days' notice, in the case of a
prepayment of a CD Loan or Base Rate Loan, two (2) Eurocurrency Business Days'
notice, in the case of a prepayment of a Eurodollar Loan, or three (3)
Eurocurrency Business Days' notice, in the case of prepayment of a Eurocurrency
Loan, each Borrower shall be entitled to prepay any Committed Loan or Bid Rate
Loan from time to time and at any time, in whole or in part, without premium or
penalty (subject, however, to Borrowers' other obligations hereunder in respect
of funding losses and other matters); provided that (a) each partial prepayment
shall equal or exceed the principal amount of (i) $100,000, or any integral
multiple thereof (or the Dollar Equivalent Value thereof if such prepayment is
made in any currency other than Dollars), for each Bid Rate Loan, (ii)
$10,000,000 (or the Dollar Equivalent Value thereof if such prepayment is made
in any currency other than Dollars) in the aggregate for Committed Loans, or
(iii) the unpaid principal balance of any Committed Loan or Bid Rate Loan being
prepaid in full, (b) a Borrower shall only be entitled to make a prepayment if
all accrued interest on the amount prepaid (including, without limitation, past
due interest, if any) payable to such Lender hereunder shall be paid to the date
of such prepayment and (c) except as otherwise set forth herein, prepayments of
CD Loans shall only be made on a Business Day and prepayments of Eurodollar
Loans or Eurocurrency Loans shall only be made on a Eurocurrency Business Day.
Prior to the Commitment Termination Date, the Loans prepaid may, subject to the
conditions of this Agreement, be reborrowed hereunder, and this Agreement shall
not be deemed to be terminated or canceled prior to the expiration or
termination of Lenders' Commitments solely because the Obligation may from time
to time be paid in full.
3.10. Inadequacy of Eurodollar, Eurocurrency or CD Loan Pricing. If with
respect to any Interest Period for any Eurodollar Loan or any Eurocurrency Loan
(i) Administrative Agent determines (which determination shall be binding and
conclusive on all parties) that by reason of circumstances affecting the
interbank Eurocurrency market generally, deposits in any Primary Currency or
Secondary Currency in which a Loan or a Bid Rate Loan is then outstanding (in
the applicable amounts) are not being offered to the relevant Lenders in the
interbank Eurocurrency market for such Interest Period or (ii) Majority Lenders
advise Administrative Agent that the Eurodollar Rate or the Eurocurrency Rate,
as the case may be, will not adequately and fairly
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reflect the cost to such Lenders of maintaining or funding such Eurodollar Loan
or such Eurocurrency Loan for such Interest Period, and Administrative Agent
shall forthwith give notice thereof to EDS and all affected Borrowers and
Lenders, whereupon until Administrative Agent notifies EDS and such affected
Borrowers that the circumstances giving rise to such suspension no longer exist,
(A) the obligation of Lenders to make Eurodollar Loans or Eurocurrency Loans in
the relevant currency shall be suspended, and (B) all affected Borrowers shall
either (1) repay in full the then outstanding principal amount of the affected
Loans, together with accrued interest thereon, on the last day of the then-
current Interest Period applicable thereto, (2) convert such affected Loans (if
such affected Loans are Eurodollar Loans) to CD Loans or Base Rate Loans in
accordance with Section 3.4 of this Agreement at the end of the then-current
Interest Period applicable to such affected Loans or (3) exercise the option set
forth in Section 3.17(b). If with respect to any Interest Period for any CD
Loan, Majority Lenders advise Administrative Agent that the CD Rate will not
adequately and fairly reflect the cost to such Lenders of maintaining or funding
CD Loans, then Administrative Agent shall forthwith give notice thereof to all
affected Borrowers and Lenders, whereupon, until Administrative Agent shall
notify Borrowers that the circumstances giving rise to such suspension no longer
exist (A) the obligation of Lenders to make CD Loans shall be suspended and (B)
all affected Borrowers shall either (1) repay in full the then outstanding
principal amount of any CD Loans, together with accrued interest thereon on the
last day of the then-current Interest Period(s) applicable thereto, (2) convert
all outstanding CD Loans to Eurodollar Loans or Base Rate Loans in accordance
with Section 3.4 at the end of the then-current Interest Period applicable to
such CD Loans or (3) exercise the option set forth in Section 3.17(b).
3.11. Illegality. If, after the date of this Agreement, the adoption of
any applicable Law or any change therein, or any change in the interpretation or
administration thereof by any Tribunal charged with the interpretation or
administration thereof, or compliance by any Lender with any request or
directive of any such authority, central bank or comparable agency, shall make
it unlawful or impossible for any Lender to make, maintain or fund its
Eurodollar Loans or Eurocurrency Loans or any of them, and such Lender shall so
notify Administrative Agent, which shall notify EDS (and, if EDS shall so
request, such Lender shall provide EDS with reasonable evidence of such
illegality or impossibility), then, until such Lender notifies EDS, via
Administrative Agent, that the circumstances giving rise to such suspension no
longer exist, the obligation of such Lender to make Eurodollar Loans and/or
Eurocurrency Loans, as the case may be, or to convert Base Rate Loans or CD
Loans to Eurodollar Loans, shall be suspended, provided, however, if such
unlawfulness or impossibility affects only a Lender's ability to make, maintain
or fund Loans in certain currencies, such Lender's obligations hereunder in
respect of other currencies shall not be affected. Subject to the provisions of
Section 3.17(a), if such Lender shall determine that it may not lawfully
continue to maintain and fund any of its outstanding Eurodollar Loans or
Eurocurrency Loans or any of them to maturity and shall so specify in such
notice, each affected Borrower shall immediately prepay in full the then
outstanding principal amount of each such Loan or Bid Rate Loan together with
accrued interest thereon without premium or penalty (subject, however, to
Borrowers' other obligations hereunder in respect of funding losses and other
matters); provided that, concurrently with prepaying each such Committed Loan
the affected Borrower may (i) borrow a Base Rate Loan or a CD Loan in an equal
principal amount (or, if the Loan being prepaid is denominated in a currency
other than
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Dollars, a Base Rate Loan or a CD Loan in the Dollar Equivalent Value of the
Loan so prepaid) from such Lender or, if such circumstances affect only certain
Primary Currencies borrow a Eurocurrency Loan in a Primary Currency other than
the affected Primary Currency and in any amount substantially equivalent to the
Loan being prepaid. Any Lender that has given a notice of unlawfulness pursuant
to this Section 3.11 shall rescind such notice promptly upon the cessation of
such unlawfulness by giving notice to the Administrative Agent, EDS and the
affected Borrower(s).
3.12. Increased Cost and Reduced Return.
(a) Increases in Reserve Requirements. If, after the date hereof,
the adoption of any applicable Law or any change therein, or any change in
the interpretation or administration thereof by any Tribunal charged with
the interpretation or administration thereof, or compliance by any Lender
(or its lending office) with any request or directive of general
applicability (whether or not having the force of Law) of any such Tribunal
shall impose, modify or deem applicable any reserve, special deposit or
similar requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but
excluding (A) with respect to any CD Loan or Bid Rate Loan any such
requirement included in an applicable Domestic Reserve Percentage, and (B)
with respect to any Eurodollar Loan, Eurocurrency Loan, or Bid Rate Loan any
such requirement included in an applicable Eurocurrency Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by such Lender (or its Applicable Lending Office), or shall impose on such
Lender (or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its CD Loans, Eurodollar Loans, Eurocurrency Loans, Bid Rate
Loans, its Notes evidencing such Loans or Bid Rate Loans, or its obligation
to make such Loans and the result of any of the foregoing is actually to
increase the cost to (or to impose a cost on) such Lender (or its Applicable
Lending Office) of making or maintaining any such Loan or Bid Rate Loan, or
to reduce the amount of any sum received or receivable by such Lender (or
its Applicable Lending Office) under this Agreement or under its Notes with
respect thereto by an amount deemed by such Lender to be material, then,
subject to the provisions of Section 3.17(a), if such Lender is generally
imposing payments for increased costs on its similarly situated customers,
within ten (10) Business Days after demand by such Lender, made via
Administrative Agent, accompanied by the certificate required by Section
3.12(c), any affected Borrower or EDS shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such
increased cost or reduction actually incurred by it in connection with this
Agreement and EDS may reduce the Commitment of that Lender and prepay (or
cause any other Borrower to prepay) Loans from that Lender without premium
or penalty (subject, however, to Borrowers' other obligations hereunder in
respect of funding losses and other matters).
(b) Capital Adequacy Rules. If, after the date hereof, the adoption
or phase-in of any Law of general applicability regarding capital adequacy,
or any change in existing or future Laws regarding capital adequacy, or any
change in the interpretation or
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administration of any such Law by any Tribunal charged with the
interpretation or administration thereof, or compliance by any Lender (or
its Applicable Lending Office or any corporation controlling such Lender)
with any request or directive of general applicability regarding capital
adequacy (whether or not having the force of Law) of any such Tribunal,
shall, in the reasonable determination of any Lender, have the effect of
reducing the rate of return on such Lender's capital or on the capital of
the corporation controlling such Lender as a consequence of such Lender's
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy), then from time to time if Lender is generally imposing payments
for such reduction on its similarly situated customers, within ten (10)
Business Days after demand by such Lender, made via Administrative Agent,
all affected Borrowers or EDS shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction, net of
the savings, if any, which may be reasonably projected to be associated with
any such increased capital requirement.
(c) Procedure for Claiming Compensation. Any affected Lenders will
promptly notify Borrowers, via Administrative Agent, of any event of which
such Lender has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section 3.12 and will
designate a different lending office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender. A
certificate of such Lender, delivered via Administrative Agent, claiming
compensation under this Section 3.12 and setting forth the additional amount
or amounts to be paid to it, as well as the manner in which such amount or
amounts were calculated, hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the affected Lender may use any
reasonable averaging and attribution methods.
3.13. Several Obligations. Except as otherwise expressly set forth herein
and in the Guaranty, the obligations of Borrowers hereunder are several and not
joint and each Borrower shall be liable only in respect of Loans and Bid Rate
Loans made to such Borrower and the Obligation of such Borrower related thereto.
3.14. Taxes.
(a) Payments to be Free and Clear. All payments made by any
Borrowers under this Agreement shall be made, in accordance with Sections
3.2 and 3.3, free and clear of and without any deduction or withholding for
or on account of any Tax, by way of setoff or otherwise, except as otherwise
provided by this Section 3.14 and by Section 11.16.
(b) Grossing-up of Payments. If any Borrower shall be required by
Law to deduct any Tax (other than an Excluded Tax) from or in respect of any
sum payable hereunder to any Lender or the Administrative Agent:
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(i) as soon as such Borrower is aware that any such deduction,
withholding or payment of a Tax (other than an Excluded Tax) is
required, or of any change in any such requirement, it shall notify
Administrative Agent;
(ii) the sum payable by such Borrower shall be increased to the
extent necessary so that, after the Borrower has made all required
deductions (including deductions applicable to additional sums payable
under this Section), such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have
received had no such deductions been made; provided, however, that
such Borrower shall not be required to increase any such sums payable
to any Lender if such Lender fails to comply with the requirements of
Section 3.14(e);
(iii) such Borrower shall make such deductions, or pay such Tax
(other than an Excluded Tax), before any interest or penalty becomes
payable or, if such Tax (other than an Excluded Tax) is paid by the
Administrative Agent or any Lender, shall reimburse the Administrative
Agent or such Lender (as the case may be) on demand for the amount
paid by it;
(iv) such Borrower shall pay the full amount deducted to the
relevant taxing authority or other authority in accordance with
applicable Law; and
(v) within thirty (30) days after paying any such Tax (other than
an Excluded Tax), the relevant Borrower shall deliver to
Administrative Agent, at its address referred to in Section 11.4
satisfactory evidence of that deduction, withholding or payment and
(where remittance is required) of the remittance thereof to the
relevant taxing or other authority.
(c) Stamp and Other Taxes. Each Borrower shall pay any present and
future stamp or documentary taxes or any other excise or property Taxes
which arise from any payment made by such Borrower or by the Administrative
Agent hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement.
(d) Indemnification. Within thirty (30) days from the date of written
demand therefor from any Lender or the Administrative Agent, each Borrower
will indemnify and hold harmless each Lender and the Administrative Agent
from and against the full amount of Taxes (other than Excluded Taxes),
including, without limitation, Taxes imposed by any jurisdiction on amounts
payable under this Section 3.14(d), paid by such Lender or the
Administrative Agent (as the case may be) and any liability, including
penalties, interest and expenses, arising therefrom or with respect thereto
whether or not such Taxes were correctly or legally asserted by such
jurisdiction, provided, however, that any Lender receiving indemnification
from any Borrower under this Section 3.14(d) shall (i) at the request,
direction and expense of such Borrower challenge and contest the imposition
of such Taxes, if such Lender is the appropriate party in interest to
initiate and pursue such a challenge, or (ii) cooperate fully with and
assist such Borrower in any challenge or contest
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by such Borrower relating to such Taxes, if such Borrower is the
appropriate party in interest to initiate and pursue such a challenge,
which challenge shall be pursued at such Borrower's expense except that, in
either case, Borrowers have no right hereunder to participate in the
internal tax affairs of any Lender.
(e) Tax Certificates.
(i) In the event a Borrower is incorporated under the laws of the
United States or a state or jurisdiction thereof, then each Lender
that is not incorporated under the laws of the United States or a
state thereof shall, so long as it is lawfully able to do so:
(A) deliver to the relevant Borrower and Administrative
Agent (A) two (2) duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form,
as the case may be, and (B) one (1) duly completed copy of
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(B) deliver to the relevant Borrower and Administrative
Agent two (2) further copies of any such form or certification on
or before the date that any such form or certification expires or
becomes obsolete and after the occurrence of any event requiring
a change in the most recent form previously delivered by it to
the applicable Borrower; and
(C) obtain such extensions of time for filing and
completing such forms or certifications as may reasonably be
requested by the relevant Borrower or Administrative Agent.
Such Lender shall certify (I) in the case of a Form 1001 or 4224, that
it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal or state income
taxes and (II) in the case of a Form W-8 or W-9, that it is entitled
to an exemption from United States backup withholding tax. Each
Person not incorporated under the laws of the United States or a state
thereof that is an Assignee hereunder pursuant to Section 11.12 shall,
upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this Section
3.14.
(ii) In the event a Borrower is not incorporated under the laws of the
United States of America or a state thereof, then each Lender (and any
Assignee hereunder pursuant to Section 11.12) shall deliver any
statements, declarations, certifications, or other documentation that
may be reasonably requested by such Borrower in accordance with
Section 3.14(f).
(f) Statements and other Documentation. Each Lender shall honor all
reasonable requests from any Borrower to file or to provide such Borrower
with such
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statements, declarations, certifications or other documentation as shall
enable such Borrower to claim on behalf of such Lender a reduced rate of
Tax or exemption from any Taxes, provided that no Lender shall be required
to file or provide any such statement, declaration, certification or other
documentation unless (i) such Borrower shall have provided to such Lender,
within a reasonable time prior to the date such Borrower wishes to receive
or have such Lender file such statement or other documentation, a written
request describing such statement or other documentation and, if available,
a blank copy thereof with instructions for completion thereof and (ii) the
information necessary for completion of such statement or other
documentation is within the control of such Lender, and, provided, further,
that any Borrower receiving information or documentation pursuant to this
Section 3.14 shall keep such information and documentation confidential and
disclose the same only to appropriate Tribunals in furtherance of the
purposes of this Section 3.14.
3.15. Application of Principal Payments.
(a) Payment of Committed Loans. Each repayment or prepayment of the
principal of Committed Loans in any currency by any Borrower shall be
applied (except as EDS may otherwise specify by notice to the
Administrative Agent when no Default shall be continuing), to the extent of
such payment, Pro Rata to the Committed Loans:
(i) first, to the Committed Loans in such currency to such Borrower
having an Interest Period ending on the date of such payment,
(ii) second, to any outstanding Base Rate Loans in such currency to
such Borrower,
(iii) third, to any outstanding CD Loans in such currency to such
Borrower, and
(iv) fourth, to any outstanding Eurodollar Loans or Eurocurrency
Loans in such currency to such Borrower, or, if there are no
Eurodollar Loans or Eurocurrency Loans outstanding in such currency to
such Borrower on the date of such repayment or prepayment, such amount
shall be applied to the repayment or prepayment of any Loans to such
Borrower selected by Administrative Agent.
Notwithstanding the foregoing or any other provision of this
Agreement, no Eurodollar Loans or Eurocurrency Loans shall be prepaid on
any day other than the last day of the Interest Period therefor except
pursuant to the provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11, 3.12 or
3.14 or upon acceleration pursuant to this Agreement.
(b) Payment of Bid Rate Loans. Each repayment or prepayment of the
principal of Bid Rate Loans by any Borrower shall be applied (except as EDS
may otherwise specify by notice to the relevant Lender when no Default
shall be continuing), to the extent of such repayment or prepayment;
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(i) first, to the Bid Rate Loans made by the Lender receiving such
payment having an Interest Period ending on the date of such payment,
and
(ii) second, if any such repayment or prepayment is made in a
currency other than Dollars, such amount shall be applied to the
repayment or prepayment of any Loans selected by the Lender receiving
such payment which are denominated in such currency.
Notwithstanding the foregoing or any other provision of this
Agreement, no Bid Rate Loans which are Eurodollar Loans or Eurocurrency
Loans shall be prepaid on any day other than the last day of the Interest
Period therefor except pursuant to the provisions of Sections 3.5, 3.8,
3.9, 3.10, 3.11, 3.12 or 3.14 or upon acceleration pursuant to this
Agreement.
3.16. Payments, Computations, Judgments, etc. All payments by any
Borrower pursuant to this Agreement or any other Loan Document, whether in
respect of principal or interest or otherwise, shall be made by such Borrower in
the currency in which such Obligation was denominated (the "REQUIRED CURRENCY");
provided that failure by any Borrower to make any payment of principal or
interest with respect to any Loan (excluding any Loan denominated in Dollars) in
the Required Currency on the due date therefor because such Required Currency
has ceased to be freely transferable and convertible into Dollars in the
relevant interbank market shall not constitute a Default if such Borrower pays
the Dollar Equivalent Value (as calculated by Administrative Agent in good
faith) of such Required Currency on such due date. In addition to any such
Dollar payment, not later than ten (10) Business Days after demand by any
Lender, made via Administrative Agent, such Borrower shall pay to such Lender,
via Administrative Agent, such amount as will (in the reasonable determination
of such Lender) reimburse such Lender for any loss or expense caused by the
failure of such Borrower to make any payment in the Required Currency on the due
date therefor. A statement as to any such loss or expense (including
calculations thereof in reasonable detail) shall be submitted by such Lender to
Administrative Agent and the affected Borrower, and such statement shall, in the
absence of manifest error, be conclusive and binding on such Borrower.
3.17. Mitigation of Circumstances; Replacement of Affected Lenders.
(a) Mitigation of Circumstances. Each Lender agrees to use reasonable
efforts to mitigate or avoid (i) an obligation by any Borrower to withhold
or deduct any Taxes pursuant to Section 3.14, pay any amounts pursuant to
Section 3.16, or pay any costs pursuant to Section 3.12 or (ii) the
occurrence of any circumstances of the nature described in Section 3.10 or
Section 3.11 (including by changing the office through which it has booked
or funded its Commitment or any Loan or Bid Rate Loan or by making any
other mechanical change in funding Loans or Bid Rate Loans), in each case
prior, if possible, to the occurrence of such circumstances or the
incurrence of any obligation of any Borrower to compensate such Lender for
amounts payable pursuant to any such Section, provided, however, that, in
the reasonable judgment of such Lender, such efforts
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are consistent with legal and regulatory restrictions and are not
materially disadvantageous to such Lender.
(b) Replacement of Affected Lenders. At any time any Lender is
affected by any condition or circumstance set forth in Sections 3.10, 3.11,
3.12 or 3.14, and so long as no Default or Potential Default exists, (i)
EDS may replace such affected Lender as a party to this Agreement with one
or more other bank(s) or financial institution(s), (and upon notice from
EDS such affected Lender shall assign, pursuant to Section 11.12, without
recourse or warranty, its Commitment, its Loans and Bid Rate Loans, its
Note(s) and all of its other rights and obligations hereunder to such
replacement bank(s) or other financial institution(s) for a purchase price
equal to the sum of the principal amount of the Loans and Bid Rate Loans so
assigned, all accrued and unpaid interest thereon, its ratable share of all
accrued and unpaid facility fees and its ratable share of the remaining
unpaid Obligation owed to such affected Lender) and/or (ii) EDS may (and,
if EDS replaces any affected Lender in part as provided in clause (i)
above, concurrently with such replacement EDS shall) cause such affected
Lender to cease to be a party hereto by terminating the Commitment of such
Lender (whereupon the Aggregate Committed Sum shall be reduced by the
amount of such affected Lender's Committed Sum less any portion thereof
assigned pursuant to clause (i) above) by paying, and causing any other
relevant Borrower to pay, the principal amount of such affected Lender's
Loans and Bid Rate Loans, all accrued and unpaid interest thereon, all
accrued and unpaid commitment fees owed to such affected Lender and the
remaining unpaid Obligations owed to such affected Lender, in each case to
the extent not assigned and purchased pursuant to clause (i) above, and
such affected Lender shall thereupon cease to be a party hereto.
Notwithstanding anything to the contrary set forth in this Section 3.17,
EDS may not require any assignment or effect the termination of any
Lender's Commitment pursuant to this Section 3.17 if such assignment or
termination would conflict with any applicable Law.
3.18. Failure to Pay Additional Amounts. Notwithstanding anything to the
contrary set forth herein, the failure of any Borrower to pay any amount
demanded by any Lender pursuant to Sections 3.5, 3.8, 3.10, 3.11, 3.12, 3.14 or
11.17 shall not be deemed to constitute a Default hereunder to the extent that
such Borrower is contesting in good faith its obligations to pay such amount by
ongoing discussions diligently pursued with such Lender or by appropriate
proceedings provided, however, that under no circumstances shall any such
failure to pay continue for more than forty (40) days from the date on which the
related amount is demanded consistent with the terms of this Agreement, at which
date such failure to pay shall become a Default.
ARTICLE IV
----------
FEES; MODIFICATION OF COMMITMENTS
---------------------------------
4.1. Facility Fee. EDS will pay Administrative Agent, for the account of
each Lender, in Dollars, a facility fee on the average daily Committed Sum of
such Lender from the Availability Date through and including the Commitment
Termination Date at a rate of 0.08 percent per annum, computed on a daily basis
for the actual number of days elapsed over a year of 360 days,
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including the first day but excluding the last day. The facility fee will be
payable quarterly in arrears on each Quarterly Date and Commitment Termination
Date and the Administrative Agent shall notify EDS, not less than ten (10) days
prior to each such date, of the amount of the facility fee then payable.
4.2. In addition to its rights under Section 2.4, upon three (3) Business
Days' prior written and irrevocable notice to Administrative Agent, EDS may from
time to time permanently reduce in whole or in part the Aggregate Committed Sum,
provided that, any reduction in part must be in the amount of at least
$10,000,000 or a greater integral multiple of $10,000,000 and, provided,
further, that no such notice may be given or become effective at any time when a
Notice of Advance or a Request for Bids is outstanding and, provided, further,
that no such reduction shall cause the Aggregate Committed Sum to be less than
the total principal amount of all Loans plus all Bid Rate Loans then
outstanding. Any such reduction shall be effective as of the date set forth in
the notice and shall reduce the Committed Sum of each Lender in proportion to
each Lender's Percentage unless such reduction shall be made (i) because one or
more Lenders has declined to extend the Commitment Termination Date pursuant to
Section 2.4, in which case the Committed Sum of such Terminating Lender(s) may
be eliminated by EDS on such Terminating Lender's Commitment Termination Date,
or (ii) pursuant to Section 3.17. EDS may, in its sole discretion, replace any
Lender at any time upon three (3) Business Days' prior notice to Administrative
Agent and such Lender, which notice shall be irrevocable, provided, however,
that no such notice may be given or become effective at any time when a Notice
of Advance or a Request for Bids is outstanding, and, provided, further, that
such Lender's Commitment is assigned to another bank effective as of the date of
such replacement pursuant to Section 11.12 and any amounts due to such Lender as
a result of such termination have been paid in full. Any reduction in the
Aggregate Committed Sum and any replacement of any Lender shall have no effect
upon any Loans then outstanding hereunder, except as otherwise provided in
Section 2.4.
ARTICLE V
---------
CONDITIONS PRECEDENT
--------------------
5.1. Initial Availability. Lenders will not be obligated to make any Loan
hereunder unless, on or before the date of such Loan, Administrative Agent has
received, in addition to this Agreement, executed by EDS, all of the items
described below in form and substance reasonably satisfactory to Administrative
Agent:
(a) Note(s). The applicable Note(s) executed by EDS.
(b) Guaranty. The Guaranty, executed by EDS.
(c) Articles of Incorporation. A recent copy of the articles or
certificate of incorporation and all amendments thereto, of EDS certified
by the Secretary of State of Texas.
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(d) Good Standing. A recent certificate of existence and good
standing from appropriate officials of the State of Texas.
(e) Officers' Certificate. An Officers' Certificate certifying as to
(i) bylaws, (ii) resolutions and (iii) incumbency of all officers of EDS
who will be authorized to execute or attest to any Loan Document
substantially in the form of Exhibit L. The Administrative Agent may
conclusively rely on such certificate until it shall receive a further
certificate canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(f) Opinion of Counsel. An opinion of Hughes & Luce, L.L.P., or
Counsel - Corporate Acquisitions and Finance, EDS, substantially in the
form attached hereto as Exhibit J, and an opinion of special New York
counsel to EDS regarding the enforceability under New York law of the Loan
Documents executed on or before the Availability Date by EDS.
5.2. Each Advance. In addition, Lenders will not be obligated to make any
Loan or Bid Rate Loan unless (a) each statement or certification made by the
relevant Borrower in its Notice of Advance shall be true and correct in all
material respects on the Borrowing Date; (b) at the time of each Loan or Bid
Rate Loan no Default or Potential Default shall exist; (c) the Administrative
Agent shall have received a Notice of Advance or a Request for Bids and a Notice
of Acceptance related thereto, as applicable, and each statement or
certification made therein shall be true and correct in all material respects on
the Borrowing Date; (d) the Administrative Agent shall have received a Note duly
executed by the relevant Borrower (other than EDS) complying with the terms and
provisions hereof; and (e) no event or circumstance analogous or similar to any
of the events or circumstances described in Sections 8.1(e) and/or (f) shall
have occurred and be continuing with respect to the relevant Borrower.
5.3. Waiver of Conditions to Bid Rate Loans. Any Lender may, at its
election, waive any condition to the making of its Bid Rate Loan (except the
existence of a Default), but no such waiver shall be deemed to be a waiver of
the requirement that each such condition precedent be satisfied as a
prerequisite for any subsequent Bid Rate Loan or any Loan.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
6.1. EDS Representations and Warranties. To induce Lenders to enter into
this Agreement and make Loans and Bid Rate Loans hereunder, EDS represents and
warrants to Lenders as follows:
(a) Corporate Existence and Authority. Each Borrower (i) is duly
organized, validly existing, and in good standing under the Laws of its
jurisdiction of organization (ii) is duly qualified to transact business
and is in good standing in each jurisdiction where the failure to do so
would have a Material Adverse Effect, and (iii) has all requisite power and
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authority (x) to own its assets and to carry on the business in which it is
engaged, (y) to execute, deliver and perform its obligations under each
Loan Document to which it is a party, and (z) to issue the Notes to which
it is a party in the manner and for the purpose contemplated by this
Agreement.
(b) Binding Obligations. The execution and delivery of the Loan
Documents have been duly authorized and approved by all necessary corporate
or partnership action and the Loan Documents constitute the legal, valid,
and binding obligations of each Borrower having executed the Loan
Documents, enforceable against it in accordance with their respective terms
except as the enforceability thereof may be limited by applicable Debtor
Relief Laws.
(c) Compliance with Laws and Documents. Each Borrower is not, nor
will the execution, delivery, and the performance of and compliance with
the terms of the Loan Documents cause any Borrower to be, in violation of
(i) any Laws, other than such violations which could not, individually or
collectively, cause a Material Adverse Effect, or (ii) its organizational
documents, including, where relevant, its bylaws or articles or certificate
of incorporation (as amended) other than such violations which could not,
individually or collectively, cause a Material Adverse Effect. The
execution, delivery, and the performance of and compliance with the terms
of the Loan Documents are not inconsistent with, and will not conflict with
or result in any breach of, or constitute a default (excluding breaches and
defaults which individually or collectively could not have a Material
Adverse Effect) under, or result in the creation or imposition of any lien
upon any of the material property or assets of any Borrower pursuant to the
terms of its organizational documents, any material indenture, mortgage,
lease, deed of trust, agreement, contract, or instrument to which any
Borrower is a party or by which any Borrower or any of its property or
assets is bound or to which it is subject. No Default or Potential Default
has occurred or is continuing.
(d) Financial Statements. EDS has delivered to Administrative Agent a
copy of the Financial Statements as of the period ended December 31, 1994.
Such Financial Statements were prepared in accordance with GAAP and present
fairly the financial condition and the results of operations of EDS and its
consolidated Subsidiaries as of, and for the portion of the fiscal year
ending on, the date or dates thereof. All material liabilities (direct or
indirect, fixed or contingent) of EDS and its consolidated Subsidiaries as
of the date or dates of such Financial Statements are reflected therein or
in the notes thereto. Between the date or dates of such Financial
Statements and the date hereof, there has been no material adverse change
in the financial condition of EDS and its consolidated Subsidiaries.
(e) Litigation. Except for the Litigation described on Schedule 6.1,
EDS and its Subsidiaries are not involved in, nor, to the best of EDS's
knowledge, are they aware of, any Litigation which could, collectively or
individually, have a Material Adverse Effect, if determined adversely to
EDS and its Subsidiaries, nor are there any outstanding or unpaid judgments
against EDS or its Subsidiaries in excess of $25,000,000 (calculated, in
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the case of judgments denominated in currencies other than Dollars, by
reference to the Dollar Equivalent Value of the amount of such judgment in
such other currency), in the aggregate.
(f) Taxes. All tax returns and reports of EDS required by Law to be
filed have been filed, and all Taxes imposed upon EDS which are due and
payable have been paid, other than Taxes being contested in good faith and
for which reserves have been established to the extent required by GAAP.
(g) Guaranty Authorization. All requisite corporate action has been
taken by EDS to authorize the Guaranty.
(h) No Approvals, etc. No authorization, consent, approval, license
or formal exemption from, nor any filing, declaration or registration with,
any Tribunal, including the Securities and Exchange Commission or any
securities exchange, is required in connection with the execution, delivery
or performance by EDS of any Loan Document.
(i) Investment Company. Neither EDS nor any other Borrower is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
(j) ERISA Compliance. EDS is in compliance with all material
provisions of ERISA except to the extent that all failures to be in
compliance could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
ARTICLE VII
-----------
COVENANTS
---------
So long as Lenders have any commitment to make Loans under this Agreement
and thereafter until the Obligation is paid and performed in full, unless
Majority Lenders shall otherwise consent in writing:
7.1. Use of Proceeds. EDS covenants and agrees that it shall, and shall
cause each Borrower to, and each Borrower covenants and agrees to, use the
proceeds of Loans for general corporate or partnership purposes and working
capital needs, including, without limitation, capital expenditures, purchase of
capital stock and support of EDS's or such Borrower's commercial paper
facilities (or any commercial paper facilities of any EDS Affiliate guaranteed
by EDS).
7.2. Accounting Books and Financial Records; Inspections. EDS covenants
and agrees that it shall (a) keep, in accordance with GAAP, proper and complete
accounting books, and financial records and permit Lenders to inspect the same
during reasonable business hours, (b) allow Lenders to inspect any of its
properties during reasonable business hours and (c) allow Lenders to discuss its
affairs, condition, and finances with its directors or officers from time to
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time during reasonable business hours; provided, that all information obtained
pursuant to this Section 7.2 shall be kept confidential.
7.3. Items to be Furnished. EDS covenants and agrees that it shall cause
to be furnished to Administrative Agent, with a copy for each Lender, each of
the following:
(a) Annual Financial Statements. As soon as available, but no later
than one hundred twenty (120) days after the last day of each fiscal year
of EDS, audited Financial Statements as of, and for the year ended on, such
last day, in each case setting forth, in comparative form, the
corresponding figures for the previous fiscal year, accompanied by the
opinion of independent certified public accountants, without qualification,
that such Financial Statements were prepared in accordance with GAAP and
present fairly the financial condition and results of operations of EDS and
its consolidated Subsidiaries, accompanied by a certificate signed by the
Treasurer or the Chief Financial Officer of EDS, which certificate shall
state that, to the best of his or her knowledge, EDS has fulfilled all its
obligations under the Loan Documents and, at the end of such fiscal period,
no Default or Potential Default exists, and further sets forth the then-
current calculation of the covenant contained in Section 7.8.
(b) Quarterly Financial Statements. As soon as available, but no
later than sixty (60) days after the last day of each of the first three
fiscal quarters of EDS, Financial Statements showing the financial
condition and result of operations of EDS and its consolidated Subsidiaries
as of, and for the period from the beginning of the current fiscal year to,
such last day, in each case setting forth, in comparative form, the
corresponding figures for the corresponding dates and periods of the
preceding fiscal year, accompanied by a certificate signed by the Treasurer
or Chief Financial Officer of EDS, which certificate shall state that, to
the best of his or her knowledge, at the end of such fiscal period, no
Default or Potential Default exists, and further sets forth the then-
current calculation of the covenant contained in Section 7.8.
(c) SEC Filings. In the event that EDS shall be required to file
reports with the Securities and Exchange Commission pursuant to Sections 13
or 15(d) of the Securities Exchange Act of 1934, promptly upon transmission
thereof, copies of all such financial statements, proxy statements, notices
and reports as it shall send to its public stockholders generally and
copies of all registration statements (without exhibits) and all reports
which it files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the Securities
and Exchange Commission), but excluding any filings relating to shelf
registrations or Debt issuances.
(d) Notices of Significant Events. Notice, promptly after EDS knows
or has reason to know, of (i) the commencement or change in status of any
Litigation with respect to EDS which could have a Material Adverse Effect,
(ii) any change in any material fact or circumstance represented or
warranted in any Loan Document, (iii) a Default or Potential Default,
specifying the nature thereof and what action EDS has taken, is taking, or
proposes to take with respect thereto.
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7.4. Taxes. EDS covenants and agrees that it shall promptly pay when due
any and all Taxes due, except Taxes being contested in good faith by appropriate
proceedings so long as reserves have been established to the extent required by
GAAP.
7.5. Maintenance of Corporate Existence, Assets, Business and Insurance.
EDS covenants and agrees that it (or any successor corporation of EDS permitted
by Section 7.9) shall at all times: maintain its corporate existence and
authority to transact business and good standing in its jurisdiction of
incorporation and all other jurisdictions where the failure to do so might have
a Material Adverse Effect; maintain all licenses, permits, and franchises
necessary for its businesses and where the failure to do so might have a
Material Adverse Effect; maintain, preserve and keep all of its assets which are
useful in and necessary to its businesses in good working order and condition
and from time to time make all necessary and proper repairs, replacements, and
renewals thereto and replacements thereof where the failure to do so might have
a Material Adverse Effect; and maintain insurance with financially sound and
reputable insurance companies or associations or self insure as deemed
appropriate in the reasonable judgment of EDS, in such amounts and covering such
risks as are usual to companies with comparable assets engaged in similar
businesses and owning properties in the same general areas in which EDS
operates, and where the failure to do so might have a Material Adverse Effect.
7.6. Compliance with Laws and Documents. EDS covenants and agrees that it
will not, directly or indirectly, violate the provisions of any material Laws,
its articles or certificate of incorporation or bylaws or any material
agreements if such violation alone, or when aggregated with all other such
violations, could cause a Material Adverse Effect.
7.7. Regulation U. EDS covenants and agrees that neither the making of
any Advance hereunder nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System as now or from time to time hereafter in
effect.
7.8. Net Worth. EDS covenants and agrees that, at all times, the Net
Worth of EDS and its consolidated Subsidiaries shall exceed the sum of (a)
$3,070,050,000 plus (b) fifty percent (50%) of the Net Income of EDS and its
consolidated Subsidiaries for each fiscal quarter commencing on or after
June 30, 1995.
7.9. Mergers; Consolidations; Transfers of Assets. EDS covenants and
agrees that it shall not consolidate with, or sell or convey all or
substantially all of its assets to, or merge with or into any other Person or
Persons, in a single transaction or a series of transactions, unless (a) either
EDS is the continuing corporation, or the successor corporation(s) is(are)
organized under the laws of the United States or a state thereof and the
successor corporation(s) expressly assume(s) all obligations of EDS under the
Facility and the due and punctual performance and observance of all of the
covenants and conditions of EDS under the Facility; and (b) EDS or the successor
corporation(s), as the case may be, will not, immediately after the merger,
consolidation, sale or conveyance, be in Default under the Facility and no
Potential Default under the Facility will have occurred and be continuing.
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7.10. Pari Passu. EDS covenants and agrees that all obligations of EDS
under this Agreement shall rank at least pari passu with all other unsecured
Debt of EDS.
7.11. EDS covenants and agrees that if, at any time when there shall
exist a deficiency in excess of $25,000,000 in the assets of any Pension Plan
which are available to satisfy the benefits guaranteeable under ERISA with
respect to such Pension Plan, (i) the PBGC institutes proceedings to terminate
such Pension Plan or notice of intent to terminate such Pension Plan is filed
under Title IV of ERISA by EDS or any Subsidiary having liability with respect
thereto, or (ii) any Reportable Event for which the PBGC has not waived the
30-day notice requirement shall occur with respect to such Pension Plan and such
Reportable Event shall present a material risk of termination with respect to
such Pension Plan, EDS shall (A) give Administrative Agent prompt written notice
thereof, (B) within fifteen (15) days after the date of such event, propose to
Administrative Agent a plan for bringing such Pension Plan into compliance with
ERISA or reducing such deficiency to $25,000,000 or less and (C) within thirty
(30) days after the date of such event, cause such deficiency to be reduced to
$25,000,000 or less, or cause such Pension Plan to be brought into compliance
with ERISA.
ARTICLE VIII
------------
DEFAULT
-------
8.1. Default. A "DEFAULT" shall exist if any one or more of the following
events shall occur and be continuing:
(a) Payment of Obligation. (i) The failure or refusal of any Borrower
to pay any principal installment when due in accordance with the terms of
the Loan Documents or (ii) the failure or refusal of any Borrower to pay
any interest installment, any fee or any other sum (other than principal)
payable hereunder to any Lender or the Administrative Agent when due in
accordance with the terms of the Loan Documents and such failure or refusal
continues for a period of five (5) Business Days.
(b) Representations and Warranties. Any representation or warranty
made by a Borrower is untrue in any material respect on the date as of
which made or deemed to be made.
(c) Certain Covenants. The failure or refusal of EDS punctually and
properly to perform, observe, and comply with Sections 7.9, 7.10 or 7.11
or to maintain its corporate existence, except as the result of an action
permitted by Section 7.9.
(d) Other Covenants. The failure or refusal of any Borrower
punctually and properly to perform, observe, and comply with any covenant,
agreement, or condition contained in any of the Loan Documents, other than
the agreements described in Sections 8.1(a) or 8.1(c), and such failure or
refusal continues for a period of thirty (30) days (or, in the case of
Section 7.8, twenty (20) days) after the earlier of (i) EDS's having
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knowledge thereof, or (ii) written notice thereof is given by
Administrative Agent or any Lender to such Borrower and EDS.
(e) Voluntary Debtor Relief. EDS shall (i) execute an assignment for
the benefit of creditors, (ii) admit in writing its inability to or
generally fail to pay its debts generally as they become due, (iii)
voluntarily seek the benefits of any Debtor Relief Law which could suspend
or otherwise affect any of Lender's Rights under any of the Loan Documents,
or (iv) take any action to authorize any of the foregoing.
(f) Involuntary Proceedings. An order, judgment or decree shall be
entered against EDS by any Tribunal pursuant to any Debtor Relief Law, the
effect of which could be to suspend or otherwise affect any Lenders' Rights
under any of the Loan Documents or a petition shall be filed against EDS
seeking the benefit or benefits provided for by any Debtor Relief Law, the
effect of which could be to suspend or otherwise affect any of Lenders'
Rights under any of the Loan Documents, and such order, judgment, decree,
or petition is not discharged within ninety (90) days after the entry or
filing thereof.
(g) Payment of Judgments. EDS shall fail to pay any money judgment in
excess of $25,000,000 (or, in the case of a money judgment denominated in a
currency other than Dollars, any money judgment having a Dollar Equivalent
Value in excess of $25,000,000) against it or its assets at least ten (10)
days prior to the date on which its assets may be sold lawfully to satisfy
such judgment.
(h) Default Under Other Debt. EDS shall default in the due and
punctual payment of the principal of or the interest on any Debt, which
Debt is in excess of $25,000,000 (or, in the case of Debt denominated in a
currency other than Dollars, any Debt having a Dollar Equivalent Value in
excess of $25,000,000) in aggregate principal amount, secured or unsecured,
or in the due performance or observance of any covenant or condition of any
indenture or other agreement executed in connection therewith, and as a
consequence thereof such Debt shall be declared to be due and payable or
required to be repaid prior to its stated maturity (other than by a
regularly scheduled required prepayment).
(i) Change of Control. A Change of Control shall occur, provided,
however, that such a Change of Control shall not constitute a Default if
immediately thereafter, the long-term indebtedness of EDS is rated at least
BBB- or the equivalent thereof by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or Baa3 or the equivalent thereof by Moody's
Investors Services, Inc., or if such rating is not made, then the
commercial paper of EDS is rated at least A-2 or the equivalent thereof by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or P-2 or
the equivalent thereof by Moody's Investors Services, Inc.
(j) Default Under Certain Other Debt. A Default, as defined therein,
shall exist under that certain Revolving Credit and Term Loan Agreement
dated as of October
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4, 1995, among EDS, Citibank, N.A., as administrative agent, and the
lenders named therein, as hereafter amended or extended from time to time.
ARTICLE IX
----------
RIGHTS AND REMEDIES UPON DEFAULT
--------------------------------
9.1. Remedies Upon Default. Should a Default exist, Majority Lenders
may, at their election, do any one or more of the following without notice of
any kind, including, without limitation, notice of acceleration or of intention
to accelerate, presentment and demand or protest, all of which are hereby
expressly waived by each Borrower: (a) declare the entire unpaid balance of the
Obligation, or any part thereof, immediately due and payable, whereupon it shall
be due and payable (provided that, upon the occurrence of a Default under
Section 8.1(e) or (f), the entire Obligation shall automatically become due and
payable without notice or other action of any kind whatsoever); (b) terminate
all or any portion of their Commitments hereunder; (c) reduce any claim to
judgment; (d) exercise the Rights of offset or banker's lien against the
interest of each Borrower in and to every account and other property of Borrower
which are in the possession of any Lender to the extent of the full amount of
the Obligation; and (e) exercise any and all other legal or equitable Rights
afforded by the Loan Documents or applicable Laws as Majority Lenders shall deem
appropriate.
9.2. Waivers by Borrower and Others. Each Borrower and each surety,
endorser, guarantor, and other party ever liable for payment of any of the
Obligation jointly and severally waive notice, presentment, demand for payment,
protest, notice of intention to accelerate, notice of acceleration, and notice
of protest and nonpayment, and agree that their liability with respect to the
Obligation, or any part thereof, shall not be affected by any renewal or
extension in the time of payment of the Obligation, by any indulgence, or by any
release or change in any security for the payment of the Obligation, and hereby
consent to any and all renewals, extensions, indulgences, releases, or changes,
regardless of the number thereof.
9.3. Delegation of Duties and Rights. Each Lender may perform any of
its duties or exercise any of its Rights under the Loan Documents by or through
its officers, directors, employees, attorneys, agents, or other representatives.
9.4. Lenders Not in Control. None of the covenants or other provisions
contained in this Agreement shall, or shall be deemed to, give Lenders the Right
or power to exercise control over the affairs or management of any Borrower, the
power of Lenders being limited to the Rights of creditors generally and the
Right to exercise the remedies provided in this Article IX.
9.5. Cumulative Remedies. The Rights provided for in this Agreement and
the other Loan Documents are cumulative and not intended to be exclusive of any
other Right given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
9.6. Expenditures by Lenders. Following any Default hereunder, all court
costs, reasonable attorneys' fees, other costs of collection, and other sums
spent by Lenders pursuant to
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the exercise of any Right (including, without limitation, any effort to collect
or enforce the Notes) provided herein shall be payable by Borrowers to Lenders
on demand, shall become part of the Obligation, and shall bear interest at a
rate per annum that is one percent (1%) above the Base Rate from the date spent
until the date repaid.
9.7 Performance by Administrative Agent. Should EDS or any other
Borrower fail to perform any covenant, duty, or agreement contained herein or in
any of the Loan Documents, the Administrative Agent, after giving ten (10) days'
notice to EDS and such Borrower, may, but shall not be obligated to, perform or
attempt to perform such covenant, duty, or agreement on behalf of such Borrower.
In such event, such Borrower shall, at the request of the Administrative Agent
promptly pay any amount expended by the Administrative Agent in such performance
or attempted performance to the Administrative Agent at the Payment Office for
Dollars together with interest thereon at the default rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly
understood that neither Administrative Agent nor Lenders assume any liability or
responsibility for the performance of any duties of any Borrower hereunder or
under any of the Loan Documents or other control over the management and affairs
of any Borrower, nor by any such action shall the Administrative Agent or the
Lenders be deemed to create a partnership arrangement with any Borrower.
ARTICLE X
---------
THE ADMINISTRATIVE AGENT
------------------------
10.1. Appointment and Authorization. Each Lender hereby irrevocably
appoints and authorizes Administrative Agent to take such action on its behalf
and to exercise such powers under the Loan Documents as are delegated to
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto. With respect to its Committed Sum, the Committed
Loans and Bid Rate Loans made by it and the Notes issued to it, Administrative
Agent shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not Administrative Agent; and
the term "Lender" or "Lenders" shall, unless otherwise expressly indicated,
include the Administrative Agent in its capacity as a Lender. Administrative
Agent and its affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with, any of
Borrowers, and any Person which may do business with any of Borrowers, all as if
Administrative Agent were not Administrative Agent hereunder and without any
duty to account therefor to Lenders.
10.2. Note Holders. Administrative Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with it signed by such payee and in form satisfactory to Administrative Agent.
10.3. Consultation with Counsel. Lenders agree that Administrative Agent
may retain legal counsel, accountants and other professionals and may consult
with such professionals selected by it and shall not be liable for any action
taken or suffered in good faith by it in accordance with the advice of such
professionals.
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10.4. Documents. Administrative Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, enforceability, genuineness or
value of any of the Loan Documents or any other instrument or document furnished
pursuant thereto or in connection therewith, and Administrative Agent shall be
entitled to assume that the same are valid, effective, enforceable and genuine
and what they purport to be.
10.5. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by giving thirty (30) days'
prior written notice thereof to Lenders, EDS and Borrowers and the
Administrative Agent may be removed at any time with or without cause by EDS.
Upon any such resignation or removal, EDS shall appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Article X
shall continue in effect for its benefit in respect to any actions taken or
omitted to be taken by it while it was acting as Administrative Agent.
10.6. Responsibility of Administrative Agent. It is expressly understood
and agreed that the obligations of Administrative Agent under the Loan Documents
are only those expressly set forth in the Loan Documents and that Administrative
Agent shall be entitled to assume that no Default exists, unless Administrative
Agent has actual knowledge of such fact or has received notice from a Lender
that such Lender considers that a Default exists and specifying the nature
thereof. Lenders recognize and agree that Administrative Agent has no
responsibility for confirming the accuracy of any statements made by Borrowers,
or to inspect the property, including the books and financial records, of any
Borrower, and in disbursing funds to Borrowers, Administrative Agent may rely
fully upon statements contained in the relevant Notice of Advance. Neither
Administrative Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it under or in connection
with the Loan Documents, except for its own gross negligence or willful
misconduct. In the absence of gross negligence or willful misconduct,
Administrative Agent shall incur no liability under or in respect of any of the
Loan Documents by acting upon any notice, consent, certificate, warranty or
other paper or instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything which it may
do or refrain from doing in the reasonable exercise of its judgment, or which
may seem to it to be necessary or desirable in the premises.
Administrative Agent shall not be responsible to Lenders for any
recitals, statements, representations or warranties contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by any Lender under, this Agreement, or for the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any document referred to or provided for herein or for any failure by Borrowers
to perform any of their obligations hereunder. Administrative Agent may employ
agents and attorneys-in-fact and
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shall not be answerable, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
The relationship between Administrative Agent and each of the Lenders
is only that of agent and principal and has no fiduciary aspects, and
Administrative Agent's duties hereunder are acknowledged to be only ministerial
and not involving the exercise of discretion on its part. Nothing in this
Agreement or elsewhere contained shall be construed to impose on Administrative
Agent any duties or responsibilities other than those for which express
provision is herein made. In performing its duties and functions hereunder,
Administrative Agent does not assume and shall not be deemed to have assumed,
and hereby expressly disclaims, any obligation or responsibility toward or any
relationship of agency or trust with or for Borrowers. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of Majority Lenders and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that Administrative Agent shall not be required to take any
action which exposes Administrative Agent to personal liability or which is
contrary to this Agreement or applicable law.
10.7. Notices of Default. In the event that Administrative Agent shall
have acquired actual knowledge of any Default or any Potential Default,
Administrative Agent shall promptly give notice thereof to Lenders.
10.8. Independent Investigation. Each of Lenders severally represents and
warrants to Administrative Agent that it has made its own independent
investigation and assessment of the financial condition and affairs of EDS in
connection with the making and continuation of its participation in the Loans
hereunder and has not relied exclusively on any information provided to such
Lender by Administrative Agent in connection herewith, and each Lender
represents, warrants and undertakes to Administrative Agent that it shall
continue to make its own independent appraisal of the creditworthiness of EDS
while the Loans are outstanding or while it has any obligation to make Loans
hereunder to Borrowers.
10.9. Indemnification of Administrative Agent. Lenders agree to indemnify
Administrative Agent (to the extent not reimbursed by Borrowers), Pro Rata, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by Administrative Agent under the Loan Documents,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Administrative Agent's gross negligence
or willful misconduct. Without limitation of the foregoing, each Lender agrees
to reimburse the Administrative Agent, on a Pro Rata basis, promptly upon demand
for its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Administrative Agent in connection with the preparation,
execution,
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delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, to the extent that
the Administrative Agent is not reimbursed for such expenses by the Borrowers.
10.10. Arrangers and Managers. None of the Lenders identified on the
cover page or signature pages of this Agreement as an "arranger" or "manager"
shall have any right, power, obligation, liability, responsibility or duty,
including, without limitation, any fiduciary duty, under this Agreement other
than those applicable to all Lenders as such. Each Lender acknowledges that it
has not relied, and will not rely, on any of the Lenders so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.
10.11. Benefit of Article X. The agreements contained in this Article X
are solely for the benefit of Administrative Agent and Lenders, and are not for
the benefit of, or to be relied upon by, Borrowers or any third party.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1. Number and Gender of Words. Whenever in any Loan Document the
singular number is used, the same shall include the plural where appropriate,
and vice versa; and words of any gender in any Loan Document shall include each
other gender where appropriate.
11.2. Headings. The headings, captions, and arrangements used in any of
the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify, or modify the terms of the Loan
Documents, nor affect the meaning thereof.
11.3. Exhibits. If any Exhibit which is to be executed and delivered
contains blanks, the same shall be completed correctly and in accordance with
the terms and provisions contained and as contemplated herein prior to, at the
time of, or after the execution and delivery thereof.
11.4. Communications. Unless specifically otherwise provided, whenever
any Loan Document requires or permits any consent, approval, notice, request, or
demand from one party to another, such communication must be in writing (which
may be by telecopier) to be effective and shall be deemed to have been given on
the day actually delivered or telecopied, or, if mailed, on the third Business
Day after it is enclosed in an envelope, addressed to the party to be notified
at the address stated below, properly stamped for first class delivery, sealed,
and deposited in the appropriate official postal service. Until changed by
notice pursuant hereto (any party being entitled to change its address for
purposes of this Section 11.4 by notice to all other parties hereto), the
address, and telecopy number for each party for purposes hereof are as follows:
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BORROWERS: Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Telecopy No.: (214) 605-3005
Telephone No.: (214) 605-3002
Attention: Manager, Corporate Finance
COPY TO: Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Telecopy No.: (214) 605-5613
Telephone No.: (214) 605-5500
Attention: General Counsel
LENDERS: See Schedule 1
ADMINISTRATIVE
AGENT: FOR NOTICES UNDER ARTICLES II AND III AND SECTION
4.2:
Citibank, N.A.
Bank Loan Syndications
One Court Square, 7th Floor
Long Island City, NY 11120
Attention: Mr. Phil Green
Telecopy No.: (718) 248-4844/45
Telephone No.: (718) 248-4529
IN ALL CASES WITH A HARD COPY TO:
Citibank, N.A.
Central Customer Service
One Court Square, 7th Floor
Long Island City, NY 11120
Attention: Ms. Angela Valentin
FOR ALL OTHER NOTICES:
Citibank, N.A.
399 Park Avenue
8th Floor, Zone 12
New York, NY 10043
Attention: Mr. William G. McKnight, III
Telecopy No.: (212) 826-2375
Telephone No.: (212) 559-8851
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PROCESS AGENT:
Prentice Hall Systems, Inc.
15 Columbus Circle
New York, New York 10023-7773.
COPY TO: Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Telecopy No.: (214) 605-5613
Attention: General Counsel
11.5. Exceptions to Covenants. No Borrower shall take any action or fail
to take any action which is permitted as an exception to any of the covenants
contained in any of the Loan Documents if such action or omission would result
in the breach of any other covenant contained in any of the Loan Documents.
11.6. Survival. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents shall survive all closings
under the Loan Documents and, except as otherwise indicated, shall not be
affected by any investigation made by any party.
11.7. GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK (OTHER THAN THE CONFLICT OF LAWS PROVISIONS THEREOF), EXCEPT
TO THE EXTENT THAT FEDERAL LAWS MAY APPLY.
11.8. Maximum Interest Rate. Regardless of any provision contained in any
of the Loan Documents, no Lender shall ever be entitled to contract for, charge,
take, reserve, receive, or apply, as interest on the Obligation, or any part
thereof, any amount in excess of the Highest Lawful Rate, and, in the event any
Lender ever contracts for, charges, takes, reserves, receives, or applies as
interest any such excess, it shall be deemed a partial prepayment of principal
and treated hereunder as such and any remaining excess shall be refunded to the
relevant Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Highest Lawful Rate, Borrowers and
Lenders shall, to the maximum extent permitted under applicable Law, (a) treat
all Advances as but a single extension of credit (and Lenders and Borrowers
agree that such is the case and that provision herein for multiple Advances and
for one or more Notes is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (c)
exclude voluntary prepayments and the effects thereof, and (d) "spread" the
total amount of interest throughout the entire contemplated term of the
Obligation; provided that, if the Obligation is paid and performed in full prior
to the end of the full contemplated term thereof, and if the interest received
for the actual period of existence thereof exceeds the Highest Lawful Rate, any
Lender receiving such excess interest shall refund such excess, and, in such
event, such Lender shall not be subject to any penalties provided by any Laws
for contracting for, charging, taking, reserving, or receiving interest in
excess of the Highest
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Lawful Rate. To the extent the Laws of the State of Texas are applicable for
purposes of determining the "Highest Lawful Rate," such term shall mean the
"indicated rate ceiling" from time to time in effect under Article 1.04, Title
79, Revised Civil Statutes of Texas, as amended.
11.9. ENTIRETY AND AMENDMENTS. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Agreement and the other Loan Documents embody the entire agreement between
Borrowers and Lenders and supersedes all prior proposals, agreements and
understandings relating to the subject matter hereof. Borrowers certify that
they are relying on no representation, warranty, covenant or agreement except
for those set forth herein and the other Loan Documents of even date herewith.
This Agreement and the other Loan Documents may be amended, or the provisions
hereof waived, only by an instrument in writing executed jointly by an
authorized officer of EDS and Administrative Agent, acting on behalf of Majority
Lenders, and supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof. Notwithstanding anything to the
contrary set forth herein, no change in the Loan Documents or waiver of the
provisions thereof which has the effect of (a) extending the maturity or
decreasing the amount of any payment on any Notes or payment of any fee, (b)
decreasing any rate or amount of interest or other sums payable to any Lender
under the Loan Documents, (c) changing the definition of the term "Majority
Lenders", (d) amending or waiving Sections 5.2 (except with respect to a Bid
Rate Loan as set forth in Section 5.3), 7.8, 11.9 or 11.12 or (e) discharging
any guarantor shall be effective absent the concurrence of all Lenders. No
increase to the Committed Sum of any Lender, no extension of the Commitment
Termination Date of any Lender and no imposition of any additional obligations
upon any Lender, except as expressly provided herein, shall be effective without
the consent of such Lender. Notwithstanding the foregoing, EDS or any other
Borrower and any Lender of a Bid Rate Loan may, from time to time, and at any
time, enter into an amendment of such Bid Rate Loan and the Bid Rate Note
related thereto. EDS and Administrative Agent may, from time to time and at any
time, enter into an amendment hereof, for the purpose of adding as a Lender
hereunder any commercial lending institution.
11.10. Waivers. The acceptance by Lenders at any time and from time to
time of partial payment on the Obligation shall not be deemed to be a waiver of
any Default or Potential Default then existing. No failure to exercise and no
delay on the part of Lenders or their respective officers, directors, employees,
agents, representatives or attorneys in exercising any Right under this
Agreement or any of the Loan Documents shall operate as a waiver thereof, nor
shall any single or partial exercise of any Right under this Agreement preclude
any other or further exercise thereof or the exercise of any other Right. Any
waiver or consent allowed hereunder and in conformity with the provisions hereof
shall be effective only in the specific instance to which it relates and for the
purpose for which it is given.
11.11. Multiple Counterparts. This Agreement may be executed in any
number of identical counterparts, and by different parties hereto on separate
counterparts, each of which shall be deemed an original for all purposes and all
of which constitute, collectively, one
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Agreement; but, in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
11.12. Parties Bound; Participations and Assignments.
(a) Successors and Assigns. This Agreement is binding upon, and
inures to the benefit of, each Lender, each Borrower, and their respective
successors and assigns; provided that, unless otherwise permitted by this
Section 11.12, no Lender may transfer, pledge, assign, sell participations
in or otherwise encumber its Commitment or Loans hereunder; and provided
further that, except as otherwise expressly provided herein, the Borrowers
shall not have any right to assign their rights or obligations hereunder or
any interest herein without the prior written consent of the Lenders.
(b) Participations. Any Lender may, in accordance with
applicable Law, at any time sell to one or more banks or other entities
(each, a "PARTICIPANT") participating interests in any Loan owing to such
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder; provided that such Lender shall have given prior written notice
to EDS of the identity of each such Participant and provided, further, that
no Lender shall transfer, grant or assign any participation under which any
Participant shall have rights to approve any amendment, supplement or
modification to or waiver of this Agreement except to the extent such
amendment, supplement, modification or waiver would (i) increase the amount
of the Participant's funding obligations in respect of such Lender's
Commitment, (ii) reduce the principal of, or interest on, any of the
Participant's interest in such Lender's Notes or any fees or other amounts
payable to such Lender hereunder (to the extent an interest therein has
been sold to the Participant) or (iii) postpone the date fixed for any
payment of principal of, or interest on, any of such Lender's Notes or any
fees or other amounts payable to such Lender hereunder (to the extent an
interest therein has been sold to the Participant). In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of any obligation owing to it hereunder for all purposes under this
Agreement, and Borrowers and the Administrative Agent shall continue to be
entitled to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Borrowers
hereby agree that each Participant shall be entitled to the benefits of
Sections 3.5, 3.10, 3.11, 3.12 and 3.14 with respect to its participation
in the Commitment and the Loans outstanding from time to time as if it were
a Lender; provided that no Participant shall be entitled to receive any
greater amount pursuant to any such Section than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had
no such transfer occurred.
(c) Assignments. Any Lender may, in the ordinary course of its
commercial lending business and in accordance with applicable Law, at any
time and from time to time, assign to any Lender or any Affiliate thereof
or, with the prior written consent of
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EDS (which consent shall not be unreasonably withheld), to an additional
bank or financial institution (each such Lender, Affiliate, bank or
financial institution, an "ASSIGNEE") all or any part of its rights and
obligations under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit I, executed by such Assignee, such
assigning Lender and EDS and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that, unless EDS
otherwise consents, any such assignment to any Assignee that is not a
Lender, or an Affiliate of a Lender shall be an undivided share of the
assigning Lender's Committed Sum and Loans, in a minimum amount of
$17,500,000 and shall not exceed fifty percent (50%) of the assigning
Lender's Committed Sum as of the date such Lender became a Lender hereunder
and provided, further, that no Assignee shall be entitled to receive any
greater amount pursuant to Sections 3.12(a) or 3.14 than the assignor
Lender would have been entitled to receive in respect of the amount of the
Loan(s) assigned had no such assignment occurred. Upon such execution,
delivery, acceptance and recording from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of (and be) a
Lender hereunder with a Commitment as set forth therein, and (y) the
assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement. Notwithstanding anything to the contrary contained herein, any
Lender may sell, transfer, assign or grant participations in all or any
part of the Bid Rate Loans made by it to any Assignee without requirement
of notice or consent and without limitation of any kind, provided that no
Assignee of any Bid Rate Loan shall be entitled to receive any greater
amount pursuant to Sections 3.12(a) or 3.14 than the assignor Lender would
have been entitled to receive in respect of the amount of the Bid Rate
Loan(s) assigned had no such assignment occurred.
(d) Maintenance of Register. The Administrative Agent shall maintain
at its address referred to in Section 11.4 a copy of each Assignment and
Acceptance delivered to it and a register (the "REGISTER") for the
recordation of the name and address of each of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from
time to time. The entries in the Register shall be prima facie evidence of
the existence and amounts of the obligations of Borrowers therein recorded,
and Borrowers, Administrative Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection and copying by Borrowers or any Lender at any reasonable time
and from time to time upon reasonable prior notice. The Administrative
Agent shall provide a copy of the Register to EDS on a monthly basis.
(e) Payment of Costs. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender, an Assignee, Administrative
Agent and EDS and payment by the assigning Lender to Administrative Agent
and EDS of all of their reasonable costs in connection with such
assignment, including without limitation a processing and recordation fee
of $3,000 to Administrative Agent, Administrative Agent shall (i) promptly
accept such Assignment and Acceptance and (ii) on the effective date
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<PAGE>
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the
assigning Lender, its Assignee and EDS.
(f) Delivery of Notes. Within five (5) Business Days after its
receipt of an Assignment and Acceptance, together with an execution copy of
each replacement Note, the applicable Borrower, shall execute and deliver
to the Administrative Agent in exchange for the surrendered Note or Notes
such replacement Note or Notes, duly executed, and payable to the order of
such Assignee in an amount equal to the amount assigned to it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained a
portion of the Obligation hereunder, a replacement Note or Notes to the
order of the assigning Lender in an amount equal to the portion of the
Obligation retained by it hereunder. Such replacement Note or Notes shall
be in an aggregate principal amount equal to the aggregate principal amount
of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the
form of the surrendered Note or Notes.
(g) Disclosure of Borrower Information. Borrowers authorize each
Lender to disclose to any prospective Participant, any Participant or any
prospective Assignee (each, a "TRANSFEREE") any and all financial
information in such Lender's possession concerning Borrowers which has been
delivered to such Lender by or on behalf of Borrowers pursuant to this
Agreement or which has been delivered to all Lenders by or on behalf of
Borrowers in connection with their respective credit evaluations of
Borrowers prior to becoming a party to this Agreement; provided that each
Lender disclosing such information notifies EDS in advance that it is doing
so, and, prior to any such disclosure, the Transferee shall agree to
preserve the confidentiality of any information relating to Borrowers
received from such Lender. Nothing contained in this Section 11.12(f)
shall be deemed to prohibit the delivery to any Transferee of any financial
information which is otherwise publicly available or to subject the
delivery of any such publicly available information to the notice and
consent procedures hereinabove set forth.
(h) Pledges and Assignments to Federal Reserve Banks. Nothing herein
shall prohibit any Lender from pledging or assigning all or any portion of
its Loans or Bid Rate Loans to any Federal Reserve Bank in accordance with
applicable Law but such Lender shall remain liable for performance of its
obligations hereunder.
11.13. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWERS HEREBY
AGREE THAT ANY SUIT, ACTION OR PROCEEDING AGAINST BORROWERS WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF,
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR
IN THE UNITED STATES COURTS LOCATED IN THE STATE OF NEW YORK, BOROUGH OF
MANHATTAN AS MAJORITY LENDERS IN THEIR SOLE DISCRETION MAY ELECT AND THE
BORROWERS HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE
PURPOSE OF
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ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWERS HEREBY AGREE THAT SERVICE OF ALL
WRITS, PROCESS AND SUMMONSES IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
THE STATE OF NEW YORK MAY BE MADE UPON PROCESS AGENT AT ITS ADDRESS AS SET FORTH
IN SECTION 11.4 (AS SUCH ADDRESS MAY BE CHANGED FROM TIME TO TIME) AND EACH OF
THE BORROWERS HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS TRUE AND LAWFUL
ATTORNEY-IN-FACT IN THE NAME, PLACE AND STEAD OF SUCH BORROWER TO ACCEPT SUCH
SERVICE OF ANY AND ALL SUCH WRITS, PROCESS AND SUMMONSES, AND AGREES THAT THE
FAILURE OF THE PROCESS AGENT TO GIVE ANY NOTICE OF SUCH SERVICE OF PROCESS TO IT
SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED
THEREON. BORROWERS HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING IN SAID COURTS BY THE MAILING THEREOF BY
ADMINISTRATIVE AGENT OR ANY LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO BORROWERS' ADDRESS SET FORTH IN SECTION 11.4 HEREOF. EACH BORROWER
HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY NOTE BROUGHT IN THE COURTS LOCATED IN THE STATE OF NEW
YORK, BOROUGH OF MANHATTAN, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY
OF THE OTHER LOAN DOCUMENTS, WHICH WAIVER IS INFORMED AND VOLUNTARY.
11.14. Payment of Expenses. EDS agrees to pay (a) all costs and expenses
of Lenders, including attorneys' fees and expenses, incurred by Lenders in
connection with the preservation and enforcement of Lenders' rights under this
Agreement, the Notes and/or the other Loan Documents and (b) the legal fees and
expenses of Haynes and Boone, L.L.P., in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Notes and the other
Loan Documents.
11.15. Invalid Provisions. If any provision of any of the Loan Documents
is held to be illegal, invalid or unenforceable under present or future laws
during the term of this Agreement, such provision shall be fully severable; such
Loan Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document; and
the remaining provisions of such Loan Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Loan Document a provision mutually agreeable to Borrowers,
Administrative Agent and Majority Lenders as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
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<PAGE>
In the event Borrowers, Administrative Agent and Majority Lenders are unable to
agree upon a provision to be added to the Loan Document in question within a
period of ten (10) Business Days after a provision of any Loan Document is held
to be illegal, invalid or unenforceable, then a provision acceptable to
Administrative Agent and Majority Lenders as similar in terms to the illegal,
invalid or unenforceable provision as is possible and be legal, valid and
enforceable shall be added automatically to such Loan Document. In either case,
the effective date of the added provision shall be the date upon which the prior
provision was held effectively to be illegal, invalid or unenforceable.
11.16. Borrowers' Right of Offset.
(a) Offset Against Accounts. Each of Lenders and the Borrowers hereby
agree, with respect to the Obligation, that, automatically and without any
action by or notice to the Borrowers, upon the occurrence of the
appointment of a conservator or receiver for a Lender or, if a Lender's
deposits are insured by the Federal Deposit Insurance Corporation on the
date of an Advance by such Lender, the termination of federal deposit
insurance of such Lender's deposits by the Federal Deposit Insurance
Corporation, or any successor thereto, each Borrower's unpaid payment
obligations under the Obligation, including any unpaid principal and
interest thereunder, shall be offset, Dollar for Dollar, against any and
all funds of such Borrower on deposit with such Lender in any and all
accounts which such Borrower maintains at such Lender in the name of such
Borrower, whether individually, or jointly with any of its Affiliates, and
which have not been previously pledged to a party other than such Lender
(the "Accounts"). The Accounts shall in such circumstance be applied
against the Obligation in such order as each Borrower elects or, if no such
election is made, in such order as the Lender or the entity applying such
Accounts elects.
(b) Lender Representations. Each Lender whose deposits are insured by
the Federal Deposit Insurance Corporation represents and warrants that the
execution of this Agreement by such Lender and the obligations herein
undertaken by it have been approved in compliance with applicable
regulations of the Federal Deposit Insurance Corporation.
11.17. Indemnification of Lenders. EDS agrees to indemnify and hold
Administrative Agent and each Lender and their respective directors, officers,
shareholders, employees, attorneys and agents, and Affiliates (each, an
"INDEMNITEE") harmless from and against any and all liabilities, obligations,
losses, actions, judgments, suits, disbursements, penalties, damages (other than
consequential damages) and related expenses, including attorneys' fees and
expenses, with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes, and the other Loan Documents
(collectively, the "INDEMNIFIED LIABILITIES" and, individually, an "INDEMNIFIED
LIABILITY"), provided, however, that EDS and the Borrowers shall have no
obligation hereunder to any Indemnitee with respect to Indemnified Liabilities
arising from (a) the gross negligence or willful misconduct of any Indemnitee,
(b) any legal proceedings commenced against any Indemnitee by any other
Indemnitee or by any Participant or Assignee, (c) any violation or claimed
violation by any Indemnitee of any material banking Law of the jurisdiction of
its or its related Lender's Applicable Lending Office, or (d) any
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<PAGE>
action by Administrative Agent or any Lender not required or contemplated by the
Agreement or the Loan Documents or necessary for the performance of
Administrative Agent's or any Lender's obligations, Administrative Agent's or
any Lender's duties or enforcement of Administrative Agent's or any Lender's
rights thereunder. The provisions of this Section 11.17 shall remain operative
and in full force and effect regardless of the termination of the Commitments,
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the occurrence of the Commitment Termination Date, the invalidity,
illegality, or unenforceability of any term or provision of this Agreement or
any other Loan Document, or any investigation made by or on behalf of
Administrative Agent or the other Lenders. All amounts due under this Section
11.17 shall be payable within ten (10) days after written demand therefor,
delivered to EDS and the relevant Borrower (if other than EDS) through the
Administrative Agent as promptly as practical after the Indemnitee in question
obtains knowledge of any Indemnified Liability, which notice shall be certified
by an authorized officer of Administrative Agent or Lender (if Administrative
Agent or such Lender is the Indemnitee making such claim) and shall reasonably
identify the basis upon which such claim is made.
11.18. Designation of EDS Affiliates as Borrowers. EDS may, at any time
or from time to time, supplement or amend Schedule 2 hereto to add an EDS
Affiliate or delete a Designated EDS Affiliate by delivering to Administrative
Agent a revised Schedule 2 together, in the case of an addition of an EDS
Affiliate, with a certificate executed by the Treasurer, Assistant Treasurer or
Chief Financial Officer of EDS stating that the guaranty by EDS of the
obligations of such EDS Affiliate may reasonably be expected to benefit,
directly or indirectly, EDS.
11.19 Judgment Currency.
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or under the Notes from a currency
(the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY"), the
parties hereto agree, to the fullest extent that they may effectively do
so, that the rate of exchange used shall be that at which in accordance
with normal banking procedures the Administrative Agent could purchase the
Original Currency with the Other Currency at its Payment Office in London,
England on the second Eurocurrency Business Day preceding the day on which
final judgment is given.
(b) The obligation of any Borrower in respect of any sum due in the
Original Currency from it to any Lender or the Administrative Agent
hereunder or under the Note held by such Lender shall, notwithstanding any
judgment in any Other Currency, be discharged only if and to the extent
that on the Eurocurrency Business Day following receipt by such Lender or
the Administrative Agent of any sum adjudged to be so due in such Other
Currency such Lender or the Administrative Agent may in accordance with
normal banking procedures purchase such amount of the Original Currency
with such Other Currency at its Payment Office in London, England which the
Administrative Agent could have purchased on the second Eurocurrency
Business Day preceding the day on which the final judgment referred to in
Section 11.19(a) is given; if the amount of the Original Currency so
purchased is less than the amount of the Original Currency which the
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<PAGE>
Administrative Agent could have purchased on the second Eurocurrency
Business Day preceding the day on which such final judgment is given, such
Borrower agrees, as a separate Obligation and notwithstanding any such
judgment, to indemnify such Lender or the Administrative Agent against such
difference, and if the amount of the Original Currency so purchased exceeds
the amount of the Original Currency which the Administrative Agent could
have purchased on the second Eurocurrency Business Day preceding that on
which such final judgment is given, such Lender or the Administrative Agent
agrees to remit to such Borrower such excess.
11.20 Lenders' Right of Setoff; Payments Set Aside; Sharing of Payments.
(a) Right of Setoff. Should a Default exist, each Lender is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to setoff and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of a Borrower against any and all of the obligations of such
Borrower now or hereafter existing under this Agreement and the Notes,
irrespective of whether or not demand shall have been made under this
Agreement or any such Note and although such obligations may be unmatured.
Each Lender agrees promptly to notify any affected Borrower after any such
setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section 11.20 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Lender may have.
(b) Payments Set Aside. To the extent that EDS or any other Borrower
makes a payment or payments to a Lender or a Lender exercises its right of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other person under any Debtor Relief Law or
equitable cause, then, to the extent of such recovery, the obligation or
part thereof originally intended to be satisfied, and all rights and
remedies therefor, shall be revived and shall continue in full force and
effect as if such payment had not been made or such enforcement or setoff
had not occurred.
(c) Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Loans made by it (other than costs
or losses paid pursuant to Sections 3.5, 3.10 or 3.12) in excess of its
ratable share of payments on account of the Loans obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Loans made by them as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of
them, provided, however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to
the proportion of (i) the
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amount of such Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid
or payable by the purchasing Lender in respect of the total amount so
recovered. EDS and each Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 11.20(c) may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of
such participation.
[The remainder of this page is intentionally
left blank.]
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EXECUTED as of the day and year first above written.
BORROWER:
ELECTRONIC DATA SYSTEMS
CORPORATION
By:______________________________________
Name:____________________________________
Title:___________________________________
ADMINISTRATIVE AGENT:
CITIBANK, N.A., in its individual capacity
as a Lender and as Administrative Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
ARRANGERS/LENDERS:
BANCO SANTANDER - NEW YORK
BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
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BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
CHEMICAL BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:______________________________________
Name:____________________________________
Title:___________________________________
NATIONSBANK OF TEXAS, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
MANAGERS/LENDERS:
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
CIBC INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
PNC BANK, NATIONAL ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
TORONTO DOMINION (TEXAS), INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
WACHOVIA BANK OF GEORGIA, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
62
<PAGE>
LENDERS:
THE DAI-ICHI KANGYO BANK, LTD.
By:______________________________________
Name:____________________________________
Title:___________________________________
SOCIETE GENERALE, SOUTHWEST
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
THE SANWA BANK, LIMITED, DALLAS
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
THE BANK OF TOKYO LTD.,
NEW YORK AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
NEDERLAND",
NEW YORK BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
THE FUJI BANK, LIMITED - HOUSTON
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
THE SUMITOMO BANK, LIMITED,
HOUSTON AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
COMMERZBANK
AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN
BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
FIRST FIDELITY BANK, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.P.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
BANCA DI ROMA - HOUSTON
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
COMERICA BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
KREDIETBANK N.V.
By:______________________________________
Name:____________________________________
Title:___________________________________
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NATIONAL WESTMINSTER BANK Plc
By:______________________________________
Name:____________________________________
Title:___________________________________
THE ROYAL BANK OF SCOTLAND plc
By:______________________________________
Name:____________________________________
Title:___________________________________
THE SAKURA BANK, LIMITED,
HOUSTON AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
SUNBANK, NATIONAL ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
UNITED STATES NATIONAL BANK OF
OREGON
By:______________________________________
Name:____________________________________
Title:___________________________________
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AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
CAYMAN ISLANDS BRANCH
By:______________________________________
Name:____________________________________
Title:___________________________________
BANK OF MONTREAL
By:______________________________________
Name:____________________________________
Title:___________________________________
CREDIT SUISSE
By:______________________________________
Name:____________________________________
Title:___________________________________
FIRST INTERSTATE BANK OF
CALIFORNIA
By:______________________________________
Name:____________________________________
Title:___________________________________
THE FIRST NATIONAL BANK OF
BOSTON
By:______________________________________
Name:____________________________________
Title:___________________________________
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THE FIRST NATIONAL BANK OF MARYLAND
By:______________________________________
Name:____________________________________
Title:___________________________________
MELLON BANK, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
STANDARD CHARTERED BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
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<PAGE>
EXHIBIT 10(J)
REGISTRATION RIGHTS AGREEMENT
By and Between
GENERAL MOTORS CORPORATION
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee of
THE GENERAL MOTORS
HOURLY-RATE
EMPLOYEES PENSION PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Contribution of Registrable Securities......................... 2
2. Restrictions on Transfer....................................... 4
3. Demand Transfers............................................... 12
4. Piggyback Registration......................................... 17
5. Holdback Period................................................ 20
6. Other Registration Rights...................................... 21
7. Demand, Piggyback and Shelf Registration Procedures............ 25
8. Participation in Underwritten Transfers........................ 27
9. Registration Expenses and Legal Counsel........................ 27
10. Indemnification................................................ 28
11. Definitions.................................................... 31
12. Miscellaneous.................................................. 33
EXHIBITS
--------
EXHIBIT A......................................... Form of Transfer Agreement
EXHIBIT B......................................... Interest Rate Schedule
EXHIBIT C......................................... Form of Succession Agreement
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Agreement is entered into on March 12, 1995, by and between
General Motors Corporation, a Delaware corporation (sometimes referred to herein
as "Issuer"), and United States Trust Company of New York, as trustee (the
"Trustee") of a trust established under the General Motors Hourly-Rate Employees
Pension Plan (the "Pension Plan"), for the account and on behalf of the Pension
Plan (which shall thereby be deemed a party to this Agreement). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
set forth in Section 11.
WHEREAS, Issuer intends, subject to the satisfaction of certain
regulatory and other conditions, to contribute approximately 177 million shares
of Class E Common Stock to the Pension Plan; and
WHEREAS, the Pension Plan is prepared to accept the Class E Common
Stock that may be contributed to it as described herein and to hold and dispose
of any such Class E Common Stock on the terms and conditions hereinafter stated;
and
WHEREAS, the Pension Plan is the owner of shares of Class E Common
Stock acquired by the Pension Plan pursuant to an Exchange and Registration
Agreement, dated as of November 4, 1992 (the "Exchange Agreement"), by and among
Issuer, the Pension Plan and the General Motors Retirement Program for Salaried
Employees (the "Salaried Plan"); and
WHEREAS, General Motors and the Pension Plan have entered into a
Transfer Agreement, dated as of the date hereof, substantially in the form of
Exhibit A attached hereto (as such agreement may be amended or modified from
time to time, the "Transfer Agreement"), pursuant to which the Pension Plan has
agreed to hold and dispose of the Class E Common Stock owned by the Pension Plan
on the terms and conditions stated therein; and
WHEREAS, the Trustee has been appointed by the named fiduciary of the
Pension Plan (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 any shares of Class E Common Stock held by the Pension
Plan as described herein and to exercise all rights, powers and privileges
appurtenant to such shares (subject to the authority of the Named Fiduciary to
terminate such appointment and appoint one or more other investment managers for
any such shares); and
WHEREAS, the Trustee has full power and authority to execute and
deliver this Agreement for the account and on behalf of the Pension Plan and to
so bind the Pension Plan;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Issuer and the Pension
Plan agree as follows:
1. Contribution of Registrable Securities.
--------------------------------------
(a) Issuer agrees that any contribution of Registrable Securities made
by Issuer to the Pension Plan (each such contribu tion being hereinafter
referred to as a "Contribution") shall be made only on such days as the New York
Stock Exchange, Inc. ("NYSE") shall be open for trading (a "Business Day").
(b) The Pension Plan represents that it beneficially owns _______
shares of Class E Common Stock as of the date hereof (as determined pursuant to
Section 16 of the Exchange Act (or any successor thereto) ("Section 16")) and
agrees that, after the date hereof and until the final Contribution is made
hereunder, it shall not acquire beneficial ownership of any additional shares of
Class E Common Stock (as so determined), except pursuant to a Contribution made
hereunder. Issuer agrees that if it makes multiple Contributions, either (i) no
Contribution prior to the final Contribution will cause the Pension Plan to
become a ten percent beneficial owner (as defined in Rule 16a-2 under the
Exchange Act (or any successor thereto)) or (ii) Issuer will not propose to its
stockholders any transaction that would result in a "sale" of shares of Class E
Common Stock by the Pension Plan for purposes of Section 16 being deemed to
occur (unless such sale is exempt under Section 16(b) of the Exchange Act (or
any successor thereto) ("Section 16b")) prior to the date that is six months and
one day after the final Contribution (or, if Section 16 is amended to change the
period within which purchases and sales are matched for purposes of determining
whether profits are recoverable by an issuer, the date that is one day after the
expiration of a period of such length commencing on the date the final
Contribution is made); provided, that is understood that nothing herein shall
prohibit Issuer from submitting any such transaction to its stockholders prior
to such date so long as any such sale is deemed to occur on or after such date.
(c) Issuer agrees that it shall give the Trustee and its valuation
adviser on behalf of the Pension Plan notice by teleconf erence after the close
of normal trading on the NYSE but no later than 5:00 p.m., New York time, on the
Business Day prior to the Business Day on which Issuer contemplates making such
Contribution that it contemplates making a Contribution; provided, however, that
such notice shall be revocable by Issuer at any time in its sole discretion
prior to the conclusion of the teleconference referred to in Section 1(d). In
such teleconference, Issuer shall state the date on which Issuer contemplates
making the proposed Contribution and a range for the number of Registrable
Securities which may be
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contributed, and the Trustee, together with its valuation adviser, will estimate
a value per share, based on the closing price on the day of notice on the NYSE
of Class E Common Stock, at various points within such range.
(d) As soon as practicable, and in any event prior to 10:30 a.m., New
York time, on the day of the proposed Contribution, Issuer will give the Trustee
and its valuation adviser on behalf of the Pension Plan notice by teleconference
of its continued inter est, if any, in making a Contribution. In such
teleconference, Issuer will make one or more estimates of the specific number of
Registrable Securities which Issuer may contribute, and the Trustee, together
with its valuation adviser, will state the value per share it would assign for
the Contribution based on each such estimate. If Issuer so decides, it shall
irrevocably commit itself in such teleconference to contribute a number of
Registrable Securities equal to one of such estimates, and the Trustee's valua
tion adviser shall be irrevocably committed to opine to the applicable value per
share previously stated by it in such tele conference. The Contribution, if
any, shall be effective at the end of such teleconference, and the value per
share for purposes of such Contribution shall be such stated value. Immediately
after the teleconference in which a Contribution is made, Issuer shall deliver
instructions to its transfer agent to issue the Registrable Securities so
contributed (in the form described below) and to register such Registrable
Securities in the name of the Pension Plan or its nominee, and Issuer shall
confirm such Contribution by delivering copies of such transfer instructions to
the Trustee. As soon as practicable after the teleconference, and in any case
no later than 5:00 p.m., New York time, on the Business Day on which such
Contribution is made, the Trustee's valuation adviser will deliver to the
Trustee, with a copy to Issuer, its written valua tion opinion, confirming the
valuation given in the teleconference.
(e) Delivery of certificates representing the duly authorized, validly
issued, fully paid and nonassessable shares of Class E Common Stock contributed
in a Contribution shall be made to the Pension Plan at the offices of the
Trustee for the Pension Plan (or such other place as may be mutually agreed
upon), in such form as shall permit, subject to the provisions of this
Agreement, the Transfer of the Registrable Securities through normal means of
settlement (subject to the proviso in the next following sentence), not later
than 5:00 p.m., New York time, on the fourth full Business Day after such
Contribution. Such certificates shall be in due and proper form for delivery
under applicable corporate law and shall be accompanied by such other documents
and certificates as may be reasonably requested by the Trustee to confirm that
the Pension Plan, upon receipt of such certificates, may, subject to the
provisions of this Agreement, Transfer record and beneficial ownership of the
shares of Class E Common Stock represented by such certificates; provided,
however, that, subject to Section 1(f) below, each such certificate representing
the Registrable Securi-
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ties shall conspicuously bear legends in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT, DATED __________, 1995, BY AND BETWEEN THE
ISSUER OF SUCH SECURITIES (THE "COMPANY") AND UNITED STATES TRUST COMPANY
OF NEW YORK, AS TRUSTEE OF A TRUST ESTABLISHED UNDER THE GENERAL MOTORS
HOURLY-RATE EMPLOYEES PENSION PLAN, THAT CONTAINS, AMONG OTHER THINGS,
CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH SECURITIES. A COPY OF SUCH
REGISTRATION RIGHTS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The certificates representing shares of Class E Common Stock held by the Pension
Plan and acquired other than pursuant to a Contribution shall be promptly
surrendered to Issuer in order that Issuer's transfer agent may place such
legends upon them.
(f) Issuer will instruct its transfer agent that the legends set
forth in Section 1(e) shall be removed upon the Pension Plan's Transfer of
shares of Class E Common Stock if such Transfer is made in accordance with all
applicable provisions of this Agreement; provided, however, that if such
Transfer is a Negotiated Transfer (as defined below) that is not registered
under the Securities Act, the first legend shall remain on the certificates
representing such shares until such time as the restrictions set forth in such
legend cease to be applicable.
(g) The Pension Plan represents and warrants that the Pension Plan,
together with its investment managers, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Registrable Securities. The Pension Plan
understands and acknowl edges that the Contributions have not been and will not
be regis tered under the Securities Act or any state securities law and that the
Registrable Securities may not be the subject of any Transfer except as
expressly permitted by this Agreement.
2. Restrictions on Transfer.
(a) The Pension Plan shall not make any Transfer of any Registrable
Securities other than, in each case, in accordance with the terms and conditions
of this Agreement, pursuant to (i) a
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Public Transfer (as defined below), (ii) a Negotiated Transfer, (iii) as
described in subsection (d), (e), (f), (g) or (h) below, (iv) as described in
Section 4 or 6 below, (v) from and after such time as the Pension Plan reduces
its ownership of the Registrable Securities to less than 50 million shares of
Class E Common Stock, pursuant to Rule 144 under the Securities Act or any
successor thereto ("Rule 144") (without giving effect to the provisions of
paragraph (k) (or any successor thereto) of Rule 144) and (vi) from and after
such time as the Pension Plan reduces its ownership of the Registrable
Securities to less than 25 million shares of Class E Common Stock, pursuant to
Rule 144, (vii) a Transfer to Issuer or a wholly-owned direct or indirect
subsidiary of Issuer pursuant to a self-tender offer or otherwise and (viii) a
Transfer pursuant to a merger or consolidation in which Issuer or a wholly-owned
direct or indirect subsidiary of Issuer is a constituent corporation. Except as
provided in Section 6(b), no Transfer described in clause (iii), (iv), (v),
(vi), (vii) or (viii) of the preceding sentence shall be considered a Demand
Transfer (as defined below).
(b) The Pension Plan shall not make any Transfer of Registrable
Securities pursuant to a Demand Registration Statement (as defined below), a
Shelf Registration Statement (as defined below) or a registration statement
pursuant to a Piggyback Registration (as defined below) or a Strategic Partner
Demand Registration (as defined below) other than in accordance with the plan of
distribution described therein.
(c) The Pension Plan shall not make any Transfer of securities
convertible into or exercisable or exchangeable for the Registrable Securities
or any other securities the value of which is derived from the Registrable
Securities without obtaining the prior written consent of Issuer to such
Transfer.
(d) Notwithstanding the provisions of this Agreement to the contrary,
the Pension Plan may at any time deliver to Issuer a written notice that the
Pension Plan proposes to make a Transfer of Registrable Securities to or for the
benefit of an employee benefit plan maintained or contributed to by Issuer or
any of its affiliates in connection with the satisfaction of ordinary course
funding obligations or investment objectives with respect to such employee
benefit plan. Each notice of a proposed Transfer pursuant to this Section 2(d)
shall be delivered a reasonable period of time before such proposed Transfer
and, in any event, not less than 30 days before such proposed Transfer. The
Pension Plan shall establish, to the reasonable satisfaction of Issuer, that
such proposed Transfer is in compliance with ERISA, federal and state securities
laws and regulations and other applicable laws and regulations. Notwithstanding
the foregoing, the Pension Plan shall not effect any such Transfer if Issuer's
legal counsel advises Issuer and the Pension Plan in writing that such Transfer
would constitute a "prohibited transaction" (as described in Section 4975 of the
Internal Revenue Code of 1986, as amended), unless the
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Pension Plan establishes to the reasonable satisfaction of Issuer that an
exemption from such Section is available.
(e) Notwithstanding the provisions of this Agreement to the contrary,
the Pension Plan may at any time effect a Transfer by tendering any or all of
the Registrable Securities into an exchange offer, a tender offer or a request
or invitation for tenders (as such terms are used in Sections 14(d) or 14(e) of
the Exchange Act and the rules and regulations of the Commission thereunder)
(collectively, a "tender offer")) for Class E Common Stock if (X) such Transfer
is effected within the 24-hour period immediately prior to the then scheduled
expiration time for such tender offer, and (Y) at the time the Pension Plan
proposes to effect such Transfer:
(i) Issuer (A) does not have in effect a stockholders rights
plan or (B) has in effect a stockholders rights plan but there has been a
redemption, revocation or similar invalidation of the preferred stock or
other rights issued under such stockholders rights plan (the "Rights"), in
either case as a result of (X) action of the Board of Directors of Issuer
(or any committee thereof) in connection with such tender offer (including
as a result of a finding that such tender offer was a "permitted offer"
under the terms of such stockholders rights plan) or (Y) a final and non-
appealable order of a court of competent jurisdiction issued in connection
with such tender offer in response to a challenge to the validity and/or
effects of such stockholders rights plan or Rights; or
(ii) Issuer (A) does not have in effect a stockholders rights
plan or (B) has in effect a stockholders rights plan but there has been a
redemption, revocation or similar invalidation of any Rights issued
thereunder, in either case other than as a result of the matters described
in clause (i) above and other than as a result of a court order of the type
described in clause (i) above that has not become final and non-appealable,
and (X) the Board of Directors of Issuer has not recommended rejection of
such tender offer pursuant to Rule 14e-2(a) under the Exchange Act or any
successor thereto ("Rule 14e-2(a)"), or (Y) at least half of the members of
the Board of Directors of Issuer who are not officers or employees of
Issuer and who are not representatives, nominees or affiliates of the
bidder (as defined in Rule 14d-1(c) under the Exchange Act or any successor
thereto) (the "Bidder") making such tender offer (collectively, the
"Independent Directors") did not recommend rejection of such tender offer
when the Board of Directors of Issuer determined the position of Issuer
with respect to such tender offer as contemplated by Rule 14e-2(a) or (Z)
there are fewer than two members of the Board of Directors of Issuer that
are Independent Directors at
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the time the Board of Directors of Issuer considers such tender offer; or
(iii) Issuer (A) does not have in effect a stockholders rights
plan or (B) has in effect a stockholders rights plan but there has been a
redemption, revocation or similar invalidation of any Rights issued
thereunder, in either case other than as a result of the matters described
in clause (i) above and other than as a result of a court order of the type
described in clause (i) above that has not become final and non-appealable
and other than as a result of a proposal initiated, recommended, endorsed,
supported or encouraged, directly or indirectly, publicly or privately, by
the Pension Plan (it being understood that, for purposes of this subsection
(iii), a vote by the Pension Plan in favor of any such proposal shall
constitute support for such proposal), and both (X) the Pension Plan, after
consultation with its legal counsel and financial advisors, has concluded
in good faith that the Minimum Tender Condition with respect to such tender
offer will likely be satisfied without giving effect to any shares of Class
E Common Stock tendered or to be tendered into such tender offer by the
Pension Plan and (Y) after the date of the commencement of such tender
offer and prior to the 24-hour period immediately prior to the then
scheduled expiration time of such tender offer, Issuer has not given
written notice to the Pension Plan that such Transfer may not be made under
this subsection (iii), which notice included the good faith determination
of the Board of Directors of Issuer as to the Put Price as contemplated by
Section 2(f)(iii) (or, if given, such notice has been withdrawn in
writing).
If, at any time after the Pension Plan has made a Transfer by tendering
Registrable Securities into a tender offer pursuant to this Section 2(e), the
Bidder making such tender offer decreases the percentage or number of shares of
Class E Common Stock being solicited for purchase, decreases the amount or
changes the form of consideration offered to tendering stockholders or otherwise
makes a material change or waives a material condition in the terms of such
tender offer such that the then scheduled expiration date of such tender offer
is extended, then the Pension Plan shall, upon the request of Issuer, withdraw
such Registrable Securities from such tender offer as promptly as practicable,
subject to the Pension Plan's right to tender Registrable Securities again as
contemplated by this Agreement.
If the Pension Plan is not permitted to make a Transfer of Registrable
Securities pursuant to Section 2(g), promptly (and in any event within one
Business Day after any public announcement with respect thereto) after the Board
of Directors of Issuer determines the position of Issuer with respect to any
tender offer as contemplated by Rule 14e-2(a), Issuer shall give the Pension
Plan written notice of such position by the Board of Directors of
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Issuer and by the Independent Directors as described in subsection (ii) above.
If there are fewer than two members of the Board of Directors of Issuer that are
Independent Directors at the time the Board of Directors of Issuer considers
such tender offer, such notice shall so state. If, based on such positions by
the Board of Directors of Issuer and the Independent Directors, a Transfer to be
made by tendering into such tender offer would be permitted only by subsection
(iii) of this Section 2(e) (excluding for purposes of such determination the
conditions set forth in clauses (X) and (Y) of such subsection (iii)), Issuer
shall promptly commence arranging financing so that it will be able to pay in
full all amounts due in connection with any exercise of the Put Right (as
defined below) in connection with such tender offer and shall use all
commercially reasonable efforts to obtain such financing so as to pay all such
amounts as and when due (it being understood that the obligation of Issuer to
make payment at the Put Closing (as defined below) shall be absolute and that
compliance with this sentence shall not relieve Issuer of its obligations under
this Agreement or excuse performance hereunder).
(f) (i) If the Pension Plan in good faith desires to effect a
Transfer of Registrable Securities by tendering into a tender offer and
such Transfer would be permitted only by subsection (iii) of Section 2(e)
(assuming that Issuer has not and will not give the notice described in
such subsection (iii) that such Transfer may not be made thereunder) then
the Pension Plan shall, no later than 96 hours prior to the then scheduled
expiration time for such tender offer, deliver to Issuer a written notice
(the "Tender Notice") of such proposed tender that specifies the number of
shares of Registrable Securities proposed to be so tendered. If, after the
delivery of such Tender Notice and prior to the then scheduled expiration
time for such tender offer, the Bidder making such tender offer amends the
terms thereof or another Bidder commences a tender offer for shares of
Class E Common Stock, then the Pension Plan may revoke such Tender Notice
by delivering written notice thereof to Issuer at any time prior to the
then scheduled expiration time for the tender offer that was the subject of
such Tender Notice. No such revocation shall limit the Pension Plan's right
to deliver a Tender Notice with respect to any tender offer, including any
such amended tender offer or new tender offer.
(ii) If (A) the Pension Plan has delivered, and not revoked, a
Tender Notice with respect to a tender offer, each in accordance with
subsection (i), (B) Issuer has given (and not withdrawn) the notice
described in subsection (iii) of Section 2(e) that such Transfer may not be
made under such subsection (iii)), (C) the Minimum Tender Condition with
respect to such tender offer has been satisfied and shares required to
satisfy such Minimum Tender Condition have been accepted for purchase and
purchased pursuant to such tender
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offer and (D) effecting a Transfer of Registrable Securities to Issuer
pursuant to an exercise of the Put Right would not violate the Transfer
Agreement, then the Pension Plan shall have the right (the "Put Right") to
require Issuer to purchase up to the number of shares of Registrable
Securities specified in the Tender Notice multiplied by, if applicable,
the proration fraction applied to determine the number of shares of Class
E Common Stock purchased from each tendering stockholder pursuant to such
tender offer (the "Maximum Share Number"). The purchase price per share at
which Issuer shall be required to purchase such Registrable Securities
shall be equal to the price per share of Class E Common Stock paid in such
tender offer (or, to the extent such tender offer price was paid in
consideration other than cash, the cash equivalent of the fair market
value thereof as of the expiration time of such tender offer determined as
described below) (the "Put Price"). The Pension Plan may exercise the Put
Right, in whole or in part, by delivering to Issuer a written notice (the
"Exercise Notice") of such exercise that specifies the number of
Registrable Securities to be purchased pursuant to such exercise (which
number shall not exceed the Maximum Share Number). The delivery of the
Exercise Notice shall constitute an agreement binding upon the Pension
Plan to sell, and upon Issuer to purchase, such Registrable Securities.
The term of the Put Right shall commence immediately after the Bidder
making such tender offer accepts for purchase and purchases shares of
Class E Common Stock tendered pursuant to such tender offer and shall
terminate ten days after Issuer gives the Pension Plan notice that such
purchase has occurred.
(iii) If any portion of the tender offer price for any tender
offer is payable in consideration other than cash: (A) any notice given by
Issuer to the Pension Plan under subsection (iii) of Section 2(e) that a
Transfer may not be made under such subsection (iii) shall include a good
faith determination by the Board of Directors of Issuer as to the Put
Price; (B) if the Put Right has become exercisable as described in
subsection (ii) above in connection with such tender offer, within 24 hours
after the expiration time for such tender offer, Issuer shall deliver to
the Pension Plan a notice (the "Put Price Notice") confirming the (or, if
necessary, setting forth a revised) good faith determination of Issuer's
Board of Directors as to the Put Price; and (C) in the Exercise Notice, if
any, the Pension Plan shall either agree to the Put Price as set forth in
the Put Price Notice or set forth its own good faith determination as to
the Put Price. Each such determination shall separately identify the value
attributed to each component of the consideration offered in such tender
offer. If the Pension Plan does not so agree to the Put Price as set forth
in the Put Price Notice and Issuer and the Pension Plan, negotiating in
good faith, are unable to reach an agreement on the Put Price within 15
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days after delivery of an Exercise Notice, an investment banking firm shall
be selected and instructed to determine the Put Price as contemplated
herein and submit to Issuer and the Pension Plan promptly (and in any event
no later than 30 days after the delivery of the Exercise Notice) a written
report setting forth such determination. If Issuer and the Pension Plan are
unable to agree on an investment banking firm within 15 days after delivery
of an Exercise Notice, a firm shall be selected by lot (until a firm so
selected has agreed to accept the engagement to determine the Put Price as
contemplated herein) from the top eight New York-based investment banking
firms, as determined in each case by dollar volume of equity offerings in
which such firms acted as lead underwriters, on the basis of the most
recently available information, after Issuer and the Pension Plan have each
eliminated one such firm and after the elimination of each such firm that
represented the Bidder, Issuer or the Pension Plan in connection with such
tender offer or, within the 365-day period prior to the delivery of the Put
Notice, otherwise performed substantial services for the Bidder. If, as a
result of the selection process set forth in the preceding sentence, no
such firm is eligible to be so selected or no such firm accepts the
engagement, Issuer and the Pension Plan shall promptly agree on an
alternative process to promptly select an investment banking firm to
determine the Put Price as contemplated herein. In any case, the fees and
expenses of such firm shall be borne by Issuer, and the determination of
such firm shall be final and binding upon all parties; provided, that if
such determination results in a Put Price greater than the Put Price set
forth by the Pension Plan in the Exercise Notice, the Put Price determined
by such firm shall be deemed to equal the Put Price set forth in the
Exercise Notice for purposes hereof. Issuer and the Pension Plan shall
cooperate and provide each other (and any such firm) with the information
(in reasonable detail) used in making its determinations with respect to
the Put Price. Issuer shall cooperate with any investment banking firm
engaged to determine the Put Price hereunder, including providing
information as reasonably requested by such firm in connection with such
determination.
(iv) The closing (the "Put Closing") of the purchase and sale of
the Registrable Securities specified in the Exercise Notice shall occur no
later than 90 days after the delivery of the Exercise Notice (or, if such
day is not a Business Day, the immediately following Business Day) (the
"Final Date"), at a time and place mutually agreeable to Issuer and the
Pension Plan. If Issuer and the Pension Plan are unable to agree on a time
and place for the Put Closing, the Put Closing shall be at 10:00 a.m.
(local time) at the principal executive offices of Issuer on the Final
Date; provided, that the Issuer may specify that the Put Closing occur on
any Business Day prior to the Final Date by giving written notice to the
Pension Plan
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at least two Business Days prior to the date so specified. At the Put
Closing, Issuer shall pay to the Pension Plan, by wire transfer of
immediately available funds to the account designated in writing by the
Pension Plan, an amount (the "Base Purchase Price") equal to (Y) the Put
Price, multiplied by (Z) the number of shares of Registrable Securities to
be purchased, together with interest on the Base Purchase Price at the
interest rate determined as set forth in Exhibit B attached hereto for the
period from and including the fifth Business Day after the delivery of the
Exercise Notice through but excluding the day the Base Purchase Price (and
all accrued interest thereon) is paid in full (calculated on the basis of
actual days elapsed and a 365-day year). At the Put Closing, the Pension
Plan shall deliver to Issuer certificates representing the Registrable
Securities to be sold to Issuer, together with duly executed stock powers
endorsed in blank, and shall execute and deliver such other certificates,
agreements and instruments as Issuer may reasonably request to effect such
sale (which shall include a representation and warranty of the Pension Plan
that all Registrable Securities sold to Issuer pursuant to the Put Right
are owned of record by the Pension Plan, free and clear of any liens,
pledges, security interests, encumbrances, equities, claims, options or
limitations of whatever nature (other than those contemplated by this
Agreement) but which shall not include any further representations and
warranties from the Pension Plan).
(g) Notwithstanding any provisions of this Agreement to the contrary,
at any time that the Pension Plan owns Registrable Securities that constitute
7.5% or less of the Class E Common Stock on a fully-diluted basis (calculated
for such purpose without giving effect to options, warrants or other rights
exercisable for the Class E Common Stock issued or issuable pursuant to any
employee stock option or other benefit plan maintained by Issuer), the Pension
Plan may effect a Transfer by tendering any or all of the Registrable Securities
into a tender offer for Class E Common Stock.
(h) Nothing in this Agreement shall prohibit Issuer and the Pension
Plan from at any time agreeing to effect or effecting a Transfer of Registrable
Securities from the Pension Plan to Issuer or any of its consolidated
subsidiaries. If Issuer or any of its consolidated subsidiaries intends to
purchase Class E Common Stock on the open market for or on behalf of any
employee benefit plan maintained or contributed to by Issuer, any of its
consolidated subsidiaries or any of their predecessors or succes sors, it shall
make reasonable efforts to consult in good faith with the Pension Plan with
respect to the possibility of purchasing such shares from the Pension Plan.
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(i) Prior to making any Transfer of Registrable Securities pursuant
to clause (v) or (vi) of the first sentence of Section 2(a), the Pension Plan
shall deliver to Issuer an opinion of counsel reasonably satisfactory to Issuer
to the effect that such Transfer may be made without registration under the
Securities Act in reliance upon Rule 144.
(j) No Transfer of Registrable Securities in violation of this
Agreement shall be made or recorded on the books of Issuer and any such Transfer
shall be void and of no effect.
3. Demand Transfers.
(a) The Pension Plan may from time to time deliver to Issuer a
written notice that the Pension Plan proposes to make a Transfer of Registrable
Securities either (i) pursuant to an under written public offering reasonably
designed to achieve a broad public distribution of the securities being offered
(a "Public Transfer") or (ii) subject to Section 3(h), pursuant to a negotiat ed
transaction or series of related transactions effected on the same date and at
the same price per share with one or more transferees (each such transaction or
series of related transac tions described in this clause (ii), whether
registered or not, being referred to herein collectively as a "Negotiated
Transfer"). Public Transfers and Negotiated Transfers, whether made pursuant to
a Demand Registration Statement, a Shelf Registration Statement or without a
registration statement, are referred to herein collec tively as "Demand
Transfers." The number of Public Transfers (including any Transfer considered a
Public Transfer under Section 6(b)) and Negotiated Transfers that are registered
under the Securities Act that may be effected by the Pension Plan in any 12-
month period shall not exceed two in the aggregate; provided, that there shall
be no numerical limit hereunder on the number of Negotiated Transfers that may
be effected by the Pension Plan without registration under the Securities Act.
Notwithstanding anything to the contrary in the immediately preceding sentence,
from and after the first time at which an issuer other than General Motors shall
become the Issuer pursuant to the succession provisions of Section 12(a), the
Pension Plan shall not effect more than two Demand Transfers (including any
Transfer considered a Public Transfer under Section 6(b)) in any 12-month
period. For purposes of this Agreement, a Demand Transfer is deemed to be
effected (x) if the Demand Transfer is to be made pursuant to a Demand
Registration Statement, on the effective date of such Demand Registration
Statement and (y) if the Demand Transfer is to be made either pursuant to a
Shelf Registration Statement, or without a registration statement, on the date
of the consummation of such Demand Transfer. A registered transaction pursuant
to a Demand Registration Statement shall not be considered a Demand Transfer
unless and until the applicable registration statement has become effective
pursuant to the Securities Act (unless the failure to become effective is due
solely to a breach by the Pension Plan of
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its obligations hereunder) and in the case of a Shelf Registration Statement,
unless and until Registrable Securities are actually Transferred pursuant to the
Shelf Registration Statement. The Pension Plan may withdraw any Demand Transfer
request prior to the effective date of a Demand Registration Statement, in the
case of a Demand Transfer to be made pursuant to a Demand Registration
Statement, prior to the commencement of an offering of Registrable Securities,
in the case of a Public Transfer to be made pursuant to a Shelf Registration
Statement, or prior to the consummation of a Transfer of Registrable Securities,
in the case of a Negotiated Transfer to be made either pursuant to a Shelf
Registration Statement or without a registration statement, in each of which
cases such request shall not be considered a Demand Transfer.
(b) At any time after the fourth anniversary of the date of the
initial Contribution pursuant to Section 1, so long as the Pension Plan owns not
less than 50 million shares of Registrable Securities, the Pension Plan may
deliver to Issuer a written request that Issuer prepare and file with the
Commission a registration statement on the appropriate form under the Securities
Act (together with any amendments or supplements thereto, the "Shelf
Registration Statement"), registering under the Securities Act up to the lesser
of (i) 40 million shares of Registrable Securities or (ii) the amount of
Registrable Securities that, if Transferred, would result in the Pension Plan
owning 50 million shares of Registrable Securities, in either case for offering
and sale by the Pension Plan in Public Transfers and Negotiated Transfers from
time to time pursuant to Rule 415 under the Securities Act or any successor
thereto ("Rule 415"). Subject to Sections 3(f) and 12(a), as promptly as
reasonably practicable after the receipt of the Pension Plan's request for the
filing of a Shelf Registration Statement, Issuer shall file a Shelf Registra
tion Statement registering the number of shares of Registrable Securities so
requested.
Subject to Sections 3(f) and 12(a), at any time after Issuer has filed
a Shelf Registration Statement and until such time as the Pension Plan has
reduced its ownership of Registrable Securities to less than 50 million shares
of Class E Common Stock, if fewer than 20 million shares of Registrable
Securities remain subject to the Shelf Registration Statement, Issuer shall, if
and to the extent requested by the Pension Plan, prepare and file with the
Commission an additional Shelf Registration Statement (utilizing a combined
prospectus as provided for by Rule 429 under the Securities Act or any successor
thereto ("Rule 429")) as promptly as reasonably practicable after receipt of
such request, registering under the Securities Act up to the number of shares of
Registrable Securities equal to the lesser of (i) the difference between 40
million and the number of such shares remaining subject to the Shelf
Registration Statement then in effect and (ii) the amount of such Registrable
Securities that, if Transferred, would
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result in the Pension Plan owning 50 million shares of Registrable Securities.
(c) Notwithstanding any other provision of this Agreement, if within
395 days following the delivery of a written request for a Demand Transfer by
the Pension Plan, such Demand Transfer has not been consummated, such request
has not been withdrawn or a Liquidity Event has not occurred and (i) in the case
of a Public Transfer, either Issuer has not filed the related registration
statement or there has not been a period of at least 45 consecutive days
following the date on which the Commission has completed its review, if any, of
the related Demand Registration Statement (or, if a Shelf Registration Statement
is then effective, following the date of such request) without the occurrence of
a Blackout Period, (ii) in the case of a Negotiated Transfer that is to be
registered under the Securities Act pursuant to this Agreement, either Issuer
has not filed the related registration statement or there has not been a period
of at least 20 consecutive days following the date on which the Commission has
completed its review, if any, of the related Demand Registration Statement (or,
if a Shelf Registration Statement is then effective, following the date of such
request) without the occurrence of a Blackout Period or (iii) in the case of a
Negotiated Transfer that is not to be registered under this Agreement, there has
not been a period of at least 20 consecutive days following the date of such
request without the occurrence of a Blackout Period, then the Pension Plan may,
at the end of such 395-day period, deliver to Issuer a written request for a
Demand Transfer, and Issuer shall take all reasonable actions that are necessary
to permit the Pension Plan to effect such Demand Transfer, including, if such
Demand Transfer is to be registered under the Securities Act pursuant to this
Agreement, and a Shelf Registration Statement is not then effective, (i)
preparing and filing a registration statement for the Transfer of the
Registrable Securities requested to be registered in connection with such Demand
Transfer within a period of 30 days following the delivery of such request and
(ii) providing the Pension Plan with a period of at least 45 days following the
date on which the Commission has completed its review, if any, of such
registration statement, or, if such Demand Transfer is not to be registered
under the Securities Act pursuant to this Agreement or a Shelf Registration
Statement is then effective, the date of the delivery of such request, in either
case, to allow for the marketing and Transfer of such Registrable Securities.
Without limiting the generality of the foregoing, Issuer shall, within 60 days
following the date of delivery of the Pension Plan's request, terminate any
proposal or plan or make any public disclosure, that, in either case, would
otherwise give rise to Issuer's right of postponement pursuant to Section 3(f).
All of the Pensions Plan's rights and all of Issuer's obligations under this
Section 3(c) shall terminate from and after the time the Pension Plan has
reduced its ownership of Registrable Securities to less than 25 million shares
of Class E Common Stock.
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<PAGE>
(d) Each notice of a proposed Demand Transfer shall be delivered a
reasonable period of time before the proposed Transfer and, in any event, (i) in
connection with a proposed Public Transfer pursuant to a Demand Registration
Statement, not less than 30 days before the anticipated filing date of such
Demand Registration Statement if Issuer is eligible to use Form S-3 or any
successor form ("Form S-3") or 45 days before such date in the event Issuer is
not eligible to use such form, (ii) in connection with a proposed Negotiated
Transfer pursuant to a Demand Registration Statement, not less than 20 days
before the anticipated filing date of such Demand Registration Statement if
Issuer is eligible to use Form S-3 or 45 days before such date in the event
Issuer is not eligible to use such form, (iii) in connection with a proposed
Transfer pursuant to a Shelf Registration Statement, not less than 10 days
before the proposed commencement of such proposed Transfer and (iv) in
connection with a proposed Negotiated Transfer that is not to be registered
under the Securities Act pursuant to this Agreement, not less than five days
before the proposed consummation of such Negotiated Transfer. Each notice of a
proposed Demand Transfer shall specify whether such Transfer will be a Public
Transfer or a Negotiated Transfer, the approximate number of Registrable
Securities proposed to be Transferred, the proposed time table for the
transaction and the anticipated per share price range for such Transfer.
(e) Unless a Shelf Registration Statement is effective with respect to
the full amount of shares proposed to be subject to a Demand Transfer, (i) each
notice of a proposed Public Transfer shall constitute a request that Issuer
register the proposed Transfer of the Registrable Securities under the
Securities Act on the appropriate form and (ii) in connection with any notice of
a proposed Negotiated Transfer, the Pension Plan may request that Issuer
register the proposed Transfer of the Registrable Securities; provided, however,
that if the Pension Plan does not request that Issuer register such proposed
Transfer of the Registrable Securities, the Pension Plan shall establish, to the
reasonable satisfaction of Issuer, that such Negotiated Transfer may be made
without registration under applicable securities laws. In the case of each
request for registration pursuant to the foregoing sentence (a "Demand
Registration"), Issuer shall file the requested registration statement (together
with any amendments or supplements thereto, a "Demand Registration Statement")
as promptly as reasonably practicable, subject to postponement as provided in
Section 3(f); provided, however, that Issuer shall not be required to register a
proposed Negotiated Transfer of the Registrable Securities if Issuer's legal
counsel advises in writing that (i) such registration would not be permitted
under applicable federal and state securities laws and regulations, (ii) if such
Transfer is not so registered, the shares Transferred in such Transfer would not
constitute "restricted securities" (as defined in Rule 144) in the hands of the
transferee in such proposed Transfer or (iii) such registration is not required
under applicable federal securities
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<PAGE>
laws and Issuer and the Pension Plan reasonably agree that the shares
Transferred in such Transfer would constitute "restricted securities" in the
hands of the transferee in such proposed transaction regardless of registration.
(f) Subject to Section 3(c), Issuer may postpone the filing or
effectiveness of any Demand Registration Statement, the initial filing or
effectiveness of any Shelf Registration Statement or the making of any Demand
Transfer, whether registered or not, at any time if Issuer determines, in its
reasonable judgment, that (i) such action or proposed action would interfere
with any proposal or plan by Issuer or any of its affiliates to engage in any
material acquisition, merger, consolidation, tender offer, securities offering
(including any proposal or plan to register or offer Class E Common Stock
existing as of the time of the Pension Plan's notice to Issuer of a proposed
Demand Transfer) or other material transaction or (ii) would require Issuer to
make a public disclosure of previously non-public material information and
Issuer shall promptly notify the Pension Plan of any postponement pursuant to
this Section 3(f). Issuer agrees that it will terminate any such postponement as
promptly as reasonably practicable and will promptly notify the Pension Plan of
such termination. In making any such determination to initiate or terminate a
postponement, Issuer shall not be required to consult with or obtain the consent
of the Pension Plan or any investment manager therefor (including the Trustee),
and any such determination shall be Issuer's responsibility alone, and neither
the Pension Plan nor any investment manager for the Pension Plan (including the
Trustee) shall be responsible or have any liability therefor.
(g) The Pension Plan may select the lead underwriter and co-manager or
co-managers to administer any Public Transfer of Registrable Securities from a
list of eligible lead underwriters and of eligible co-managers, respectively,
prepared for each such purpose by Issuer and delivered to the Pension Plan on
the date hereof (as such list may be revised by Issuer from time to time). The
list of eligible lead underwriters shall contain the names of no fewer than five
Persons, each of which shall be among the top six underwriting firms, and the
list of eligible co-managers shall contain the names of no fewer than seven
Persons, no fewer than six of which shall be among the top ten underwriting
firms, as determined in each case by dollar volume of equity offerings in which
such firms acted as lead underwriters, on the basis of the most recently
available information. The Pension Plan shall have the right to request that
Issuer add a Person to the list of eligible lead underwriters and of eligible
co-managers, provided that Issuer shall have no obligation to consent to any
such request. The Pension Plan may not select any Person to be lead underwriter
or co-manager unless such Person shall have agreed to use its reasonable best
efforts to effect a broad public distribution of the Registrable Securities to
be sold in the Public Transfer and to use its reasonable best efforts not to
sell to any one
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<PAGE>
Person (or group of related Persons) (whether such Person (or group of related
persons) is buying for its own account or as a fiduciary on behalf of one or
more accounts) Registrable Securities constituting more than 2% of the Class E
Common Stock then outstanding. The selection of counsel to such lead underwriter
and co-manager or co-managers shall be subject to the consent of Issuer, which
consent shall not be unreasonably withheld.
(h) The Pension Plan shall not make a Negotiated Transfer to (i) any
one Person (or group of related Persons) (whether such Person (or group of
related Persons) is buying for its own account or as a fiduciary on behalf of
one or more accounts) of more than 2% of the Class E Common Stock then
outstanding or (ii) any one Person (or group of related Persons) if such Person
(or group of related Persons) is then required to file, or has filed, or as a
result of such Negotiated Transfer will be required to file (to the knowledge of
the Pension Plan after reasonable inquiry) a Schedule 13D under the Exchange Act
(or any successor thereto) with respect to the Class E Common Stock. If the
Registrable Securities subject to any Negotiated Transfer are not to be
registered under the Securities Act, the Pension Plan shall, prior to effecting
such Negotiated Transfer, cause each transferee in such Negotiated Transfer to
represent and warrant to the Pension Plan and Issuer in writing that (i) such
transferee is acquiring such Registrable Securities for its own account, or for
one or more accounts, as to each of which such transferee exercises sole
investment discretion, for investment purposes only and not with a view to, or
for resale in connection with, any distribution (within the meaning of the
Securities Act) and (ii) such transferee does not constitute an underwriter
(within the meaning of the Securities Act) with respect to the acquisition of
such Registrable Securities from the Pension Plan.
(i) Issuer shall make available members of the management of Issuer
and its affiliates for reasonable assistance in the selling efforts relating to
any public offering of the Registrable Securities pursuant to a Public Transfer,
to the extent customary for public offerings (including, without limitation, to
the extent customary, senior management attendance at due diligence meetings
with underwriters and their counsel and road shows), and for such assistance as
is reasonably requested by the Pension Plan and its counsel in the selling
efforts relating to any Negotiated Transfer.
4. Piggyback Registration.
(a) In the event that Issuer proposes to register any shares of Class
E Common Stock for its own account or for the account of any holder or holders
of Class E Common Stock (other than the Strategic Partner) pursuant to
contractual rights of such holder or holders or otherwise, in either case under
the Securities Act in an underwritten public offering (other than on a
registration statement on Form S-4 or S-8 under the Securities Act
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<PAGE>
or any successors thereto, a registration statement for a delayed or continuous
offering pursuant to Rule 415, a registration statement covering securities
convertible into or exercisable or exchangeable for Class E Common Stock, an
offering of securities solely to Issuer's existing shareholders or otherwise in
connection with any offer to exchange securities) (together with any
underwritten public offering of Class E Common Stock pursuant to Rule 415 as
described in Section 4(b) below, a "Piggyback Registration"), Issuer shall give
the Pension Plan written notice of such proposed registration no less than 30
days before the date of filing anticipated by Issuer in connection with such
registration. Subject to Sections 4(d), (e) and (f), Issuer shall include in
such registration all Registrable Securities held by the Pension Plan with
respect to which Issuer has received a written request for inclusion therein
within 15 days after Issuer's notice of such proposed registration.
(b) In the event that Issuer proposes to offer for its own account or
for the account of any holder or holders of Class E Common Stock (other than the
Strategic Partner) pursuant to contractual rights of such holder or holders or
otherwise, in either case any shares of Class E Common Stock in any underwritten
public offering pursuant to Rule 415, Issuer shall give the Pension Plan written
notice of such proposed offering no less than 30 days before the date of
commencement of distribution anticipated by Issuer in connection with such
offering. Subject to Sections 4(d), (e) and (f), Issuer shall include in such
offering all such Registrable Securities with respect to which Issuer has
received a written request for inclusion therein within 10 days after Issuer's
notice of such proposed offering. Without limiting the generality of the
foregoing, in order to so include such Registrable Securities, Issuer shall, to
the extent necessary, file an amendment to the registration statement then in
effect for the Class E Common Stock or an additional registration statement for
the Class E Common Stock that uses a combined prospectus pursuant to Rule 429.
(c) Issuer may select the lead underwriter and co-manager or
co-managers to administer any offering of Registrable Securities pursuant to a
Piggyback Registration; provided, however, that if Registrable Securities held
by the Pension Plan and expected to be included in any such offering constitute,
in Issuer's reasonable judgment, at least 25% of the shares of Class E Common
Stock expected to be Transferred in such offering, the Pension Plan shall have
the right to appoint one co-manager (reasonably acceptable to Issuer) for such
offering, who shall participate in such offering on the same terms as the
co-managers appointed by Issuer. In the event that Issuer gives the Pension Plan
notice of its intention to effect an offering pursuant to a Piggyback
Registration and subsequently declines to proceed with such offering, the
Pension Plan shall have no rights in connection with such offering; provided,
however, that, subject to Section
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3(f), at the request of the Pension Plan, Issuer shall proceed with such
offering with respect to the Registrable Securities, which offering shall be
deemed to be a Demand Transfer for all purposes hereunder. The Pension Plan
shall participate in any offering of Registrable Securities pursuant to a
Piggyback Registration in accordance with the same plan of distribution for such
Piggyback Registration as Issuer or the holder or holders of Class E Common
Stock that proposed such Piggyback Registration, as the case may be.
(d) Until the earlier of (i) the date on which the Pension Plan
reduces its ownership of Registrable Securities to less than 100 million shares
of Class E Common Stock and (ii) the seventh anniversary of the date of the
initial Contribution pursuant to Section 1 (the "Piggyback Priority Date"), if
there is a Share Limitation in connection with a Piggyback Registration, then
Issuer shall include in such offering (i) first, the Class E Common Stock that
Issuer proposes to Transfer, (ii) second, the Registrable Securities requested
to be included in the offering by the Pension Plan, (iii) third, other shares of
Class E Common Stock requested to be included therein pursuant to contractual
rights of the holder or holders thereof (including the Strategic Partner, if
any, and the holder or holders of Class E Common Stock that proposed such
Piggyback Registration, if any) and (iv) fourth, any other shares of Class E
Common Stock.
(e) From and after the Piggyback Priority Date and until such time as
the Pension Plan reduces its ownership of Registrable Securities to less than 25
million shares of Class E Common Stock (the "Priority Termination Date"), if
there is a Share Limitation in connection with any Piggyback Registration, then
Issuer shall include in such offering (i) first, the Class E Common Stock that
Issuer proposes to Transfer, (ii) second, an equal number of Registrable
Securities and shares of Class E Common Stock from each of the Pension Plan and
the Strategic Partner, if any, respectively, until all of the shares requested
to be included therein by either the Pension Plan or the Strategic Partner have
been selected, (iii) third, any additional Registrable Securities and shares of
Class E Common Stock requested to be included therein by the Pension Plan or the
Strategic Partner, as the case may be, (iv) fourth, other shares of Class E
Common Stock requested to be included therein pursuant to contractual rights of
the holder or holders thereof (including the holder or holders of Class E Common
Stock that proposed such Piggyback Registration, if any) and (v) fifth, any
other shares of Class E Common Stock; provided, however, that if the Strategic
Partner, if any, does not beneficially own at least 25 million shares of Class E
Common Stock as of the time of such proposed offering, all shares of Registrable
Securities requested by the Pension Plan to be included therein shall be so
included before any shares of Class E Common Stock requested by the Strategic
Partner to be included therein are so included.
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<PAGE>
(f) From and after the Priority Termination Date, if there is a Share
Limitation in connection with a Piggyback Registration, then Issuer shall
include in such offering (i) first, the Class E Common Stock Issuer proposes to
Transfer, (ii) second, the shares of Class E Common Stock requested by the
Strategic Partner, if any, and the holder or holders of Class E Common Stock
that proposed such Piggyback Registration, if any, to be included therein
pursuant to contractual rights of the Strategic Partner and such holder or
holders, as the case may be, (iii) third, the Registrable Securities requested
to be included therein by the Pension Plan, (iv) fourth, other shares of Class E
Common Stock requested to be included therein pursuant to contractual rights of
the holder or holders thereof and (v) fifth, any other shares of Class E Common
Stock.
5. Holdback Period.
(a) The Pension Plan agrees not to make any Transfer of Registrable
Securities during the period commencing with the effective date of a
registration statement for any underwritten public offering of the Class E
Common Stock (or any securities convertible into or exchangeable or exercisable
for the Class E Common Stock) or, in the case of a Rule 415 registration
statement, upon Issuer's notice of commencement of distribution in connection
with such offering, and terminating on the 90th day after the effectiveness of
the registration statement for such offering pursuant to the Securities Act or,
in the case of a Rule 415 registration statement, the commencement of such
offering, or, in either case, on such earlier date as Issuer gives notice to the
Pension Plan that Issuer declines to proceed with such offering, unless the
underwriter or underwriters administering such offering otherwise agree.
(b) Issuer agrees not to make any Transfer of any Class E Common Stock
(or any securities convertible into or exchangeable or exercisable for the Class
E Common Stock) during the period commencing with the date of any notice of a
proposed Public Transfer and terminating on the 90th day after the effectiveness
of the registration statement for such Public Transfer pursuant to the
Securities Act or, in the case of a Shelf Registration Statement, the
commencement of distribution in connection with such Public Transfer, or, in
either case, on such earlier date as the Pension Plan gives notice to Issuer
that the Pension Plan declines to proceed with such Public Transfer, except (i)
for the issuance of shares of Class E Common Stock upon the conversion, exercise
or exchange, by the holder thereof, of options, warrants or other securities
convertible into or exercisable or exchangeable for the Class E Common Stock
pursuant to the terms of such options, warrants or other securities (which, in
the case of any conversion, exercise or exchange which is at Issuer's option,
Issuer shall not call for conversion, exercise or exchange during such period
(it being understood that nothing herein shall limit the right of
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Issuer to call for redemption any security convertible, exercisable or
exchangeable for Class E Common Stock or to issue shares of Class E Common Stock
to the extent a holder of any such security elects to convert, exercise or
exchange such security in lieu of accepting any redemption payments)), (ii)
pursuant to the terms of any other agreement to issue shares of Class E Common
Stock (or any securities convertible into or exchangeable or exercisable for the
Class E Common Stock) in effect on the date of the notice of a proposed
Transfer, including any such agreement in connection with any previously
disclosed acquisition, merger, consolidation or other business combination, and
(iii) in connection with Transfers to dividend reinvestment plans or to employee
benefit plans in order to enable any such employee benefit plan to fulfill its
funding obligations in the ordinary course, unless the underwriter or
underwriters administering the offering in connection with such Public Transfer
otherwise agree. Notwithstanding the foregoing, the provisions of this Section
5(b) shall be subject to the provisions of Section 3(f), and if Issuer exercises
its rights of postponement pursuant to Section 3(f) with respect to any proposed
Public Transfer, the provisions of this Section 5(b) shall not apply unless and
until such time as Issuer notifies the Pension Plan of the termination of such
postponement and the Pension Plan notifies Issuer of its intention to continue
with such proposed Public Transfer.
6. Other Registration Rights.
(a) Nothing herein shall restrict the authority of Issuer to grant to
any Person, including a Strategic Partner, if any, the right to obtain
registration under the Securities Act of any equity securities of Issuer, or any
securities convertible into or exchangeable or exercisable for such securities;
provided, however, that Issuer shall not grant any such right with respect to
the Class E Common Stock or securities convertible into or exchangeable or
exercisable for the Class E Common Stock that conflicts with the rights of the
Pension Plan under Section 3(c), 4 or 6 in a manner that limits or reduces such
rights. Without limiting the generality of the foregoing, Issuer shall cause
each such Person, including a Strategic Partner, if any, and a holder or holders
of Class E Common Stock with the right to propose a registration giving rise to
a Piggyback Registration, if any, to agree to the provisions of Sections 3(c), 4
and 6(b) and to agree not to make any Transfer of any such securities during the
period referred to in Section 5(b) to the extent such Transfer would be
prohibited if made by Issuer.
(b) If at any time a Strategic Partner has been designated by Issuer,
the relative rights of the Pension Plan and the Strategic Partner shall be as
follows:
(i) If at any time the Strategic Partner, if any, elects to
exercise any rights for a demand registration of
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shares of Class E Common Stock pursuant to an underwritten public
offering (a "Strategic Partner Demand Registration"), Issuer shall
give the Pension Plan written notice of such proposed Strategic
Partner Demand Registration within five days of receipt of notice
thereof from the Strategic Partner.
(ii) Until the earlier of (A) the date on which the Pension Plan
reduces its ownership of Registrable Securities to less than 100
million shares of Class E Common Stock and (B) the fifth anniversary
of the date of the initial Contribution under Section 1 (the "Demand
Priority Date"), if the Pension Plan requests (and does not withdraw
its request for) a Public Transfer within 10 days of Issuer's notice
of a proposed Strategic Partner Demand Registration, Issuer shall
(subject to Section 3(f)) effect such Public Transfer as contemplated
herein, and the proposed Strategic Partner Demand Registration shall
not proceed. In such case, the Pension Plan shall proceed with such
Public Transfer in good faith, taking into account market conditions,
until such Public Transfer is consummated or abandoned by the Pension
Plan. The Pension Plan shall give Issuer prompt written notice if it
determines to abandon any such proposed Public Transfer.
(iii) The Pension Plan may at any time elect to participate in any
Strategic Partner Demand Registration by giving Issuer notice thereof
within 10 days of Issuer's notice to the Pension Plan of such
Strategic Partner Demand Registration. In such case, subject to
Section 6(b)(iv), Issuer shall include in such registration the number
of Registrable Securities requested by the Pension Plan to be included
therein (which number shall be set forth in the Pension Plan's notice
to Issuer of its election to participate therein). Any such
registration shall be considered a Public Transfer and shall be deemed
made on such date as such Registrable Securities are Transferred
pursuant thereto. The Pension Plan shall participate in any offering
of Class E Common Stock in connection with such registration in
accordance with the same plan of distribution as the Strategic
Partner.
(iv) Until the Priority Termination Date, if there is a Share
Limitation in connection with any Strategic Partner Demand
Registration in which the Pension Plan has elected to participate,
Issuer shall include in such registration (A) first, an equal number
of Registrable Securities and shares of Class E Common Stock from each
of the Pension Plan and the Strategic Partner, respectively, until all
of the shares requested to be included therein by either the Pension
Plan or the Strategic Partner have been selected, (B) second, any
additional Registrable Securities and shares of Class E Common Stock
requested to be included therein by the Pension Plan or the Strategic
Partner, as the case may be, (C) third, other
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shares of Class E Common Stock requested to be included therein by the
holder or holders thereof pursuant to contractual rights of such
holder or holders and (D) fourth, any other shares of Class E Common
Stock. From and after the Priority Termination Date, if there is a
Share Limitation in connection with a Strategic Partner Demand
Registration in which the Pension Plan has elected to participate,
Issuer shall include in such registration (W) first, the shares of
Class E Common Stock proposed to be registered by the Strategic
Partner, (X) second, the shares of Registrable Securities requested to
be included therein by the Pension Plan, (Y) third, other shares of
Class E Common Stock requested to be included therein by the holder or
holders thereof pursuant to contractual rights of such holder or
holders and (Z) fourth, any other shares of Class E Common Stock.
(v) The Strategic Partner, if any, may at any time elect to
participate in any Public Transfer requested by the Pension Plan by
giving Issuer notice thereof within 15 days of the Pension Plan's
notice to Issuer of such Public Transfer. In such case, subject to
Section 6(b)(vi), Issuer may include in the registration in connection
with such Public Transfer the number of shares of Class E Common Stock
requested by the Strategic Partner to be included therein. The
Strategic Partner shall participate in any offering of Class E Common
Stock in connection with such Public Transfer in accordance with the
same plan of distribution for such Public Transfer as the Pension
Plan.
(vi) Until the Demand Priority Date, if there is a Share
Limitation in connection with any Public Transfer requested by the
Pension Plan in which the Strategic Partner has elected to
participate, Issuer shall include in such registration (A) first, the
Registrable Securities requested to be included therein by the Pension
Plan, (B) second, shares of Class E Common Stock requested to be
included therein by the Strategic Partner, (C) third, other shares of
Class E Common Stock requested to be included therein pursuant to
contractual rights of the holder or holders thereof and (D) fourth,
any other shares of Class E Common Stock. From and after the Demand
Priority Date and until the Priority Termination Date, if there is a
Share Limitation in connection with a Public Transfer requested by the
Pension Plan in which the Strategic Partner has elected to
participate, Issuer shall include in the registration in connection
with such Public Transfer (A) first, an equal number of Registrable
Securities and shares of Class E Common Stock from each of the Pension
Plan and the Strategic Partner, respectively, until all of the shares
requested to be included therein by either the Pension Plan or the
Strategic Partner have been selected, (B) second, any additional
Registrable Securities and shares of Class E
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Common Stock requested to be included therein by the Pension Plan or
the Strategic Partner, as the case may be, (C) third, other shares of
Class E Common Stock requested to be included therein by the holder or
holders thereof pursuant to contractual rights of such holder or
holders and (D) fourth, any other shares of Class E Common Stock;
provided, however, that if the Strategic Partner does not beneficially
own at least 25 million shares of Class E Common Stock as of the time
of such registration, all shares of Registrable Securities requested
by the Pension Plan to be included therein shall be so included before
any shares of Class E Common Stock requested by the Strategic Partner
to be included therein are so included. From and after the Priority
Termination Date, if there is a Share Limitation in connection with a
Public Transfer requested by the Pension Plan in which the Strategic
Partner has elected to participate, Issuer shall include in the
registration in connection with such Public Transfer (X) first, the
Registrable Securities proposed to be registered by the Pension Plan,
(Y) second, the shares of Class E Common Stock requested to be
included therein by the holder or holders thereof (including the
shares of Class E Common Stock requested to be included therein by the
Strategic Partner, if any), pursuant to contractual rights of such
holder or holders and (Z) third, any other shares of Class E Common
Stock.
(vii) Nothing herein shall obligate Issuer to grant to any Person,
including a Strategic Partner, if any, the right to obtain
registration under the Securities Act of any equity securities of
Issuer, or any securities convertible into or exercisable or
exchangeable for such securities. If and to the extent Issuer grants
any such rights to any Person, the terms thereof shall be as set forth
in the related agreement between such Person and Issuer and may
include restrictions on and obligations of such Person greater than or
in addition to those contemplated herein, subject to Section 6(a).
(c) The Pension Plan acknowledges and accepts the rights of the
Salaried Plan under the Exchange Agreement and that the Salaried Plan has not
agreed to the provisions of Sections 3(c), 4 or 6(b) hereof. The Pension Plan
and Issuer also acknowledge the arrangements set forth in the Agreement dated as
of the date hereof among Issuer, the Salaried Plan and the Hourly Plan with
respect to certain registration rights matters. Without limiting the generality
of the foregoing and notwithstanding anything to the contrary herein (including
Section 3(c)): (i) in the event of a Piggyback Registration requested by the
Salaried Plan pursuant to its rights under the Exchange Agreement, if there is a
Share Limitation, Issuer shall include in the related offering all shares of
Class E Common Stock requested to be included therein by the Salaried Plan
before including any shares of Registrable Securities requested to be included
therein by the Pension Plan, (ii) the
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events giving rise to Issuer's right to postpone under Section 3(f) shall
include performing its obligations under the Exchange Agreement in connection
with the offering and sale of shares of Class E Common Stock by the Salaried
Plan, regardless of when the notice requesting the related registration is
received by Issuer, and (iii) in no event shall Issuer be deemed to be in breach
of this Agreement (including Section 3(c)) as a result of performing its
obligations under the Exchange Agreement.
7. Demand, Piggyback and Shelf Registration Procedures. Whenever
Registrable Securities are to be registered pursuant to this Agreement, Issuer
shall, to the extent applicable for each type of registration statement:
(a) subject to Sections 3(f) and 12(a), prepare and file with the
Commission a registration statement with respect to such Registrable Securities
and use reasonable efforts to cause such registration statement to be declared
effective as promptly after the initial filing thereof as reasonably
practicable;
(b) furnish to any investment manager acting on behalf of the Pension
Plan with respect to the Registrable Securities and to one law firm representing
each such investment manager, copies of such registration statement, the
prospectus contained therein and any amendments or supplements thereto prior to
filing such documents with the Commission, but only to the extent such documents
contain information regarding such investment manager, with such documentation,
and any other documentation provided by this Agreement to be delivered to the
investment manager acting on behalf of the Pension Plan and counsel to the
Pension Plan, to be delivered as provided in Section 12(d) unless otherwise
directed by the Named Fiduciary or its delegate;
(c) subject to Sections 3(f) and 12(a), prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than nine months (or
such shorter period as may be necessary to effect the Transfer of all shares of
Registrable Securities covered by such registration statement as described
therein);
(d) furnish to the Pension Plan and the underwriters such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the Pension Plan and its
counsel may reasonably request in order to facilitate the disposition of the
Registrable Securities;
(e) so long as Class E Common Stock is listed on any United States
securities exchange or a quotation system, use its
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best efforts to cause all of the Registrable Securities to be listed on such
exchange or a quotation system;
(f) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the Pension Plan reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable the Pension Plan to
consummate the disposition in such jurisdictions of the Registrable Securities
(provided that Issuer will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subsection, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(g) notify the Pension Plan, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and, at the request of the Pension Plan,
Issuer will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Pension
Plan or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Registrable Securities; and
(i) make available (and cause all the officers, directors, employees
and independent accountants of Issuer and its subsidiaries to make available),
to the extent reasonably requested by the Pension Plan or any underwriter,
attorney, accountant or agent retained by the Pension Plan in connection with
such registration statement, all financial and other records and pertinent
corporate documents and properties of Issuer and its subsidiaries for inspection
by the Pension Plan or any underwriter, attorney, accountant or other agent
retained by the Pension Plan in connection with such registration.
Each of the parties will treat all notices of proposed Transfers and
registrations, all notices pursuant to Section 7(g) and all information relating
to any Blackout Periods under Section 3(f) received from the other party with
the strictest confidence and will not disseminate such information. Subject to
Section 3(c), nothing herein shall be construed to require Issuer or any of
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its affiliates to make any public disclosure of information at any time. In the
event Issuer has notified the Pension Plan that (i) the prospectus included in a
registration statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, (ii) the
Commission has issued or threatened to issue any stop order suspending the
effectiveness of a registration statement or has initiated proceedings for such
purpose or (iii) Issuer has received any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, then the Pension Plan shall not deliver such prospectus to any
purchaser unless and until a supplement or amendment to such prospectus has been
prepared as set forth in Section 7(g) or until Issuer advises the Pension Plan
in writing that the use of such prospectus may be resumed.
The Pension Plan shall cooperate with Issuer in the preparation and
filing of any registration statement under the Securities Act pursuant to this
Agreement and provide Issuer with all information necessary to complete such
preparation within a reasonable period of time prior to the proposed filing of
such registration statement, and in the case of any Demand Registration
Statement or Shelf Registration Statement to be filed pursuant to Section 3(c),
within such period as is necessary to enable Issuer to file such registration
statement within 30 days of the Pension Plan's request therefor.
From and after such time as the Pension Plan reduces its ownership of
the Registrable Securities to less than 50 million shares of Class E Common
Stock, Issuer shall file the reports required to be filed by it under Section 13
of the Exchange Act or any successor thereto (or, if Issuer is not required to
file such reports, make publicly available such information upon the request of
Pension Plan), and take such further action as the Pension Plan may reasonably
request, all to the extent required to enable the Pension Plan to Transfer the
Registrable Securities pursuant to Rule 144.
8. Participation in Underwritten Transfers. The Pension Plan may not
participate in any underwritten Transfers hereunder unless the Pension Plan (a)
agrees to sell the Pension Plan's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, custodian agreements
and other documents required under the terms of such underwriting arrangements.
9. Registration Expenses and Legal Counsel. Issuer shall be
responsible for all federal and state filing fees (including all blue sky
registration or qualification fees), all fees and
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expenses of its counsel and all independent certified public accountants,
underwriters (excluding discounts and commissions and fees and expenses of
counsel to the underwriters) and other Persons retained by Issuer and all other
costs or expenses incurred by Issuer in the performance of its obligations
hereunder and the reasonable fees and expenses of one outside law firm
representing the Pension Plan and other out-of-pocket expenses of the Pension
Plan in connection with any registration statement under the Securities Act
pursuant to this Agreement or any amendment thereto; provided, however, that the
selection of the law firm representing the Pension Plan shall be subject to the
consent of Issuer, which consent shall not be unreasonably withheld. Issuer
shall have the right to select the financial printer to be used in connection
with any registration of Registrable Securities under the Securities Act
pursuant to this Agreement.
10. Indemnification.
(a) Issuer agrees to indemnify and hold harmless each of the Pension
Plan, the Trustee and any successor thereto, the investment manager or managers
acting on behalf of the Pension Plan with respect to the Registrable Securities
and Persons, if any, who control any of them within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each an
"Indemnitee"), from and against any and all costs and expenses reasonably
incurred and losses, damages and other liabilities sustained by such Indemnitee
and arising out of or caused by any untrue statement or alleged untrue statement
of a material fact contained in any registration statement described herein or
any related prospectus relating to the Registrable Securities (as amended or
supplemented if Issuer shall have furnished any amendments or supplements
thereto), or arising out of 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, in light of the circumstances in which they were made,
not misleading, except insofar as such costs, expenses, losses, damages or other
liabilities arising out of or are caused by any such untrue statement or
omission included or omitted in conformity with information furnished to Issuer
in writing by such Indemnitee or any Person acting on behalf of such Indemnitee
expressly for use therein; provided, however, the foregoing indemnity agreement
with respect to any preliminary prospectuses shall not inure to the benefit of
such Indemnitee, if the Person asserting any claims, losses, damages or other
liabilities against such Indemnitee purchased Registrable Securities and a copy
of the prospectus (as then amended or supplemented if Issuer shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Indemnitee to such Person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the
Registrable Securities to such Person, and if the prospectus (as so amended or
supplemented) would have cured the defect giving rise to such asserted claim,
loss, damage or other
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liability; provided, further, that the foregoing proviso shall not apply in the
case of a Piggyback Registration if the Indemnitee is the Pension Plan or
Trustee.
(b) The Pension Plan agrees, to the extent permitted under applicable
law, and each underwriter selected shall agree, to indemnify and hold harmless
each of Issuer, its directors, officers, employees and agents, and each person,
if any, who controls Issuer within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from Issuer, but only with respect to costs, expenses,
losses, damages or other liabilities arising out of or caused by an untrue
statement or omission included or omitted in conformity with information
furnished in writing by or on behalf of the Pension Plan or such underwriter, as
the case may be, expressly for use in any registration statement described
herein or any related prospectus relating to the Registrable Securities (as
amended or supplemented if Issuer shall have furnished or any amendments or
supplements thereto). No claim against the assets of the Pension Plan shall be
created by this Section 10(b), except as and to the extent permitted by
applicable law.
(c) In case any claim is asserted or any proceeding (including any
governmental investigation) shall be instituted where indemnity may be sought by
an Indemnitee pursuant to any of the preceding paragraphs of this Section 10,
such Indemnitee shall promptly notify in writing the Person against whom such
indemnity may be sought (the "Indemnitor"); provided, however, that the omission
so to notify the Indemnitor shall not relieve the Indemnitor of any liability
which it may have to such Indemnitee except to the extent that the Indemnitor
was prejudiced by such failure to notify. The Indemnitor, upon request of the
Indemnitee, shall retain counsel reasonably satisfactory to the Indemnitee to
represent (subject to the following sentences of this section) the Indemnitee
and any others the Indemnitor may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnitee shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such Indemnitee
unless (i) the Indemnitor and the Indemnitee shall have mutually agreed to the
retention of such counsel, (ii) the Indemnitor fails to take reasonable steps
necessary to defend diligently any claim within ten calendar days after
receiving written notice from the Indemnitee that the Indemnitee believes the
Indemnitor has failed to take such steps, or (iii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnitor and the
Indemnitee and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests or legal defenses
between them and, in all such cases, the Indemnitor shall only be responsible
for the reasonable fees and expenses of such counsel. It is understood that the
Indemnitor 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 law firm (in addition to any local counsel)
for all such Indemnitees not having actual or potential differing interests or
legal defenses among them, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Pension Plan or any control Person of the Pension Plan, such firm shall be
designated in writing by the Named Fiduciary. The Indemnitor shall not be liable
for any settlement of any proceeding effected without its written consent.
(d) If the indemnification provided for in this Section 10 is
unavailable to an Indemnitee in respect of any costs, expenses, losses, damages
or other liabilities referred to herein, then the Indemnitor, in lieu of
indemnifying such Indemnitee hereunder, shall contribute to the amount paid or
payable by such Indemnitee as a result of such costs, expenses, losses, damages
or other liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnitor and the Indemnitee and Persons acting on behalf
of or controlling the Indemnitee in connection with the statements or omissions
or violations which resulted in such costs, expenses, losses, damages or other
liabilities, as well as any other relevant equitable considerations. If the
indemnification described in Section 10(a) or 10(b) is unavailable to an
Indemnitee, the relative fault of Issuer, the Pension Plan and Persons acting on
behalf of or controlling the Pension Plan 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 Issuer or by Persons acting on behalf of the Pension
Plan and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Indemnitor
shall not be required to contribute pursuant to this Section 10(d) if there has
been a settlement of any proceeding effected without its written consent. No
claim against the assets of the Pension Plan shall be created by this Section
10(d), except as and to the extent permitted by applicable law.
(e) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 10 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding section.
Notwithstanding the provisions of this Section 10, the aggregate contribution of
the Pension Plan under this Section 10 will not exceed the proceeds received by
the Pension Plan from the Registrable Securities sold by it and the Pension Plan
shall not be required to contribute under this Section 10 in respect of any
costs, expenses, losses, damages or other liabilities unless the same arise with
reference to any information furnished to Issuer in writing by Persons acting on
behalf of the Pension Plan expressly for use in any registration
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Statement pursuant to this Agreement or the prospectus or any amendment or
supplement thereto. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnification and contribution agreements contained in this
Section 10 and the representations and warranties of Issuer contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement and (ii) acceptance of and the payment by the
buyer for any Registrable Securities.
11. Definitions.
"Blackout Period" means (i) any period of time during which a
requested Demand Transfer has been postponed pursuant to Section 3(f), which
period shall continue until notice of the termination of such postponement has
been delivered to the Pension Plan, and (ii) any holdback period during which
Transfers were not permitted by operation of Section 5(a), unless in any
offering referred to in Section 5(a), the Pension Plan Transferred or had the
opportunity to Transfer shares of Registrable Securities that constituted the
lesser of (a) the number of shares of Class E Common Stock that the Pension Plan
requested to be included in such offering or (b) 25 million shares.
"Class E Common Stock" means Class E Common Stock, par value $0.10 per
share, of General Motors and any securities issued or issuable with respect to
the Class E Common Stock in connection with any stock dividend, stock split
(forward or reverse), combination of shares, recapitalization, merger,
consolidation, redemption, exchange of securities or other reorganization or
reclassification after the date hereof. In the event of any of the foregoing
with respect to the Class E Common Stock or similar transactions affecting the
Class E Common Stock, all references herein to the designation "Class E Common
Stock" and to any specific number of shares of Class E Common Stock shall be
appropriately adjusted to give effect thereto, and shall include reference to
all securities of the same class regardless of whether any such securities were
issued or issuable with respect to the securities that previously constituted
the Class E Common Stock.
"Commission" means the United States Securities and Exchange
Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"General Motors" means General Motors Corporation, a Delaware
corporation.
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"Issuer" means, initially, General Motors, and thereafter, each
successor issuer as described in Section 12(a).
"Liquidity Event" means that either (a) the Pension Plan has
Transferred an aggregate of at least 25 million shares of Registrable Securities
or (b) the Pension Plan has been given an opportunity to include at least 25
million shares of Registrable Securities in a Piggyback Registration or a
Strategic Partner Demand Registration and has declined to do so.
"Minimum Tender Condition" means, with respect to any tender offer,
that there have been validly tendered and not withdrawn pursuant to such tender
offer a number of shares of Class E Common Stock which, when taken together with
the number of shares of Class E Common Stock that the Bidder making such tender
offer otherwise beneficially owns as of immediately after the acceptance for
purchase and purchase of such tendered shares, represent more than 50% of the
voting power of all securities of Issuer outstanding as of such expiration date
and generally entitled to vote in the election of directors.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint ven ture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Registrable Securities" means (i) the Class E Common Stock
contributed pursuant to this Agreement from time to time, (ii) the Class E
Common Stock held by the Pension Plan as of the date hereof which are subject to
the Exchange Agreement and (iii) the securities issued or issuable with respect
to the securities referred to in clauses (i) and (ii) in connection with any
stock dividend, stock split (forward or reverse), combination of shares,
recapitalization, merger, consolidation, redemption, exchange of securities or
other reorganization or reclassification after the date hereof. In the event of
any of the foregoing with respect to the Registrable Securities or similar
transactions affecting the Registrable Securities, all references herein to any
designation of securities and to any specific number of shares or Registrable
Securities shall be appropriately adjusted to give effect thereto. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities when they have been Transferred by the Pension Plan in accordance
with all applicable provisions of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Share Limitation" means that the lead underwriter or co-managers of
any offering in connection with a Piggyback Registration, a Demand Registration
or a Strategic Partner Demand Registration advise Issuer in writing that in
their opinion the
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number of Registrable Securities requested to be included in such offering
exceeds, together with other shares of Class E Common Stock to be included
therein, the number of shares of Class E Common Stock which can be sold in such
offering without adversely affecting the marketability of the offering.
"Strategic Partner" means any Person (or group of Persons acting in
concert with respect to an investment in Issuer) who (i) in a single transaction
or series of related transactions entered into as part of a single business
venture (the "Strategic Partner Transactions") acquires or commits to acquire
shares of Class E Common Stock (or securities convertible into or exchangeable
or exercisable for the Class E Common Stock) that constitute not less than 10%
of the Class E Common Stock then outstanding (determined after giving effect to
such commitment (and assuming that all such shares or securities subject to such
commitment are acquired) or acquisition and the conversion, exchange or exercise
of all such securities subject to such commitment or so acquired) and (ii) is
designated as such by the Board of Directors of Issuer. Issuer shall give the
Pension Plan prompt notice of any such acquisition, commitment and designation,
of the nature and proposed timetable for any acquisitions and of the nature of
any rights granted to the Person so designated to register under the Securities
Act shares of the Class E Common Stock. If more than one Person is designated
the Strategic Partner as described above, all rights of the Strategic Partner
herein shall be shared among such Persons as such Persons and Issuer may agree.
Issuer may designate only one Person (or group of Persons as described above) as
the Strategic Partner hereunder. All references herein to the shares of Class E
Common Stock beneficially owned by the Strategic Partner shall include all
shares of Class E Common Stock (or securities convertible into or exchangeable
or exercisable for the Class E Common Stock) acquired by the Strategic Partner
pursuant to the Strategic Partner Transactions and all additional shares of
Class E Common Stock (or securities convertible into or exchangeable or
exercisable for the Class E Common Stock) that the Strategic Partner has a
right, commitment or obligation to acquire pursuant to the Strategic Partner
Transactions.
"Transfer" means any sale, transfer or other disposition (including
any pledge and any disposition upon the foreclosure of any pledge or any
agreement to do any of the foregoing).
12. Miscellaneous.
(a) Succession. In the event that the Registrable Securities are to
be converted or exchanged into (or become the right to receive) securities of
any issuer other than the Person who is then Issuer hereunder in connection with
any transaction to which such Issuer is a party, such Issuer shall cause the
issuer of such securities to agree, effective as of such conversion or exchange,
that all rights, obligations and restrictions of Issuer
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set forth in this Agreement, except for the rights, obligations and restrictions
set forth in subsections (a) through (e) of Section 1 (which shall only be
obligations of General Motors), shall continue to apply to such securities. As
of the time of such conversion or exchange, subject to the exception set forth
in the preceding sentence, such issuer shall be bound by this Agreement and
shall succeed to all rights, restrictions and obligations of Issuer set forth in
this Agreement, all references to Issuer herein shall thereafter be deemed to be
references to such issuer, and the predecessor Issuer shall be released from all
obligations under this Agreement (except with respect to any obligations under
Section 10 with respect to any registration of securities issued by such
Issuer). To evidence the foregoing, prior to the time of such conversion or
exchange, Issuer may execute, and cause such issuer to execute, a Succession
Agreement substantially in the form of Exhibit C attached hereto. Upon request,
the Pension Plan shall acknowledge and agree to any such Succession Agreement as
set forth therein. To the extent required and permissible under applicable law,
as soon as reasonably practicable after such conversion or exchange, such issuer
shall file with the Commission an amendment to the Shelf Registration Statement,
if any, then in effect to ensure that such Shelf Registration shall continue to
apply to such securities. In the event such issuer is not eligible to register
such securities on Form S-3, all references to Form S-3 herein shall thereafter
be deemed to be references to Form S-1 or any other available form, except that
such issuer shall have no obligations hereunder to file a Shelf Registration
Statement (and shall have no obligation with respect to any Shelf Registration
Statement that is then in effect) unless and until such time as such issuer
becomes eligible to register such securities on Form S-3 or any successor short
form registration statement.
(b) Termination. All rights, restrictions and obligations of Issuer
and the Pension Plan, except with respect to any rights and obligations under
Section 10, shall terminate and this Agreement shall have no further force and
effect at such time as the Pension Plan reduces its ownership of the Registrable
Securities to less than 2% of the aggregate number of shares of Class E Common
Stock then outstanding.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented except
by a writing signed by Issuer and the Pension Plan.
(d) Notices. Except where notice by teleconference is specifically
called for in this Agreement, all notices and other communications provided for
or permitted hereunder shall be in writing and, except as specified herein,
shall be made by hand delivery, by registered or certified first-class mail,
return receipt requested, overnight courier or facsimile transmission:
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(i) If to the Pension Plan:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Senior Vice President
and General Counsel
Telephone: (212) 852-1302
Facsimile: (212) 852-1310
with copies to:
General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Vice President, Portfolio Strategy
and Manager Relations
Telephone: (212) 418-3590
Facsimile: (212) 418-6339
(ii) If to Issuer:
General Motors Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Treasurer
Telephone: (212) 418-3500
Facsimile: (212) 418-3695
with copies to:
General Motors Corporation
Legal Staff
3031 West Grand Boulevard
Detroit, Michigan 48202
Attention: Warren G. Andersen, Esq.
Telephone: (313) 974-1528
Facsimile: (313) 974-0685
All notices and communications shall be deemed to have been duly given
and received: when received telephonically, if notice by teleconference is
specifically called for by this Agreement; when delivered by hand, if hand
delivered; the fifth Business Day after being deposited in the mail, registered
or certified, return receipt requested, first class postage prepaid, or earlier
Business Day actually received, if mailed; the first Business Day after being
deposited with an overnight courier, postage prepaid, if by overnight courier;
upon oral confirmation of receipt, if by facsimile transmission. Each party
agrees promptly to confirm receipt of all notices.
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Whenever notices are required to be given by Issuer, such notices may
only be given by the Treasurer of Issuer or another officer or employee of
Issuer designated by the Treasurer in advance in writing to the recipient of
such notice. Whenever notices are required to be given by any investment manager
(includ ing the Trustee) with respect to the Registrable Securities, such
notices may only be given by an officer or employee of such invest ment manager
designated in advance in writing to the recipient of such notice.
(e) No Third Party Beneficiaries. This Agreement shall be for the
sole and exclusive benefit of Issuer, the Pension Plan, the Trustee and any
other investment manager or managers acting on behalf of the Pension Plan with
respect to the Registrable Securities, and their respective successors, and
directors, trustees, officers, employees, agents and controlling Persons
indemnified hereunder. Nothing in this Agreement shall be con strued to give any
other Person any legal or equitable right, remedy or claim under this Agreement.
(f) Descriptive Headings. The headings of the sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
(g) Cooperation. Each party hereto shall take such further action,
and execute such additional documents, as may be reasonably requested by any
other party hereto in order to carry out the purposes of this Agreement.
(h) Binding Effect; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by each of the parties and
their successors and the directors, trustees (including, without limitation, any
successor trustee for the Pension Plan), officers, employees, agents and
controlling Persons of the parties. Except for an assignment to a successor
trustee or to an investment manager as stated herein, and except as contemplated
in Section 12(a), none of the rights or obligations under this Agreement shall
be assigned by the Pension Plan without the consent of Issuer or by Issuer
without the consent of the Pension Plan.
(i) Counterparts. This Agreement may be executed in counterparts,
and shall be deemed to have been duly executed and delivered by all parties when
each party has executed a counterpart hereof and delivered an original or
facsimile copy thereof to the other party. Each such counterpart hereof shall be
deemed to be an original, and all of such counterparts together shall constitute
one and the same instrument.
(j) Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by the internal
laws (and not the laws of conflict) of
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<PAGE>
the State of Delaware, except to the extent that the laws of the state or
jurisdiction of incorporation or organization of the issuer of the Registrable
Securities from time to time specifically apply to questions concerning the
relative rights of the issuer of the Registrable Securities and the stockholders
of such issuer in their capacities as such.
(k) Acknowledgments. The Pension Plan agrees that it will obtain
written acknowledgments, and provide a copy of such acknowledgments to Issuer,
from each of its investment managers with respect to the Registrable Securities
(other than the Trustee) and from the Trustee's valuation adviser, confirming
that such entity has received and reviewed this Agreement and will comply with
the terms of this Agreement applicable to it. Issuer and the Pension Plan
acknowledge and agree that, as of the date hereof and pursuant to this Section
12(k), the Exchange Agreement is terminated with respect to the Pension Plan and
is of no further force and effect with respect to the Class E Common Stock
acquired by the Pension Plan pursuant thereto, and the Pension Plan shall have
no further rights, and Issuer shall have no further obligations to the Pension
Plan, thereunder or with respect to the Class E Common Stock acquired by the
Pension Plan pursuant thereto, and the Pension Plan hereby waives any rights it
may have had thereunder.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized, have
executed and delivered this Registration Agreement on the date first above
written.
GENERAL MOTORS CORPORATION
By:
Name:
Title:
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: UNITED STATES TRUST COMPANY OF
NEW YORK, As Trustee
By:
Name:
Title:
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<PAGE>
EXHIBIT A
---------
TRANSFER AGREEMENT
This Agreement is entered into on _______________, 1995, by and between
General Motors Corporation, a Delaware corporation ("General Motors"), and
United States Trust Company of New York (the "Trustee") as trustee of a trust
established under the General Motors Hourly-Rate Employees Pension Plan (the
"Pension Plan"), for the account and on behalf of the Pension Plan (which shall
thereby be deemed a party to this Agreement). Capitalized terms used and not
otherwise defined herein shall have the respective meanings set forth in Section
5.
WHEREAS, General Motors intends, subject to the satisfaction of certain
regulatory and other conditions, to contribute approximately 177,000,000 shares
of Class E Common Stock to the Pension Plan, pursuant to the terms of a
Registration Rights Agreement, dated as of the date hereof (the "Registration
Rights Agreement"), by and between General Motors and the Pension Plan; and
WHEREAS, the Pension Plan is the owner of other shares of Class E Common
Stock that are subject to the Registration Rights Agreement; and
WHEREAS, General Motors wishes to preserve its ability to consummate at a
later date a tax-free reorganization (or series of reorganizations) under the
Internal Revenue Code of 1986, as amended, and the rules, regulations and
rulings thereunder (the "Code"), including, without limitation, a split-off
pursuant to which the outstanding shares of Class E Common Stock and, in the
discretion of General Motors, Series C Preference Stock will be converted into
or exchanged for, among other things, shares of capital stock of Electronic Data
Systems Corporation, a Texas corporation ("Texas EDS") (or a subsidiary of Texas
EDS or any other subsidiary of General Motors owning an interest in Texas EDS)
(Texas EDS and any such subsidiary being collectively referred to herein as
"EDS") such that EDS is no longer controlled by General Motors (any such
transaction or series of transactions being referred to herein as a "Split-
Off"), and to preserve the tax-free status of a Split-Off in the event that EDS
enters into a business combination with one or more other corporations or other
business entities (a "Merger") within two years of such time as a Split-Off is
effected, which objective makes it desirable that certain
<PAGE>
restrictions be imposed on the Pension Plan's ability to Transfer the
Transferable Securities; and
WHEREAS, the Pension Plan is prepared to accept the shares of Class E
Common Stock that may be contributed to it as described in the Registration
Rights Agreement and to hold and Transfer any such shares and other shares of
Class E Common Stock owned by it on the terms and conditions stated herein; and
WHEREAS, the Trustee has been appointed by the named fiduciary of the
Pension Plan (the "Named Fiduciary") (as determined in accordance with Section
402(a) of the Employee Retirement Income Security Act of 1974, as amended), to
manage any shares of Class E Common Stock held by the Pension Plan as described
in the Registration Rights Agreement and this Agreement and to exercise all
rights, powers and privileges appurtenant to such shares (subject to the
authority of the Named Fiduciary to terminate such appointment and appoint one
or more other investment managers for any such shares); and
WHEREAS, the Trustee has full power and authority to execute and deliver
this Agreement for the account and on behalf of the Pension Plan and to so bind
the Pension Plan;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, General Motors and the Pension Plan
hereby agree as follows:
1. Restrictions on Transfer.
(a) (i) From and after such date as the first shares of Class E Common
Stock are contributed to the Pension Plan pursuant to the Registration Rights
Agreement (the "Initial Contribution Date"), the Pension Plan shall not make
any Transfer of the Transferable Securities to any Person if, to the knowledge
of the Pension Plan after reasonable inquiry, such Person is a Foreign Person
and, as a result of such Transfer, such Person would own (directly or through
the attribution rules contained in the regulations under Section 367(e) of the
Code) shares of Class E Common Stock that would constitute more than 5% of the
total value of the Class E Common Stock then outstanding. The foregoing
restriction shall terminate at such time as a Split-Off is effected (the
"Split-Off Date").
(ii) From and after the Initial Contribution Date, the Pension Plan shall
not make any Transfer of the
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<PAGE>
Transferable Securities to (A) any 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 such
Transferable Securities constitute more than 2% of the Class E Common Stock
then outstanding or (B) any Person (or group of related Persons acting
pursuant to a plan or arrangement) if such Person (or group of related
Persons acting pursuant to a plan or arrangement) is then, or as a result
of such Transfer will become, to the knowledge of the Pension Plan after
reasonable inquiry, a 5% Person. The foregoing restrictions shall terminate
on the first anniversary of the Split-Off Date.
(b) From and after the Initial Contribution Date, the Pension Plan shall
not make any Transfer of the Transferable Securities to any Person (or group of
related Persons acting pursuant to a plan or arrangement) if, as a result of
such Transfer and related transactions, to the knowledge of the Pension Plan
after reasonable inquiry, such Person (or group of related Persons acting
pursuant to a plan or arrangement) would have acquired shares of Class E Common
Stock that (when aggregated with all other shares of Class E Common Stock so
acquired at any time by such Person (or group of related Persons acting pursuant
to a plan or arrangement)) would constitute 40% or more of the total number of
shares of Class E Common Stock then outstanding (computed for this purpose as if
any option, warrant or other security that permits such Person (or group of
related Persons acting pursuant to a plan or arrangement) to acquire additional
shares of Class E Common Stock (or any securities convertible into or
exchangeable or exercisable for the Class E Common Stock) had been fully
exercised, converted or exchanged). The foregoing restriction shall terminate
185 days after the Split-Off Date.
(c) From and after any such time as the Pension Plan receives notice from
General Motors or otherwise becomes aware by public announcement that General
Motors intends to effect a Split-Off (the "Split-Off Notice Date"), the Pension
Plan shall not make any Transfer of the Transferable Securities if, after giving
effect to such Transfer, the number of shares of Transferable Securities that
would be owned directly by the Pension Plan (which shall include all shares in
which the Pension Plan has a beneficial interest (whether or not registered in
the name of the Pension Plan) and which shall not include shares owned by any
Affiliate of the Pension Plan) would constitute less than 50% of the number of
Transferable Securities owned directly by the Pension Plan as of the Split-Off
Notice Date; provided that if there has been at any time from and after the
Split-Off Notice Date, to the knowledge of
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<PAGE>
the Pension Plan after reasonable inquiry, any 5% Person, then the Pension Plan
may Transfer shares of Transferable Securities only if and to the extent that
the number of Transferable Securities that would be owned directly by the
Pension Plan immediately after such proposed Transfer would exceed 50% of the
sum of (i) the number of shares of Class E Common Stock owned directly by the
Pension Plan as of the Split-Off Notice Date and (ii) the maximum number of
shares of Class E Common Stock directly or indirectly beneficially owned (as
defined in Rule 13d-3 of the Exchange Act or any successor thereto ("Rule
13d-3")) at any time since the Split-Off Notice Date, to the knowledge of the
Pension Plan after reasonable inquiry, by such 5% Person and by each other 5%
Person (reduced so as not to double count any shares Transferred by one 5%
Person to any other 5% Person). The restrictions set forth in this Section 1(c)
shall terminate (i) in the event any such Split-Off is abandoned, on such date
as the Pension Plan receives notice from General Motors or otherwise becomes
aware of such abandonment (subject to such restrictions again becoming
applicable as described in the first sentence of this Section 1(c)) or (ii) in
the event any such Split-Off is effected, on the second anniversary of the
Split-Off Date, provided that, if any agreement or letter of intent or other
announcement of an intention to effect a Merger is entered into or made prior to
the second anniversary of the Split-Off Date (a "Merger Event"), such
restrictions shall terminate (A) except as provided in clause (B) below, on the
second anniversary of such time as such Merger is consummated (such time being
referred to as the "Merger Date"), (B) in the event such Merger constitutes a
fully taxable exchange under Section 1001 of the Code, in which such Section
applies to consideration received pursuant to such Merger by all shareholders of
the Person who is then the issuer of the Transferable Securities and so long as
the Pension Plan (and the Trustee) complied fully with the provisions of Section
1(h) with respect to such Merger, on the Merger Date, or (C) in the event such
Merger is abandoned, on the later of (Y) the second anniversary of the Split-Off
Date (subject to the occurrence of another Merger Event after such abandonment
and prior to such second anniversary) and (Z) such date as the Pension Plan
receives notice from General Motors or otherwise becomes aware of such
abandonment.
(d) Sections 1(a), 1(b) and 1(f) shall not apply to any Transfer of
Transferable Securities by the Pension Plan if such Transfer is pursuant to an
underwritten public offering reasonably designed to achieve a broad public
distribution of the securities being offered; provided, that the Pension Plan
shall have caused the lead underwriter and any co-manager of such offering to
have agreed (and the Pension Plan shall have delivered evidence of such
agreement to General Motors prior to the proposed commencement of such offering)
to use its reasonable best efforts (i) to effect a
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<PAGE>
broad public distribution of such securities and (ii) not to make any Transfer
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 Transfer is of Transferable
Securities constituting more than 2% of the Class E Common Stock then
outstanding 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
Transfer, has been designated in a written list provided by General Motors to
the Pension Plan as, to the reasonable belief of General Motors, beneficially
owning (as defined in Rule 13d-3) 2% or more of the total voting power or total
value of the Class E Common Stock then outstanding.
(e) Nothing in this Agreement shall prohibit the Pension Plan from making
any Transfer of Transferable Securities if and to the extent such Transfer is
made pursuant to a Split-Off or a Merger; provided that this Agreement shall
continue to apply to any Transferable Securities received by the Pension Plan
pursuant to such Split-Off or Merger, as the case may be, as provided in this
Agreement.
(f) From and after the Initial Contribution Date, the Pension Plan shall
not make any Transfer of the Transferable Securities to any Person (or group of
related Persons acting pursuant to a plan or arrangement) if, to the knowledge
of the Pension Plan after reasonable inquiry, as a result of such Transfer, such
Person (or group of related Persons acting pursuant to a plan or arrangement)
would constitute a 5% Person, unless the Pension Plan shall cause such Person
(and all related Persons acting pursuant to a plan or arrangement) to agree to
be bound by the provisions of this Agreement and to execute a transferee
agreement reasonably satisfactory to General Motors and the Pension Plan to
effectuate the purposes hereof. An executed copy of such agreement shall be
delivered to General Motors prior to the consummation of any such proposed
Transfer of the Transferable Securities. The foregoing restriction shall
terminate on the second anniversary of the Split-Off Date; provided that if a
Merger Event occurs prior to the second anniversary of the Split-Off Date, such
restriction shall terminate on the second anniversary of the Merger Date or, in
the event such Merger is abandoned, on the later of (i) the second anniversary
of the Split-Off Date (subject to the occurrence of another Merger Event after
such abandonment and prior to such second anniversary) and (ii) such date as the
Pension Plan receives notice from General Motors or otherwise becomes aware of
such abandonment.
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<PAGE>
(g) Until all restrictions set forth in Sections 1(a) through 1(f) have
terminated pursuant to the terms set forth therein, the Pension Plan shall not
make any Transfer of securities convertible into or exercisable or exchangeable
for the Transferable Securities or any other securities the value of which is
derived from the Transferable Securities unless prior to the consummation of
such Transfer General Motors has received a Modification Ruling (as defined
below) confirming, in form and substance reasonably satisfactory to General
Motors, that no income, gain or loss will be recognized by General Motors, EDS
or General Motors's or EDS's stockholders or Affiliates on account of such
Transfer.
(h) The Trustee has determined that a Split-Off would substantially
increase the value of the Transferable Securities and is therefore in the
interests of the Pension Plan and the participants and beneficiaries of the
Pension Plan. General Motors has represented to the Trustee that it will not
consider a Split-Off unless it can be adequately assured of the tax-free status
of such Split-Off. The Trustee recognizes that such tax-free status may be
jeopardized by a taxable Merger that occurred within two years of a Split-Off.
Accordingly, until all restrictions set forth in Sections 1(a) through 1(f) have
terminated pursuant to the terms set forth therein, the Pension Plan (or the
Trustee on behalf of the Pension Plan) will vote against any proposed Merger if
(i) the Trustee determines, on the advice of tax counsel, that such Merger would
not constitute a tax-free reorganization under Section 368 of the Code in which
Section 354(a)(1) of the Code would apply to consideration received pursuant to
such Merger by all shareholders of the Person who is then the issuer of the
Transferable Securities or (ii) General Motors delivers to the Trustee, no later
than three Business Days prior to the scheduled date for the stockholders
meeting at which such Merger is to be voted on or the expiration date for the
consent solicitation with respect thereto, as the case may be, an opinion of tax
counsel reasonably satisfactory to the Trustee (which tax counsel may have been
and be retained, employed or consulted from time to time by General Motors) that
there is a material risk that such Merger would not constitute a tax-free
reorganization as described above. The Trustee shall deliver written notice to
General Motors of any determination made pursuant to clause (i) of the preceding
sentence (or of any decision not to make any such determination) as promptly as
practicable, and in any event no later than ten Business Days prior to the
scheduled date for the stockholders meeting at which such Merger is to be voted
on or the expiration date for the consent solicitation with respect thereto, as
the case may be.
(i) No Transfer or attempted Transfer of Transferable Securities in
violation of this Agreement shall be made or recorded
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<PAGE>
on the books of General Motors (or any other issuer of the Transferable
Securities) and any such Transfer shall be void and of no effect.
(j) Each certificate representing the shares of Class E Common Stock
contributed to the Pension Plan pursuant to the Registration Rights Agreement
shall conspicuously bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
TRANSFER AGREEMENT, DATED AS OF __________, 1995, BY AND BETWEEN
GENERAL MOTORS CORPORATION ("GENERAL MOTORS") AND THE INITIAL HOLDER
HEREOF THAT CONTAINS, AMONG OTHER THINGS, CERTAIN RESTRICTIONS ON THE
TRANSFER OF SUCH SECURITIES. A COPY OF SUCH TRANSFER AGREEMENT WILL
BE FURNISHED WITHOUT CHARGE BY GENERAL MOTORS TO THE HOLDER HEREOF
UPON WRITTEN REQUEST."
The certificates representing shares of Class E Common Stock held by the Pension
Plan and acquired other than pursuant to the Registration Rights Agreement shall
be promptly surrendered to General Motors in order that General Motors' transfer
agent may place such legend upon them. General Motors (or any other issuer of
the Transferable Securities) shall instruct its transfer agent that such legend
shall be removed from the certificates representing any Transferable Securities
upon the earlier of (i) the Pension Plan's Transfer of such shares of
Transferable Securities if such Transfer is made in accordance with all
applicable provisions of this Agreement and to a Person (or group of related
Persons acting pursuant to a plan or arrangement) who is not required to execute
a transferee agreement under Section 1(f) and (ii) the termination of all
restrictions set forth in Sections 1(a) through 1(f) pursuant to the terms set
forth therein.
(k) Nothing herein shall be construed as a waiver or modification of
any of the restrictions on Transfer of the Registrable Securities (as defined in
the Registration Rights Agreement) set forth in the Registration Rights
Agreement, in no event shall any Transfer of the Transferable Securities be
deemed to be a permitted Transfer of the Registrable Securities under the
Registration Rights Agreement solely because such Transfer is permitted under
this Agreement and in no event shall any Transfer of the Registrable Securities
be deemed to be a permitted Transfer of the Transferable Securities under this
Agreement solely because such Transfer is permitted under the Registration
Rights Agreement.
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<PAGE>
2. Representations, Warranties and Covenants.
-----------------------------------------
(a) The Pension Plan represents that it owns ______ shares of Class E
Common Stock and does not own any shares of Series C Preference Stock, in each
case as of the date hereof.
(b) The Pension Plan agrees that from and after the date hereof it
shall not purchase or acquire, in open market transactions or otherwise, any
additional shares of Class E Common Stock or any securities convertible into or
exercisable or exchangeable for the Class E Common Stock or any other interest
in the Class E Common Stock; provided, that (i) any securities received by the
Pension Plan as consideration for any exchange or conversion of Class E Common
Stock pursuant to the terms of a Split-Off or a Merger, (ii) any securities
acquired by the Pension Plan as a dividend or other distribution on the Class E
Common Stock and (iii) any shares of Class E Common Stock contributed to the
Pension Plan pursuant to the Registration Rights Agreement, shall not violate
this Section 2(b). The foregoing covenant shall terminate following the
consummation of a Split-Off at the time described in clause (ii) of the last
sentence of Section 1(c).
3. Cooperation and Other Covenants.
-------------------------------
(a) The Pension Plan shall take (or refrain from taking) all such
actions as General Motors may reasonably request as necessary to ensure that
General Motors obtains and maintains (i) a private letter ruling from the IRS
(the "Split-Off Ruling") confirming, in form and substance reasonably
satisfactory to General Motors, that no income, gain or loss will be recognized
by General Motors, its stockholders or Affiliates on account of a Split-Off
(except to the extent of any additional consideration described in Section 356
of the Code) and (ii) a private letter ruling from the IRS or an opinion of
counsel, as determined by General Motors in its sole discretion (the "Merger
Ruling"), confirming, in form and substance reasonably satisfactory to General
Motors, that no income, gain or loss will be recognized by General Motors, EDS
or General Motors's or EDS's stockholders or Affiliates on account of a Merger.
Without limiting the generality of the foregoing, the Pension Plan shall agree
to be bound by such further restrictions on its ability to Transfer the
Transferable Securities as may be reasonably necessary to satisfy the IRS that
the Split-Off is not a device for the distribution of profits and earnings of
General Motors to General Motors's stockholders and to make such further
representations and covenants and execute such additional documents, in each
case as General Motors may reasonably request as necessary in connection with
obtaining either the Split-Off Ruling or the Merger Ruling.
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<PAGE>
(b) If so requested by the Pension Plan, General Motors shall waive or
modify any restriction set forth in Section 1 if and to the extent that General
Motors obtains a private letter ruling from the IRS (the "Modification Ruling")
confirming, in form and substance reasonably satisfactory to General Motors,
that such proposed waiver or modification shall not cause General Motors, EDS or
General Motors's or EDS's stockholders or Affiliates to recognize any income,
gain or loss on account of either a Split-Off (except to the extent of any
additional consideration described in Section 356 of the Code) or a Merger.
Without limiting the generality of the foregoing, General Motors shall promptly
seek to obtain any such Modification Ruling as the Pension Plan may reasonably
request, including a Modification Ruling hereby requested by the Pension Plan,
confirming, in form and substance reasonably satisfactory to General Motors,
that the IRS will not consider all or part of the number of shares of Class E
Common Stock owned by 5% Persons other than the Pension Plan for purposes of
determining whether the continuity of interest requirement has been satisfied
with respect to a Split-Off or a Merger. General Motors and the Pension Plan
shall cooperate with each other (and any such tax counsel) and shall take (or
refrain from taking) such actions as either party hereto may reasonably request
as necessary to obtain any requested Modification Ruling.
(c) General Motors shall promptly notify the Pension Plan of any
intention of General Motors to effect or abandon a Split-Off and any intention
of EDS of which EDS has notified General Motors with respect to a Merger or the
abandonment of a Merger, in all such cases at such time and to the extent
determined by General Motors, in its sole discretion, to be reasonably
consistent with the purposes of this Agreement.
(d) Until all restrictions set forth in Section 1 have terminated, the
Pension Plan shall give General Motors written notice of any proposed Transfer
of the Transferable Securities within a reasonable period of time prior to such
proposed Transfer, and in any event no later than such date as any notice with
respect to such proposed Transfer is required to be given by the Pension Plan
pursuant to the Registration Rights Agreement (including any notice of election
to participate in any Piggyback Registration) or, if no such date is provided
for in the Registration Rights Agreement, 10 days prior to the proposed
consummation of such Transfer. Each notice hereunder of a proposed Transfer
shall set forth the number of shares of Transferable Securities then owned by
the Pension Plan and the terms and conditions of such proposed Transfer,
including, without limitation, the approximate number of Transferable Securities
proposed to be Transferred, the proposed timetable for such Transfer, whether
such Transfer is to be made pursuant to an underwritten public offering in
accordance with
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<PAGE>
Section 1(f) and, if such Transfer is to be made otherwise, the identity of any
proposed transferee and the number of shares of Class E Common Stock otherwise
then owned by such proposed transferee, all with sufficient particularity to
enable General Motors to determine whether such proposed Transfer would comply
with the provisions of this Agreement. If, in connection with any such proposed
Transfer, the Pension Plan receives from any proposed underwriter, co-manager or
transferee any certificate, representation, undertaking or other documentation
intended to establish compliance with the provisions of this Agreement, then the
Pension Plan shall deliver to General Motors a copy thereof prior to the
consummation of such proposed Transfer. The Pension Plan shall give General
Motors written notice of any material change in the terms and conditions of a
proposed Transfer from those described in any previous notice thereof to General
Motors from the Pension Plan as promptly as practicable, and in no event later
than two Business Days prior to such time as such Transfer is then proposed to
be consummated, and the Pension Plan shall not make any proposed Transfer other
than in accordance with such terms and conditions as so described to General
Motors. If at any time prior to the consummation of any proposed Transfer,
General Motors determines, based on the advice of its legal counsel, that such
proposed Transfer would violate any of the restrictions or be inconsistent with
any of the provisions of this Agreement, then General Motors shall give notice
to the Pension Plan of such determination and, unless and until tax counsel
(which shall not be tax counsel regularly employed by General Motors or the
Pension Plan unless otherwise agreed) mutually agreeable to General Motors and
the Pension Plan (the fees and expenses of which shall be borne equally by
General Motors and the Pension Plan) delivers an opinion to General Motors and
the Pension Plan that such proposed Transfer would not so violate or be
inconsistent with this Agreement, the Pension Plan shall not make such proposed
Transfer. General Motors and the Pension Plan shall cooperate with each other
(and any such tax counsel) and shall provide each other with such information as
may reasonably be requested in order to enable any party (or such tax counsel)
to make any determination with respect to this Agreement.
(e) Each of the parties shall treat all notices of and information
relating to proposed Transfers, Split-Offs and Mergers, including, without
limitation, all notices pursuant to Sections 3(c) and 3(d), that are received
from the other party with the strictest confidence and shall not disseminate
such information; provided, that nothing herein shall prohibit disclosure of any
such notice or information to the then issuer of the Transferable Securities.
Nothing herein shall be construed to require General Motors or any of its
Affiliates to make any public disclosure of information at any time.
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<PAGE>
4. Remedies. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that the Pension Plan's breach
of any term or provision of this Agreement will materially and irreparably harm
General Motors, that money damages will accordingly not be an adequate remedy
for any breach of the provisions of this Agreement by the Pension Plan and that
General Motors, in its sole discretion and in addition to any other remedies it
may have at law or in equity, may apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
5. Definitions and Interpretations.
-------------------------------
(a) Definitions.
-----------
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act (or any successor thereto).
"Business Day" means such days as the New York Stock Exchange, Inc.
shall be open for trading.
"Class E Common Stock" means Class E Common Stock, par value $0.10 per
share, of General Motors and any securities issued or issuable with respect to
the Class E Common Stock in connection with any stock dividend, stock split
(forward or reverse), combination of shares, recapitalization, merger,
consolidation, redemption, exchange of securities or other reorganization or
reclassification after the date hereof, including, without limitation, shares of
capital stock of EDS issued or issuable with respect to the Class E Common Stock
in connection with a Split-Off and shares of capital stock issued or issuable
with respect to such shares of capital stock of EDS in connection with a Merger.
In the event of any of the foregoing with respect to the Class E Common Stock or
similar transactions affecting the Class E Common Stock, all references herein
to the designation "Class E Common Stock" and to any specific number of shares
of Class E Common Stock shall be appropriately adjusted to give effect thereto,
and shall include reference to all securities of the same class regardless of
whether any such securities were issued or issuable with respect to the
securities that previously constituted the Class E Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
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"Exchange Agreement" means the Exchange and Registration Agreement,
dated as of November 4, 1992, by and among General Motors, the Pension Plan and
the General Motors Corporation Retirement Program for Salaried Employees.
"5% Person" means 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 Class E Common Stock that constitute
5% or more of the total voting power or total value of the Class E Common Stock
then outstanding; provided that no Person (or group of related Persons acting
pursuant to a plan or arrangement) shall be deemed a 5% Person for purposes of
Section 1(c) if such Person (or group of related Persons acting pursuant to a
plan or arrangement) (i) acquired such shares directly from General Motors or
(ii) has executed and delivered to General Motors a transferee agreement
pursuant to Section 1(f).
"Foreign Person" means any person who is not either (i) a citizen or
resident of the United States, (ii) a domestic partnership, (iii) a domestic
corporation or (iv) an estate or trust treated as a U.S. person under Section
7701(a)(30)(D) of the Code.
"IRS" means the Internal Revenue Service.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint ven ture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Series C Preference Stock" means Series C Convertible Preference
Stock, par value $0.10 per share, of General Motors.
"Transfer" means any sale, transfer or other disposition (including
any pledge and any disposition upon the foreclosure of any pledge) or any
agreement to do any of the foregoing.
"Transferable Securities" means (i) the Class E Common Stock
contributed to the Pension Plan pursuant to the Registration Rights Agreement
from time to time, (ii) the Class E Common Stock held by the Pension Plan as of
the date hereof which are subject to the Exchange Agreement and (iii) the
securities issued or issuable with respect to the securities referred to in
clauses (i) and (ii) in connection with any stock dividend, stock split (forward
or reverse), combination of shares, recapitalization, merger, consol idation,
redemption, exchange of securities or other reorganization or reclassification
after the date hereof, including, without limitation, shares of capital stock of
EDS issued or issuable with
-12-
<PAGE>
respect to the Class E Common Stock in connection with a Split-Off and shares of
capital stock issued or issuable with respect to the Class E Common Stock in
connection with a Merger. In the event of any of the foregoing with respect to
the Transferable Securities or similar transactions affecting the Transferable
Securities, all references herein to the designation "Transferable Securities"
and to any specific number of shares of Transferable Securities shall be
appropriately adjusted to give effect thereto.
(b) Interpretations.
---------------
For purposes of this Agreement, "knowledge of the Pension Plan after
reasonable inquiry" shall mean actual knowledge of the Pension Plan after such
inquiry, provided that, for purposes of determining compliance of any proposed
Transfer of Transferable Securities with the provisions of this Agreement, (i)
the Pension Plan shall be deemed to have actual knowledge of the information
contained in any Schedule 13D or 13G (or any successor thereto) filed under the
Exchange Act or any amendment thereto with respect to the Class E Common Stock
more than two Business Days prior to such proposed Transfer and (ii) if such
Transfer is made pursuant to an underwritten public offering as described in
Section 1(d), the Pension Plan shall be deemed to have made a reasonable inquiry
if it shall have conducted a search of the filings of Schedules 13D and 13G (and
any successors thereto) under the Exchange Act and any amendments thereto within
two Business Days of such proposed Transfer.
6. Miscellaneous.
-------------
(a) Successor Issuers. In the event that, at any time after the time
at which the Class E Common Stock is converted into, exchanged for or otherwise
becomes a security of EDS, EDS enters into any transaction pursuant to which the
capital stock of EDS is to be converted into, exchanged for or otherwise become
the right to receive securities of any issuer other than EDS, then all
references herein to EDS (including this Section 6(a)) shall be deemed as of the
time of consummation of such transaction to be references to both EDS and such
successor issuer.
(b) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented except
by a writing signed by General Motors and the Pension Plan.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be made by hand delivery, by
registered or certified first-class
-13-
<PAGE>
mail, return receipt requested, overnight courier or facsimile transmission:
(i) If to the Pension Plan:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Senior Vice President
and General Counsel
Telephone: (212) 852-1302
Facsimile: (212) 852-1310
with copies to:
General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Vice President, Portfolio Strategy
and Manager Relations
Telephone: (212) 418-3590
Facsimile: (212) 418-6339
(ii) If to General Motors:
General Motors Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Treasurer
Telephone: (212) 418-3500
Facsimile: (212) 418-3695
with copies to:
General Motors Corporation
Legal Staff
3031 West Grand Boulevard
Detroit, Michigan 48202
Attention: Warren G. Andersen, Esq.
Telephone: (313) 974-1528
Facsimile: (313) 974-0685
All notices and communications shall be deemed to have been duly given
and received: when delivered by hand, if hand delivered; the fifth Business Day
after being deposited in the mail, registered or certified, return receipt
requested, first class postage prepaid, or earlier Business Day actually
received, if mailed; the first Business Day after being deposited with an
overnight courier, postage prepaid, if by overnight courier; upon
-14-
<PAGE>
oral confirmation of receipt, if by facsimile transmission. Each party agrees
promptly to confirm receipt of all notices.
Whenever notices are required to be given by General Motors, such
notices may only be given by the Treasurer of General Motors or another officer
or employee of General Motors designated by the Treasurer in advance in writing
to the recipient of such notice. Whenever notices are required to be given by
any investment manager (including the Trustee) with respect to the Transferable
Securities, such notices may only be given by an officer or employee of such
investment manager designated in advance in writing to the recipient of such
notice.
(d) No Third Party Beneficiaries. This Agreement shall be for the
sole and exclusive benefit of General Motors, the Pension Plan, the Trustee and
any other investment manager or managers acting on behalf of the Pension Plan
with respect to the Transferable Securities, and their respective successors,
and directors, trustees, officers, employees, agents and controlling Persons
indemnified hereunder. Nothing in this Agreement shall be construed to give any
other Person any legal or equitable right, remedy or claim under this Agreement.
(e) Descriptive Headings. The headings of the sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
(f) Cooperation. Each party hereto shall take such further action,
and execute such additional documents, as may be reasonably requested by any
other party hereto in order to carry out the purposes of this Agreement.
(g) Binding Effect; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by each of the parties and
their successors. Except for an assignment to a successor trustee or to an
investment manager as stated herein and except as provided in Section 1(f), none
of the rights or obligations under this Agreement shall be assigned by the
Pension Plan without the consent of General Motors or by General Motors without
the consent of the Pension Plan.
(h) Counterparts. This Agreement may be executed in counterparts, and
shall be deemed to have been duly executed and delivered by all parties when
each party has executed a counterpart hereof and delivered an original or
facsimile copy thereof to the other party. Each such counterpart hereof shall
be deemed to be an original, and all of such counterparts together shall
constitute one and the same instrument.
-15-
<PAGE>
(i) Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by the internal
laws (and not the laws of conflict) of the State of Delaware, except to the
extent that the laws of the state or jurisdiction of incorporation or
organization of the issuer of the Transferable Securities from time to time
specifically govern questions concerning the relative rights of the issuer of
the Transferable Securities and the stockholders of such issuer in their
capacities as such.
(j) Acknowledgements. The Pension Plan agrees that it will (i) obtain
written acknowledgements, and provide a copy of such acknowledgments to General
Motors from each of its investment managers with respect to the Transferable
Securities (other than the Trustee), confirming that such entity has received
and reviewed this Agreement and will comply with the terms of this Agreement
applicable to it and (ii) inform each of the investment managers working with or
for the Pension Plan in any capacity of the existence and terms of the covenant
made by the Pension Plan in Section 2(b) and instruct each such investment
manager to comply with such covenant at all times until such covenant terminates
as provided in Section 2(b).
* * * * *
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized, have
executed and delivered this Transfer Agreement on the date first above written.
GENERAL MOTORS CORPORATION
By:
Name:
Title:
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: UNITED STATES TRUST COMPANY OF
NEW YORK, As Trustee
By:
Name:
Title:
-17-
<PAGE>
EXHIBIT B
---------
INTEREST RATE SCHEDULE
The interest rate referred to in Section 2(f)(iv) shall be a per annum rate
equal to the sum of (i) the rate quoted on the date of delivery of the Exercise
Notice for United States Treasury bills with a maturity of 90 days and (ii) the
amount set forth below under the column "Spread" corresponding to the rating
(the "Rating") assigned by Standard & Poor's Ratings Group ("S&P") to the short
term unsecured debt obligations of Issuer on the date of delivery of the
Exercise Notice (it being understood that, for purposes of the foregoing, (i)
the rating assigned to such debt obligations by any other rating agency shall be
disregarded, (ii) any plus attached to a rating assigned by S&P shall be
disregarded, (iii) any minus attached to a rating assigned by S&P shall be
considered a downgrade to the next lowest rating and (iv) if S&P changes its
rating system after the date hereof, the Ratings as set forth below shall be
adjusted to the comparable ratings under such new rating system).
<TABLE>
<CAPTION>
<S> <C>
Rating Spread (in basis points)
------ ------
A or better 50
BBB 100
BB 250
B or below or No Rating 400
</TABLE>
<PAGE>
EXHIBIT C
SUCCESSION AGREEMENT
This Agreement is entered into as of ___________, ____, by and between
________________________, a __________ corporation ("Predecessor"), and
___________________, a __________ corporation ("Successor"). Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in the
Registration Rights Agreement, dated as of ___________, 1995 (the "Registration
Agreement") by and between General Motors Corporation, a Delaware corporation
("General Motors"), and United States Trust Company of New York, as trustee (the
"Trustee") of a trust established under the General Motors Hourly-Rate Employees
Pension Plan (the "Pension Plan"), for the account of and on behalf of the
Pension Plan.
WHEREAS, Predecessor is currently the issuer of the securities
referred to as the "Registrable Securities" and "Class E Common Stock" in the
Registration Agreement and generally has the rights and the obligations of
Issuer under the Registration Agreement; and
WHEREAS, pursuant to ________________ (the "Transaction"), shares of
Class E Common Stock shall be [converted into] [exchanged for] securities of
Successor (the "Successor Securities"), effective as of ____________ (the
"[Conversion] [Exchange] Date"); and
WHEREAS, the Registration Agreement contemplates that in the event of
a transaction such as the Transaction, Successor shall generally succeed to the
rights and obligations of Issuer under the Registration Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Predecessor and
Successor hereby agree as follows:
1. Succession.
(a) Effective as of the [Conversion] [Exchange] Date, all rights,
obligations and restrictions with respect to shares of Class E Common Stock
(including Registrable Securities) set forth in the Registration Agreement shall
apply to the Successor Securities.
(b) Effective as of the [Conversion] [Exchange] Date, Successor shall
be bound by the Registration Agreement and shall
<PAGE>
succeed to all rights, restrictions and obligations of Issuer set forth in the
Registration Agreement, all references to Issuer therein shall thereafter be
deemed to be references to Successor, and Predecessor shall be released from all
obligations under the Registration Agreement.
(c) Notwithstanding subsections (a) and (b) above, (i) all rights and
obligations in Sections 1(a) through 1(e) of the Registration Agreement shall
remain rights and obligations of General Motors and (ii) Predecessor shall not
be released from any obligations under Section 10 of the Registration Agreement
with respect to any registration of securities issued by Predecessor.
2. Cooperation. Predecessor and Successor shall take such further
action, and execute such additional documents, as may be reasonably requested by
either party in order to carry out the purposes of this Agreement.
3. Counterparts. This Agreement may be executed in counterparts, and
shall be deemed to have been duly executed and delivered by all parties when
each party has executed a counterpart hereof and delivered an original or
facsimile copy thereof to the other party. Each such counterpart hereof shall be
deemed to be an original, and all of such counterparts together shall constitute
one and the same instrument.
* * *
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being duly authorized, have
executed and delivered this Succession Agreement on the date first above
written.
PREDECESSOR:
_________________________________
By:______________________________
Its:_____________________________
SUCCESSOR:
By:______________________________
Its:_____________________________
This Succession Agreement (including, without limitation, the release
of the Predecessor from obligations under the Registration Agreement as set
forth herein (except as provided in Section 1(c) above)) is acknowledged and
agreed to as of this _____ day of _____________, ____.
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: UNITED STATES TRUST COMPANY
OF NEW YORK, As Trustee
By: _____________________________
Its: ____________________________
-3-
<PAGE>
EXHIBIT 10(K)
SUCCESSION AGREEMENT
This Agreement is entered into as of ____________, 1996 by and between
_______________________ General Motors Corporation, a Delaware corporation
("GM"), and Electronic Data Systems Corporation, a Delaware corporation ("EDS").
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Registration Rights Agreement, dated as of March 12, 1995 (the
"Registration Agreement") by and between GM and United States Trust Company of
New York, as trustee (the "Trustee") of a trust established under the General
Motors Hourly-Rate Employees Pension Plan (the "Pension Plan"), for the account
of and on behalf of the Pension Plan.
WHEREAS, GM is currently the issuer of the securities referred to as
the "Registrable Securities" and "Class E Common Stock" in the Registration
Agreement and generally has the rights and the obligations of Issuer under the
Registration Agreement;
WHEREAS, in connection with the Split-Off of GM from EDS (the "Split-
Off"), each outstanding share of Class E Common Stock shall be converted into
one share of common stock, $.01 par value per share, of EDS (the "EDS Common
Stock"); and
WHEREAS, the Registration Agreement contemplates that in the event of
a transaction such as the Split-Off, EDS shall generally succeed to the rights
and obligations of Issuer under the Registration Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, GM and EDS hereby
agree as follows:
1. Succession.
----------
(a) Effective as of the consummation of the Split-Off, , all rights,
obligations and restrictions with respect to shares of Class E Common Stock
(including Registrable Securities) set forth in the Registration Agreement shall
apply to the EDS Common Stock.
(b) Effective as of the consummation of the Split-Off, EDS shall be
bound by the Registration Agreement and shall succeed to all rights,
restrictions and obligations of Issuer set forth in the Registration Agreement,
all references to Issuer therein shall thereafter be deemed to be references to
EDS, and GM shall be released from all obligations under the Registration
Agreement.
(c) Notwithstanding subsections (a) and (b) above, (i) all rights and
obligations in Sections 1(a) through 1(e) of the Registration Agreement shall
remain rights and obligations of GM and (ii) GM shall not be released from any
obligations under Section 10 of the Registration Agreement with respect to any
registration of securities issued by GM.
<PAGE>
2. Cooperation. GM and EDS shall take such further action, and
execute such additional documents, as may be reasonably requested by either
party in order to carry out the purposes of this Agreement.
3. Counterparts. This Agreement may be executed in counterparts, and
shall be deemed to have been duly executed and delivered by all parties when
each party has executed a counterpart hereof and delivered an original or
facsimile copy thereof to the other party. Each such counterpart hereof shall
be deemed to be an original, and all of such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto, being duly authorized, have
executed and delivered this Succession Agreement on the date first above
written.
GENERAL MOTORS CORPORATION
By:_____________________________
Name:
Title:
ELECTRONIC DATA SYSTEMS
CORPORATION
By:_____________________________
Name:
Title:
This Succession Agreement (including, without limitation, the release
of GM from obligations under the Registration Agreement as set forth herein
(except as provided in Section 1(c) above)) is acknowledged and agreed to as of
this __ day of ___________ , 1996
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: UNITED STATES TRUST COMPANY
OF NEW YORK, As Trustee
By: _________________________________
Its: _________________________________
<PAGE>
EXHIBIT 10(L)
1984 ELECTRONIC DATA SYSTEMS CORPORATION
STOCK INCENTIVE PLAN
1. PURPOSE OF PLAN. The purpose of the Plan is to provide corporate officers
and key employees of Electronic Data Systems Corporation ("EDS") and its
subsidiaries (EDS and such subsidiaries being referred to hereinafter
collectively as the "Company") with a strong incentive for individual
creativity and contribution to ensure the future growth of the Company.
The Plan is not designed to benefit persons who may be satisfied solely
with past accomplishments but, rather, is designed to reward those who are
deeply committed to a career with the Company and whose ability and
diligence permit such persons to make important contributions to the
success of the Company by enabling such persons to acquire shares of Class
E Common Stock, $0.10 par value ("Class E Stock"), of General Motors
Corporation ("GM"), in the manner contemplated by the Plan. This Plan
covers the sale of shares subject to restrictions ("Restricted Stock"), the
grant of rights, subject to restrictions ("Restricted Stock Units"), to
acquire shares which may or may not be subject to restrictions ("Unit
Stock"), the award of bonus shares which may or may not be subject to
restrictions ("Bonus Stock") and the grant of options (including options
intended to qualify as incentive stock options ("Incentive Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")),
to acquire shares which may or may not be subject to restrictions ("Option
Stock").
2. ADMINISTRATION OF PLAN. This Plan shall be administered and interpreted by
the EDS Executive Compensation Committee (the "Committee"). The Committee
shall be appointed by the Executive Compensation Committee (the "Executive
Compensation Committee") of the Board of Directors of GM (the "Board of
Directors") and shall consist of not less than three persons (at least two
of whom shall be members of the board of directors of EDS). No member of
the Committee shall be eligible, and shall not have been eligible at any
time within one year prior to his appointment to the Committee, for
selection as a person to whom stock may be sold or awarded or to whom
either rights to acquire shares or stock options may be granted pursuant to
the Plan. Subject to Section 3, the Committee shall have full authority,
in its discretion, to determine those corporate officers and key employees
who shall participate in the Plan and the number of shares to be sold or
awarded to each participant and the number of shares to be covered by
either rights to acquire shares or options granted to each participant (it
being understood that more than one sale, award or grant or any combination
thereof may relate to the same participant). Recommendations for
individual awards shall be made to the Committee by the President of EDS.
The Committee may adopt such rules and regulations for the administration
of the Plan as it deems advisable and shall have full authority, in its
discretion, to amend such rules and regulations. The Committee may act by
a meeting in person or take action by unanimous written consent or by means
of a meeting held by conference telephone call or similar communications
equipment pursuant to which all persons participating in the
<PAGE>
meeting can hear each other. The Committee may request advice or assistance
or employ such persons as it deems necessary for proper administration of
the Plan. Any determination made by the Committee shall be conclusive
except that, to the extent required by law or by the Certificate of
Incorporation or By-Laws of GM, the terms of any sale or award of shares or
any grant of either rights to acquire shares or options under the Plan and
the sufficiency of the consideration therefor shall be subject to
ratification by the Board of Directors or its Executive Compensation
Committee prior to such sale, award or grant.
3. ELIGIBLE PARTICIPANTS. Key employees, including officers and directors, of
the Company shall be eligible to participate under the Plan. However: (i)
no member of the board of directors shall be eligible to participate under
the Plan unless he is also a full time employee of the Company; (ii) no
member of the Committee shall be eligible to participate under the Plan;
(iii) no person shall be eligible to participate under the Plan if he owns,
directly or indirectly, more than 5% of the total combined voting power of
all classes of stock of GM; and (iv) not more than 32,000,000 shares may be
sold, awarded or covered by rights or options granted under this Plan with
respect to any one participant.
4. SHARES SUBJECT TO PLAN. An aggregate of 160,000,000 shares of Class E
Stock shall be subject to this Plan. In the discretion of the Board of
Directors or its delegate, such shares may be: (i) treasury shares,
including shares acquired by GM or EDS in open market transactions; or (ii)
authorized but unissued shares. In the event that such shares are
reacquired or newly issued by GM, and except as otherwise authorized by the
Board of Directors or the Committee, GM shall have the right to require the
Company to reimburse GM for such shares in an amount determined by GM,
which amount shall include any brokerage fees and commissions paid by GM
for such shares, less any amounts directly paid to GM by the employees to
whom such shares are issued. If any change is made in the number, class or
rights of shares subject to the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, issuance of rights to subscribe or other change
in capital structure), appropriate adjustments shall be made as to the
maximum number of shares subject to the Plan and the number of shares and
price per share subject to any outstanding award or grant as shall be
equitable, as determined by the Committee, to prevent dilution or
enlargement of such rights; provided, however, that the issuance by GM of
up to 480,000,000 shares of the Class E Stock, either pursuant to or
outside the ambit of the Plan, shall not require an adjustment pursuant to
this Section. The Committee in its sole discretion may provide in any
agreement with a participant relating to the sale, award or grant of
Restricted Stock ("Restricted Stock Agreement"), Restricted Stock Units
("Unit Stock Agreement"), Bonus Stock ("Bonus Stock Agreement"), or Option
Stock ("Option Stock Agreement") or otherwise for adjustments to be made
with respect to shares sold or awarded hereunder. If prior to the
termination of the Plan, shares of Restricted Stock, Unit Stock, Bonus
Stock or Option Stock issued pursuant hereto shall have been repurchased by
or redelivered to GM or EDS (as designated by the Committee) in connection
with the restrictions imposed on such shares pursuant to this Plan, such
repurchased or redelivered shares shall again become
2
<PAGE>
available for sale, award or grant under the Plan. To the extent any
Restricted Stock Units terminate in connection with the restrictions
imposed on such Units (other than pursuant to the delivery of shares in
respect thereof) or any options granted hereunder terminate or expire
unexercised in whole or in part, the shares then so covered shall again
become available for sale, award or grant under the Plan.
5. PRICE. Subject to the provisions of Sections 2, 6, 7, 8 and 9 of the Plan
and to the requirements of applicable law, the Committee shall determine
the price at which shares of Restricted Stock and Unit Stock shall be sold
to participants hereunder and the price at which any options granted to
purchase shares of Option Stock hereunder shall become exercisable. All
shares purchased upon exercise of any option shall be paid for in full at
the time of exercise and such payment may be made in whole or in part by
delivery of shares of Class E Stock already owned by the participant with
such shares being valued for these purposes at 100% of the Fair Market
Value (as defined in Section 21) thereof on the date of the exercise.
6. RESTRICTED STOCK. Shares of Restricted Stock may be sold pursuant to this
Plan at a nominal price which is consistent with the requirements of
applicable state law and which does not exceed 10% of the Fair Market Value
of the shares at the time of grant. All shares of Restricted Stock sold
pursuant to this Plan (including any shares received by the holders thereof
as a result of any adjustment pursuant to Section 4) shall be subject to
the following restrictions:
A. Shares of Unvested Stock (as defined in Section 21) may not be sold,
assigned, transferred or otherwise alienated or hypothecated.
B. Except as otherwise provided in the related Restricted Stock
Agreement, in the event of termination of employment with the Company
by a participant within such period or periods after shares are sold
to him hereunder as is established by the Committee in the related
Restricted Stock Agreement, if such termination is for any reason
other than death, transfer of an employee from employment with EDS or
a subsidiary corporation to employment with GM or a subsidiary of GM
or EDS, Total Disability (as defined in Section 21), Normal Retirement
(as defined in Section 21) or Early Retirement (as defined in Section
21), GM or EDS (as designated by the Committee) shall have the option
to buy for cash all or any part of the shares of Unvested Stock sold
to such participant at the cash price per share paid by him. Such
option shall extend for 60 days following written tender by the
participant of the Unvested Stock to the Secretary of GM or the
Secretary of EDS as required in the related Restricted Stock Agreement
and such purchase shall be as of the date of such termination of
employment (which shall be the date on which the participant is deemed
to have ceased to own the shares). A participant's failure to make the
above tender shall not limit in any manner the rights of GM or EDS to
repurchase shares of Unvested Stock hereunder and in such event the
Secretary of
3
<PAGE>
GM or the Secretary of EDS may give notice to such
participant that his tender shall be deemed to have been made on the
date of termination of employment. In the event of any conflict
between the rights of GM and EDS under this paragraph, the rights of
GM shall take precedence.
C. Except as otherwise provided in the related Restricted Stock
Agreement, in the event a participant who has purchased shares
hereunder ceases to be employed by the Company as the result of death,
Total Disability, Normal Retirement or Early Retirement, then: (i) GM
or EDS (as designated by the Committee) may repurchase that portion of
the shares of Unvested Stock sold to such participant, at such price
and on such terms and conditions, as the Committee shall determine at
such time in its sole discretion; and (ii) the other restrictions
imposed and still existing upon any or all of the shares of Unvested
Stock sold to such participant shall lapse or shall be removed in
accordance with a specified formula, all as shall be determined at
such time in the sole discretion of the Committee.
D. In the event of the failure of any condition to the vesting of shares
of Restricted Stock, all such shares of Unvested Stock shall be
repurchased by GM or EDS (as designated by the Committee) within 60
days after the occurrence of the failure of such condition as shall be
established by the Committee in the Restricted Stock Agreement at the
cash price per share paid by such participant.
E. The Committee may provide in the related Restricted Stock Agreement
for: (i) any other restrictions on any shares of Restricted Stock
sold pursuant to this Plan as it may deem advisable, including,
without limitation, restrictions based on market appreciation of Class
E Stock, increases in the revenues, sales, net worth or net earnings
of EDS or any subsidiary, division or other component thereof, or the
attainment of any other business or financial goal of the Company,
except that the restrictions contained in Section 10 shall be imposed
on all shares of Restricted Stock; and (ii) such further restrictions
as may be advisable to comply with law, including the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), any
stock exchange upon which such share or shares of the same class are
then listed and under any state securities or other laws applicable to
such shares.
F. The Committee shall determine the exercise period within which a right
to acquire shares of Restricted Stock pursuant to this Plan must be
exercised; provided, however, that such exercise period shall in no
event exceed 60 days after the date of the grant of such right and the
participant may not sell, assign, transfer or otherwise alienate or
hypothecate such right during such 60-day period other than, subject
to the other provisions of this Plan, by will or the laws of descent
and distribution and such right shall be exercisable during the
participant's lifetime only by him or his guardian or legal
representative.
4
<PAGE>
7. RESTRICTED STOCK UNITS. Subject to the requirements of applicable law, the
Committee in its sole discretion may grant Restricted Stock Units without
cash consideration. Restricted Stock Units and the shares covered by such
Units (including any shares credited thereto as a result of any adjustment
pursuant to Section 4) shall be subject to the following conditions:
A. Restricted Stock Units and any Unvested Stock received in respect of
such Units may not be sold, assigned, transferred or otherwise
alienated or hypothecated.
B. As specified in the applicable Restricted Stock Unit Agreement,
Restricted Stock Units shall be subject to restrictions similar to
those imposed on Restricted Stock, subject to adjustment, if
applicable, to reflect the lack of cash consideration paid for such
Units.
C. Each Restricted Stock Unit shall entitle the holder thereof to receive
the shares covered by such Unit (including any shares credited thereto
as a result of any adjustment pursuant to Section 4) at such time, in
such amounts and subject to such conditions as specified in the
applicable Restricted Stock Unit Agreement. Such conditions may, in
the sole discretion of the Committee, include the payment of cash
consideration in an amount not to exceed the nominal purchase price
applicable to Restricted Stock determined at the time of grant of such
Units. Upon the issuance of certificates representing such shares, a
corresponding portion of the Restricted Stock Unit shall be cancelled.
D. All shares of Unit Stock received in respect of Restricted Stock Units
(including all shares credited thereto as a result of any adjustment
pursuant to Section 4) shall be free of any restrictions (other than
those advisable to comply with applicable law) or shall be subject to
restrictions similar to those referred to in Section 6 (including
specifically Section 6E) with respect to shares of Restricted Stock as
the Committee shall establish in the related Restricted Stock Unit
Agreement, except that the restrictions contained in Section 10 shall
be imposed on all shares received in respect of any Restricted Stock
Unit.
E. Upon each Class E Stock dividend payment date, each holder of a
Restricted Stock Unit shall be entitled to receive from GM in respect
of the shares then covered by such Unit, which also were so covered on
the record date for such dividend (including any such shares credited
thereto as a result of any adjustment pursuant to Section 4), an
amount in cash equal to the amount of any cash dividend which
otherwise would have been paid to such holder in respect of such
shares if such shares had been registered in the holder's name on the
corresponding record date.
5
<PAGE>
F. No holder of a Restricted Stock Unit shall be deemed to be a holder of
any shares covered by such Unit until the issuance of certificates
representing such shares. Except as provided in Sections 4 and 7E, no
adjustment shall be made for any dividends or distributions or other
rights for which the record date is prior to the date of issuance of
such stock certificates.
8. BONUS STOCK. Subject to the requirements of applicable law, the Committee
in its sole discretion may award shares of Bonus Stock to participants
hereunder without cash consideration and may determine in the related Bonus
Stock Agreement whether shares of Bonus Stock awarded pursuant to the Plan
(including any shares received by the holders hereof as a result of any
adjustment pursuant to Section 4) shall be free of any restrictions (other
than those advisable to comply with law) or shall be subject to
restrictions similar to those referred to in Section 6 (including
specifically Section 6E) with respect to shares of Restricted Stock. In
the event that any restrictions (other than those contained in Section 10
which shall be imposed on all shares of Bonus Stock) are imposed on shares
of Bonus Stock awarded pursuant to the Plan, then such shares shall be
subject to at least the following restrictions:
A. Shares of Unvested Stock may not be sold, assigned, transferred or
otherwise alienated or hypothecated.
B. In the event of the failure of any condition to the vesting of shares
of Bonus Stock, all such shares of Unvested Stock shall be delivered
to GM or EDS (as designated by the Committee) within 60 days after the
occurrence of the failure of such condition as is established by the
Committee without any payment from GM or EDS.
9. STOCK OPTIONS. Subject to the provisions of Sections 2 and 3 of the Plan,
all options granted pursuant to the Plan shall have such terms and
conditions as the Committee in its sole discretion shall determine,
including the period during which they may be exercised in whole or in part
and the conditions under which they may be terminated and such other
provisions as may be advisable to comply with law or the rules of any stock
exchange, but the exercise price shall not be less than 100% of the Fair
Market Value of the underlying shares of stock on the date the option is
granted. Each option shall have the following additional conditions:
A. The options shall not be transferable other than by will or the laws
of descent and distribution and shall be exercisable during the
participant's lifetime only by him and, except as otherwise determined
by the Committee, shall only be exercisable prior to termination of
employment with the Company.
B. Participants shall have no right to receive any fractional shares upon
the exercise of options granted under the Plan.
6
<PAGE>
C. No optionee shall be deemed to be a holder of any shares of Class E
Stock until the issuance of certificates after the exercise of an
option. No adjustment shall be made for any dividends or
distributions or other rights for which the record date is prior to
the date such stock certificates are so issued except as provided in
Section 9D below.
D. The number of shares subject to an option and the price per share
shall be appropriately adjusted pursuant to Section 4.
E. All shares of Option Stock (and all shares received thereon as the
result of any adjustment pursuant to Section 4) shall be free of any
restrictions (other than those advisable to comply with applicable
law) or shall be subject to restrictions similar to those referred to
in Section 6 (including specifically Section 6E) with respect to
shares of Restricted Stock as the Committee shall establish in the
related Option Stock Agreement, except that the restriction contained
in Section 10 shall be imposed on all shares of Option Stock.
F. An Incentive Option shall lapse and the participant's rights with
respect to such Incentive Option shall terminate not later than ten
years from the date such Incentive Option is granted.
10. COMPETITION BY PARTICIPANT. In the event a participant, within such period
of time and such geographic limitation as shall be specified in the related
Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock
Agreement or Option Stock Agreement, directly or indirectly, individually
or as an employee, partner, officer, director or stockholder or in any
other capacity whatsoever of any person, firm, partnership or corporation:
(i) participates in any activity as or for a competitor of the Company,
which is the same or similar to the activities in which Employee was
involved at the Company at the time of Employee's termination from the
Company during the prior 12-month period; (ii) hires, attempts to hire or
assists any other person or entity in hiring or attempting to hire any
employee of the Company, or any person who was an employee of the Company
within the prior 6-month period; (iii) solicits, in competition with the
Company, the business of any customer of the Company or any person or
entity whose business the Company solicited during the 6-month period prior
to termination; or (iv) participates in any activity for any customer of
the Company or any person or entity that the Company solicited to become a
customer during the 6-month period prior to Employee's termination, which
is the same as or similar to those activities in which Employee was
involved at the time of termination; the following provisions shall apply
with respect to any shares of Restricted Stock, Unit Stock, Bonus Stock and
Option Stock received and Restricted Stock Units and options granted under
this Plan as of the date of the first occurrence prohibited under this
provision:
7
<PAGE>
A. Such participant: (i) shall immediately sell and deliver to GM or EDS
(as designated by the Committee), upon demand, all shares of
Restricted Stock, Unit Stock, Bonus Stock or Option Stock sold or
awarded to the participant under the Plan as to which the participant
is still the direct or indirect beneficial owner at the cash price per
share, if any, paid by the participant; and (ii) shall pay to GM or
EDS (as designated by the Committee) an amount in cash with respect to
each share of Restricted Stock, Unit Stock, Bonus Stock and Option
Stock not still so held equal to the Fair Market Value (as defined in
Section 21) of each such share on the first date on which such share
is no longer held less the price paid by him for such share.
B. Any option outstanding under the Plan shall automatically terminate
and shall no longer be exercisable and all Restricted Stock Units then
held shall automatically terminate.
C. The provisions of this Section shall not limit or restrict in any
manner any rights or remedies which EDS, the Company or GM and its
subsidiaries may have under any separate employment agreement with a
participant or otherwise with respect to competition by a participant.
If any provision of this Section 10 or any similar provision contained in a
Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock
Agreement or Option Stock Agreement should be found by any court of
competent jurisdiction to be unreasonable by reason of its being too broad
as to the period of time, territory, aspects of business or customers
covered or otherwise, then, and in that event, such provision shall
nevertheless remain valid and fully effective, but shall be considered to
be amended so that the period of time, territory, aspects of business or
customers covered or otherwise set forth shall be changed to be the maximum
period of time, the largest territory, the most aspects of business and
customers covered and/or the broadest other limitations, as the case may
be, which would be found reasonable and enforceable by such court and
similarly, if any remedy is so found to be unenforceable in whole or in
part, or to any extent, such provision shall remain in effect only to the
extent the remedies would be enforceable by such court.
11. RELATED AGREEMENTS. In order to enforce the restrictions imposed upon
shares issued and rights and options granted hereunder and to comply with
Federal and state securities laws and the Code, EDS shall enter into a
Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock
Agreement or Option Stock Agreement with each participant containing such
terms and conditions, including additional restrictions of the type
described in Section 6E above, as the Committee shall determine, and the
Committee may require that the certificates representing shares of Unvested
Stock shall remain in the physical custody of EDS or GM (as designated by
the Committee) or an escrow holder. The Committee shall have full
authority upon the consent of a participant to amend the terms and
provisions of any such agreement relating to the participant or the terms
of any rights or options relating to the participant which are outstanding
under the Plan.
8
<PAGE>
12. NO EFFECT ON EMPLOYMENT. Nothing herein contained, including the sale or
award of any shares and the grant of any rights or options, shall affect
the rights of the Company to terminate any participant's employment at any
time for any reason.
13. EXEMPTION FROM PENSION COMPUTATION. By acceptance of shares sold or
awarded or rights or options granted under this Plan, each participant
shall be deemed to agree that it is special incentive compensation and that
it will not be taken into account as "wages" or "salary" in pension,
retirement or other employee benefit plans or arrangements of the Company,
except as otherwise determined by the Company. In addition, each
beneficiary of a deceased participant shall be deemed to agree that such
sale, award or grant will not affect the amount of any life insurance
coverage available to such beneficiary under any life insurance plan
covering employees of the Company.
14. LEGEND. In order to enforce the restrictions imposed upon shares sold or
awarded hereunder (other than those contained in Section 10), the Committee
may cause a legend or legends to be placed on any certificates representing
shares sold or awarded pursuant to this Plan, which legend or legends shall
make appropriate reference to the restrictions imposed hereunder.
15. AMENDMENTS. The Plan may be amended at any time by the Board of Directors
or the Committee, provided that, without the approval of the stockholders
of GM entitled to vote thereon, no such amendment shall become effective if
it would: (i) increase the number of shares of Class E Stock which may be
sold or awarded under the Plan; or (ii) modify the requirements as to
eligibility for participation in the Plan.
16. TERMINATION. Unless earlier terminated by the Board of Directors or the
Committee, the Plan shall terminate on October 17, 2004. No shares shall
be sold or issued (except to the extent issued in connection with rights or
options previously granted hereunder) or rights or options granted
hereunder after such date. The termination of the Plan, however, shall not
affect any restrictions previously imposed on shares issued pursuant to the
Plan or alter the rights of participants with respect to rights or options
granted or shares issued (including Unvested Stock) pursuant to the Plan.
17. RIGHTS OF PARTICIPANTS AS STOCKHOLDERS. Each participant acquiring shares
of Restricted Stock, Unit Stock, Bonus Stock or Option Stock hereunder
shall, upon the issuance of certificates with respect to such shares, be
the owner of such shares as provided herein and in the related Restricted
Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock Agreement or
Option Stock Agreement and, except as otherwise provided herein or in any
such related Agreement, shall be entitled to full voting, dividend and
distribution rights like any other holder of Class E Stock as long as such
participant remains the owner thereof as provided.
9
<PAGE>
18. GOVERNING LAW. The Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Texas.
19. VALIDITY AND LEGALITY. If any provision of the Plan should be found by any
court of competent jurisdiction to be invalid, illegal or unenforceable, in
whole or in part, such declaration shall not affect the validity, legality
or enforceability of any remaining provision or portion thereof, which
remaining provision or portion shall remain in full force and effect as if
the Plan had been adopted with the invalid, illegal or unenforceable
provision or portion thereof eliminated.
20. EFFECTIVE DATE. The Plan shall be deemed effective upon its approval by
the Board of Directors; provided, however, that no stock, rights or options
may be sold, awarded or granted under the Plan until a Registration
Statement under the Securities Act covering the shares to be issued under
the Plan has become effective.
21. DEFINITIONS. For purpose of the Plan, the following additional definitions
shall be applicable:
"Early Retirement" and "Normal Retirement" shall mean the discontinuance of
employment of a participant in accordance with the early and normal
retirement provisions, respectively, of the Electronic Data Systems
Corporation Retirement Plan, as amended. In the event that at any time EDS
does not have a proposed or effective retirement plan, such terms shall be
defined by regulation of the Committee.
"Fair Market Value" of a share of Class E Stock shall be the mean between
the high and low sale prices for Class E Stock as reported in The Wall
Street Journal on the date of the occurrence of the event requiring the
determination of the Fair Market Value of such share of Class E Stock or on
the date immediately prior thereto on which such prices for Class E Stock
are so reported or, if not so reported, as reported in another newspaper of
national circulation selected by the Committee or, in case no such sales
take place on such date, the mean of the closing bid and asked prices
(regular way) on the New York Stock Exchange Composite Tape on such date
or, if the Class E Stock is not then listed or admitted to trading on the
New York Stock Exchange, the mean between the high and low sale prices on
such date or, in case no sales take place on such date, the mean of the
closing bid and asked prices (regular way) on the largest principal
national securities exchange on which such stock is then listed or admitted
to trading, or if not listed or admitted to trading on any principal
national securities exchange, then the last reported sale price for such
shares in the over-the-counter market, as reported on the National
Association of Securities Dealers Automated Quotation System, or, if such
sale price shall not be reported thereon, the mean of the closing bid and
asked prices as reported thereon, or if such prices shall not be reported
thereon, as the same shall be reported by the National Quotation Bureau
Incorporated, or, in all other cases, the mean of two appraisals of fair
market value, each of
10
<PAGE>
which shall be furnished by a New York Stock Exchange member firm selected
by the Committee for that purpose.
"Total Disability" shall mean that a participant is determined to be, in
the sole discretion of the Committee, disabled, due to sickness or injury
from a cause other than an excluded cause specified below, and such
disability is likely to be continuous and permanent, such that the
participant is, in the opinion of the Committee, completely unable to
perform any and every duty pertaining to his occupation with the Company
and unable to engage in any reasonable occupation with the Company or any
other employer, where "reasonable occupation" shall mean any occupation
which other individuals who have an educational and employment background
similar to that of the participant, and are in good health, are actually
engaged in as their principal means of financial support. Any opinion of
the Committee rendered in accordance herewith shall be final and conclusive
and shall not be subject to review by anyone. A participant will not be
considered to have suffered a Total Disability if, in the opinion of the
Committee considering all of the circumstances, the disability is a result
of: (i) excessive and habitual use by the participant of drugs,
intoxicants or narcotics; (ii) injury or disease sustained by the
participant which was diagnosed or discovered subsequent to the date his
employment was terminated; or (iii) injury or sickness sustained by the
participant as a result of reckless or wanton disregard of his own health
or safety, or self-inflicted injuries. The Committee may require proof in
such form as it may decide, including, in all cases where practicable, the
certificate of a duly licensed physician, satisfactory to the Committee,
that the participant has become disabled as provided herein.
"Unvested Stock" shall mean all the shares of Restricted Stock, Unit Stock,
Bonus Stock and Option Stock other than Vested Stock.
"Vested Stock" shall mean all shares of Restricted Stock, Unit Stock, Bonus
Stock and Option Stock which at the time in question have vested in
accordance with the vesting provisions contained in the Plan and any
related Restricted Stock, Restricted Stock Unit, Bonus Stock or Option
Stock Agreement.
11
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO CLASS E COMMON STOCK
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net income attributable to Class E Common Stock. $795.5 $444.4 $367.2
Dividends on Class E Common Stock............... 205.4 124.8 97.2
-------- -------- --------
Undistributed earnings.......................... 590.1 319.6 270.0
Adjustments
Change in earnings related to the assumed
share transactions........................... 0.1 -- 10.6
Dividends on assumed Class E Common Stock
transactions................................. -- -- (2.8)
-------- -------- --------
Adjusted earnings attributable to common stock.. $ 590.2 $ 319.6 $ 277.8
======== ======== ========
Weighted average Class E Common shares
outstanding.................................... 404.6 260.3 243.0
Adjustments for shares issued on assumed
conversion of preference stock................. -- -- 7.0
-------- -------- --------
Adjusted weighted average Class E Common shares
outstanding.................................... 404.6 260.3 250.0
======== ======== ========
Per share data
Earnings per share attributable to undistributed
earnings on Class E Common Stock............... $ 1.46 $ 1.23 $ 1.11
Dividends....................................... 0.52 0.48 0.40
Adjustment...................................... (0.02)(1) -- --
-------- -------- --------
Earnings per share attributable to Class E
Common Stock................................... $ 1.96 $ 1.71 $ 1.51
======== ======== ========
</TABLE>
Note: The difference between fully diluted and primary earnings per share is
immaterial.
- --------
(1) The per-share reported earnings attributable to Class E Common Stock of
$1.96 equals the sum of the separate computations of each of the four
quarters, consistent with the requirements for calculating earnings per
share based on EDS earnings and the Class E denominator. The calendar year
calculation shown above (based on 1995 weighted average outstanding Class
E shares for the year) requires an adjustment of $0.02 due to the
significant differences in the weighted average number of shares
outstanding in each quarter resulting from the Class E stock contribution
to the GM U.S. Hourly Pension Plan.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF EDS
A. T. Kearney A/S, a Denmark corporation
A. T. Kearney AB, a Sweden corporation
A. T. Kearney AG, a Switzerland corporation
A. T. Kearney AS, a Norway corporation
A. T. Kearney Bermuda Ltd., a Bermuda corporation
A. T. Kearney de Venezuela, C.A., a Venezuela corporation
A. T. Kearney GmbH, a Germany corporation
A. T. Kearney HE, a Norway corporation
A. T. Kearney International, AS, a Norway corporation
A. T. Kearney International, Inc., a Delaware corporation
A. T. Kearney Ltda., a Brazil corporation
A. T. Kearney, Inc., a Delaware corporation
A. T. Kearney, Limited, an England corporation
A. T. Kearney, Ltd., an Ontario corporation
A. T. Kearney, Oy., a Finland corporation
A. T. Kearney, S.A., a Spain corporation
A. T. Kearney, SpA, an Italy corporation
American Network Leasing Corporation, a Nevada corporation
(does business under assumed/fictitious names of American Network Leasing
Corporation of Nevada, ANLC Corporation, Legacy Recovery Group and Premier
Collection Services)
Appex, Inc., a Delaware corporation
CGT Compania General de Telecomunicaciones S.A., a Spain corporation
China Management Systems Corporation, a Republic of Taiwan (China) corporation
Database Tecnologie S.p.A., an Italy corporation
Deep Star, Inc., a California corporation
Desarrollo y Servicios de Informatica y Communiciones, S.A. de C.V. (DESIC), a
Mexico corporation
E.D.S. de Mexico, Sociedad Anonima de Capital Variable, a Mexico corporation
E.D.S. International Corporation, a Texas corporation
E.D.S. International Limited, an England corporation
E.D.S. of Canada, Ltd., an Ontario corporation
E.D.S. Service, Ltd., a Japan corporation
E.D.S. World Corporation (Far East), a Nevada corporation
E.D.S. World Corporation (Netherlands), a Texas corporation
Edley S.A., a Uruguay corporation
EDS (Australia) Pty Limited, an Australia corporation
EDS (Electronic Data Systems) Limited, an England corporation
EDS (Europe) S.A., a Switzerland corporation
EDS (New Zealand) Holdings Limited, a New Zealand corporation
EDS (New Zealand) Limited Staff Superannuation Fund, a New Zealand corporation
EDS (Schweiz) AG, a Switzerland corporation
EDS Acquisition Corporation #4, a Delaware corporation
EDS Antares, Inc., a Nevada corporation
EDS Beteiligungsverwaltungsgesellschaft Duisburg mbH, a Germany corporation
EDS Defence Limited, an England corporation
EDS Defence N.V./S.A., a Belgium corporation
EDS Electronic Data System Luxembourg S.A., a Luxembourg corporation
EDS Electronic Data Systems (City) Limited, an England corporation
EDS Electronic Data Systems (Deutschland) GmbH, a Germany corporation
1
<PAGE>
EDS Electronic Data Systems (Hong Kong) Limited, a Hong Kong corporation
EDS Electronic Data Systems (Philippines), Inc., a Philippines corporation
EDS Electronic Data Systems del Peru S.A., a Peru corporation
EDS Electronic Data Systems Italia S.p.A., an Italy corporation
EDS Electronic Data Systems Italia Software S.p.A., an Italy corporation
EDS Electronic Financial Services, Inc., a Delaware corporation
EDS Elektronikus Adatrendszer Kft, a Hungary corporation
EDS Europe, an England corporation
EDS Eurosept S.A.S., a France corporation
EDS Export Corporation, a St. Croix corporation
EDS Finance plc, an England corporation
EDS Financial Services Company (Ireland) Limited, an Ireland corporation
EDS Fleet Services, Inc., a Texas corporation
EDS Forsvars Services AB, a Sweden corporation
EDS Holding GmbH, a Germany corporation
EDS Industrie A.G., a Switzerland corporation
EDS Industrie Software GmbH, a Germany corporation
EDS Information Management AG, a Switzerland corporation
EDS Informationstechnologie & Service GmbH, a Germany corporation
EDS Informatique S.A., a Switzerland corporation
EDS International (France) S.A.S., a France corporation
EDS International (Singapore) Pte. Limited, a Singapore corporation
EDS Kaufmannische Dienste und Informatik GmbH, a Germany corporation
EDS New Zealand Limited, a New Zealand corporation
EDS Personal Communications Corporation, a Delaware corporation
EDS Technical Products Corporation, a Delaware corporation
EDS Vermogensverwaltungs-GmbH, a Germany corporation
EDS VLT Holdings, Inc., a Nevada corporation
EDS-Electronic Data Systems de Portugal Lda, a Portugal corporation
EDS-Electronic Data Systems do Brasil Ltda, a Brazil corporation
EDS-Padcom Clinical Research Beteiligungs GmbH, a Germany corporation
EDS-Scicon N.V., a Belgium corporation
EDS-Scicon, US Software Products Group Incorporated, a Delaware corporation
(does business under assumed/fictitious name of Ssytems Designers Software
Inc.)
EDSCICON (Malaysia) Sdn. Bhd., a Malaysia corporation
Electronic Data Systems (EDS) A/S, a Norway corporation
Electronic Data Systems (EDS) de Argentina S.A., an Argentina corporation
Electronic Data Systems (EDS) Gesellschaft mbH, an Austria corporation
Electronic Data Systems (EDS) International B.V., a Netherlands corporation
Electronic Data Systems (EDS) Israel, Ltd., an Israel corporation
Electronic Data Systems (EDS) Sweden AB, a Sweden corporation
Electronic Data Systems (Ireland) Limited, an Ireland corporation
Electronic Data Systems Belgium N.V., a Belgium corporation
Electronic Data Systems Chile, S.A., a Chile corporation
Electronic Data Systems Colombia, S.A., a Colombia corporation
Electronic Data Systems Danmark A/S, a Denmark corporation
Electronic Data Systems de Venezuela "EDS" C.A., a Venezuela corporation
Electronic Data Systems Espana S.A., a Spain corporation
Electronic Data Systems IT Services (M) Sdn. Bhd., a Malaysia corporation
Electronic Data Systems Limited, an England corporation
Electronic Data Systems Madrid, a Spain corporation
Electronic Data Systems, Ltd., a Japan corporation
2
<PAGE>
Eurexcel Associes S.A., a France corporation
Federal Computer Services Corporation, a Delaware corporation
GCS Limited, a New Zealand corporation
ICR Internationale Consulting und Rechenzentrum GmbH, a Germany corporation
IGR Ingeneria y Gestion de Redes S.A., a Spain corporation
Industrie Daten IDee GmbH, a Germany corporation
Informatica Centrum Infrastructuur en Milieu B.V.(ICIM), a Netherlands
corporation
Information Interchange Limited, a New Zealand corporation
Informatique Proget S.A., a Belgium corporation
Istiservice, an Italy corporation
Japan Systems Company Limited, a Japan corporation
K.K. C-2 World, a Japan corporation
K.K. Theta Tech, a Japan corporation
K.K. Tokai Atene Computer, a Japan corporation
Keisai Asociados, C.A., a Venezuela corporation
Keisai Panama, S.A., a Panama corporation
Lenguajes y Servicios Informaticos, S.A. (LEINSA), a Spain corporation
LG-EDS Systems, Inc., a Korea corporation
LINC Computer, Inc., a Japan corporation
M&DR Consultans Marketing and Data Research S.r.l., an Italy corporation
M&SD Network Services, Inc., a Delaware corporation
Management Computer Equipment S.A., a Belgium corporation
National Heritage Insurance Company, a Texas corporation
Nova Domus S.r.l., an Italy corporation
OAN Services, Inc., a Texas corporation
(does business under assumed/fictitious name of EDS OAN Services, Inc.)
Padcom Clinical Research GmbH, a Germany corporation
Pecos Holdings Corporation, a Delaware corporation
Power Investment Corporation, a Nevada corporation
(does business under assumed/fictitious name of Power Cogeneration of
Nevada)
PremiTech Corporation, a Texas corporation
Proget France S.A., a France corporation
Progical S.A., a France corporation
SD-Scicon Ltd, an England corporation
SD-Scicon Pte Limited, a Singapore corporation
Servicios Mexicanos E.D.S., S.A. de C.V., a Mexico corporation
Sociedad Anonima de Teleinformatica para Cajas de Ahorros (SATEICA), a Spain
corporation
Subarban Limited-Liability Company, a Nevada corporation
Telecommunications International, Inc., a California corporation
(does business under assumed/fictitious name of TIC)
Trade Management Services, Inc., a Nevada corporation
UMW-EDS Technologies Sdn. Bhd., a Malaysia corporation
Varitel, Inc., a California corporation
Ward FSC, Ltd, a Bermuda corporation
Electronic Data Systems Corporation transacts business in various jurisdictions
under the following assumed/fictitious names for specific purposes: BEI
Golembe, Encore Auto Financing, Inc., Energy Management Associates, Maryland
Health Information Network and Premier Results.
3
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
GENERAL MOTORS CORPORATION:
We consent to the incorporation by reference in this Solicitation
Statement/Prospectus of General Motors Corporation and Registration Statement
on Form S-4 of Electronic Data Systems Holding Corporation of our reports
dated January 29, 1996, appearing in the Annual Report on Form 10-K of General
Motors Corporation for the year ended December 31, 1995, as Amended, and to
the reference to us under the heading "Experts" in the Solicitation
Statement/Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- ----------------------
Deloitte & Touche LLP
Detroit, Michigan
April 16, 1996
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT AUDITORS
THE BOARDS OF DIRECTORS
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION
GENERAL MOTORS CORPORATION:
We consent to the use of our reports included and incorporated by reference
herein and to the reference to our firm under the heading "Experts" in the
Solicitation Statement/Prospectus, which is part of this Registration
Statement.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
April 15, 1996
<PAGE>
EXHIBIT 23(E)
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter dated March 31, 1996 to
the Board of Directors of General Motors Corporation included as Appendix B-1
to the Solicitation Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed split-off of
Electronic Data Systems Holding Corporation from General Motors Corporation
and to the references to such opinion in such Solicitation
Statement/Prospectus under the captions "Summary--The Transactions--Fairness
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated," "Summary--The
Transactions--Recommendations of the Capital Stock Committee and the GM Board;
Fairness of the Transactions," "Special Factors--Background of the Split-Off,"
"Special Factors--Recommendations of the Capital Stock Committee and the GM
Board; Fairness of the Transactions" and "Special Factors--Fairness Opinions--
Merrill Lynch Fairness Opinion." In giving such consent, we do not admit that
we come within the category of persons whose consent is required under Section
7 of the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder, nor do we thereby admit
that we are experts with respect to any part of such Registration Statement
within the meaning of the term "experts" as used in the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ Merrill Lynch, Pierce, Fenner &
Smith Incorporated
April 16, 1996
<PAGE>
EXHIBIT 23(F)
CONSENT OF LEHMAN BROTHERS INC.
We hereby consent to the use of our opinion letter dated March 31, 1996 to
the Board of Directors of General Motors Corporation included as Appendix B-2
to the Solicitation Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed split-off of
Electronic Data Systems Holding Corporation from General Motors Corporation
and to the references to such opinion in such Solicitation
Statement/Prospectus under the captions "Summary--The Transactions--Fairness
Opinions of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated,"
"Summary--The Transactions--Recommendations of the Capital Stock Committee and
the GM Board; Fairness of the Transactions," "Special Factors--Background of
the Split-Off," "Special Factors--Recommendations of the Capital Stock
Committee and the GM Board; Fairness of the Transactions" and "Special
Factors--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
/s/ Lehman Brothers Inc.
April 15, 1996
<PAGE>
EXHIBIT 23(G)
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
We hereby consent to the use of our opinion letter dated March 31, 1996 to
the Board of Directors of General Motors Corporation included as Appendix B-3
to the Solicitation Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed split-off of
Electronic Data Systems Holding Corporation from General Motors Corporation
and to the references to such opinion in such Solicitation
Statement/Prospectus under the captions "Summary--The Transactions--Fairness
Opinions of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated,"
"Summary--The Transactions--Recommendations of the Capital Stock Committee and
the GM Board; Fairness of the Transactions," "Special Factors--Background of
the Split-Off," "Special Factors--Recommendations of the Capital Stock
Committee and the GM Board; Fairness of the Transactions" and "Special
Factors--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
/s/ Morgan Stanley & Co.
Incorporated
April 15, 1996
<PAGE>
EXHIBIT 99
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 6, 1996 /S/ Ray L. Hunt
---------------
Ray L. Hunt
<PAGE>
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 6, 1996 /S/ James A. Baker III
----------------------
James A. Baker III
<PAGE>
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 15, 1996 /S/ Richard B. Cheney
----------------------
Richard B. Cheney
<PAGE>
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 7, 1996 /S/ Ray J. Groves
-----------------
Ray J. Groves
<PAGE>
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 6, 1996 /S/ Dr. Judith Rodin
--------------------
Dr. Judith Rodin
<PAGE>
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 11, 1996 /S/ Enrique J. Sosa
-------------------
Enrique J. Sosa
<PAGE>
CONSENT OF PROSPECTIVE DIRECTOR
The undersigned hereby consents to the naming of the undersigned as a
person expected to become a director of Electronic Data Systems Holding
Corporation, a Delaware corporation ("EDS"), in the registration statement on
Form S-4 to be filed by EDS in connection with the proposed split-off of EDS
from General Motors Corporation.
Date: March 11, 1996 /S/ Robert Kidder
-----------------
Robert Kidder
