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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
PEROT SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2230700
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12377 MERIT DRIVE, SUITE 1100
DALLAS, TEXAS 75251
(Address of Principal Executive Offices) (Zip Code)
(972) 383-5600
(Registrant's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK
PAR VALUE $.01 PER SHARE
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ITEM 1. BUSINESS.
Perot Systems Corporation (the "Company") was founded as a Texas
corporation in 1988 by Ross Perot and eight business associates. The Company
reincorporated in Delaware in December 1995. The Company is a leading
information technology ("IT") services and business transformation company
helping clients devise, plan, implement and manage business and IT solutions.
SERVICES
The Company pursues both opportunities to provide its services under
long-term operations contracts and on shorter-term systems integration,
development and consulting projects. The benefits of this approach include more
efficient use of staff between large engagements, the assimilation of new
industry expertise and diversification of the Company's client base. The
Company's service offerings include the following:
Systems Integration - The Company designs and implements IT systems for
clients, including constructing network architectures, integrating system
components and implementing the migration of application systems to new
platforms.
Systems Operation - The Company manages, operates and maintains client
data processing systems, including networks, desktop computing environments,
data centers, print centers and support functions.
Technical Consulting - The Company assists clients with strategic
decisions regarding platforms, networks and delivery media, the development of
overall architectures for IT systems, the selection of vendors and planning
transitions from one platform, technology or application to another.
Business Consulting - The Company assesses and develops business
strategies, evaluates and designs organizational structures, assists clients in
managing major change events, reengineers client operational processes and
assists clients with people programs.
Software Development - The Company develops application software solutions
for its clients.
The Company creates integrated service offerings to meet a client's needs
from the Company's technical and business core competencies. Examples of these
core competencies include network and client/server applications, internet and
intranet services, object-oriented technology, data mining and data
warehousing, business process automation, legacy systems, customer relationship
management and consulting.
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MARKETS
The Company conducts its business and provides its services in North
America, Europe and Asia through a combination of industry groups,
geographically based project offices, consulting groups and competency groups.
Industry groups focus on delivering services which are customized to the
particular client and are designed by business and technical experts with
extensive knowledge of the group's industry. The industry groups package and
deliver services using skills and technologies within the industry group and
may also call on discrete competency groups maintained by the Company, such as
business consulting and object-oriented technology, in order to bring
cross-industry skills to the client engagement. The Company's industry groups
include the following:
Global Financial Services. The Global Financial Services group serves
wholesale, commercial and retail banks, investment banks, brokerage firms and
other financial institutions. The Global Financial Services group helps clients
understand and capitalize on emerging market opportunities, including the
support of global infrastructure systems, electronic commerce over the
internet, customer relationship management and state-of-the-art trading and
settlement systems.
Healthcare. The Healthcare group serves managed care networks, hospital
groups, healthcare product distributors and other healthcare companies. The
Healthcare group's services emphasize the creation of integrated health
networks with the tools to manage and evaluate care, cost and quality outcomes.
The Healthcare group assists its clients with information access and
connectivity to provide tools for transaction management, care management,
decision support and internet-based demand management systems.
Energy. The Energy group serves municipal and private utilities, related
service providers and other energy companies. The Energy group helps clients
transform their businesses to commercially driven, open-competition models. In
addition, the Energy group is actively involved in the creation and management
of power exchange projects.
Communications and Media. The Communications and Media group serves
providers of voice, data, image, video, entertainment, media and information
services through wireless and wireline networks. The Communications and Media
group assists its clients with business strategy, billing, online and customer
care programs, quality assurance and testing.
Manufacturing. The Manufacturing group serves a variety of manufacturing
clients, including companies in the automobile manufacturing, automobile parts
manufacturing, steel and plastics businesses. The group provides
industry-specific solutions, including supply chain management, planning and
scheduling, order
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management and assistance with warehousing, distribution, production and
finance applications.
Travel & Transportation. The Travel and Transportation group serves rental
car companies, airlines, travel agencies and other companies in the travel and
transportation industry. This group provides its clients with expertise in
business planning, reservations systems, inventory and asset management,
customer service, billing, communications and quality assurance.
The Company has project offices in Dallas, Texas, Detroit, Michigan,
Reston, Virginia and Denver, Colorado. The project offices provide services to
a wide range of clients not encompassed by the Company's specific industry
groups and support the industry groups. The project offices typically pursue
shorter-term systems integration, software development and consulting projects.
As with the industry groups, the project offices package and deliver services
using skills and technologies within those offices and, in some cases, call on
the Company's discrete competency groups.
The Company's business consulting groups market and deliver their services
directly to clients and as part of integrated service offerings by the Company.
The Company maintains technical competency groups in order to leverage
certain technical skills across the Company's industry groups and project
offices. These groups support the design and delivery of services by the
Company's industry groups and project offices. The Company's object-oriented
group also markets and delivers its services directly to clients.
SWISS BANK CORPORATION
In January 1996, the Company formed a strategic alliance with Swiss Bank
Corporation ("Swiss Bank") which involved (i) a long-term contract for the
Company to deliver IT services to Swiss Bank's SBC Warburg Division ("SBC
Warburg"), (ii) separate agreements to provide services to other Swiss Bank
operating units and to permit the Company to use certain Swiss Bank assets and
(iii) the grant to Swiss Bank of options to acquire stock of the Company. In
April 1997, the Company concluded the renegotiation of the terms of its
strategic alliance with Swiss Bank. The new terms are effective from January 1,
1997 and involve (i) the restructuring of the IT services contract for SBC
Warburg, (ii) the termination of all options to acquire stock of the Company
that were granted in connection with the original transactions and (iii) the
sale to Swiss Bank of stock of the Company and options to purchase stock of the
Company. The agreements that contain the terms of the Swiss Bank alliance, as
renegotiated, are collectively called the "Swiss Bank Agreements". Pursuant to
the terms of the Swiss Bank Agreements, the Company also continues to hold a
40% stake in Swiss Bank's IT subsidiary, Systor AG ("Systor"). A portion of the
Company's interest in Systor will be returned to Swiss Bank if the SBC Warburg
EPI Agreement is terminated. The portion that would be returned to Swiss Bank
upon such a termination declines ratably over a 10-year period which began on
January 1, 1997.
The following summary of the principal Swiss Bank Agreements is qualified
in its entirety by reference to such agreements, copies of which are attached
hereto as Exhibits 10.30, 10.31 and 10.32.
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Master Operating Agreement
The Amended and Restated Master Operating Agreement, dated as of January
1, 1997, between the Company and Swiss Bank (the "Master Operating Agreement"),
contains the standard terms and conditions that apply to all agreements ("EPI
Agreements") pursuant to which the Company provides or may, in the future,
provide operational management services to Swiss Bank and its affiliates. The
Master Operating Agreement has an indefinite term; however, it may be
terminated by either party on or after December 31, 2008. In addition, the
Company may terminate the Master Operating Agreement and certain EPI Agreements
for cause, non-payment, Swiss Bank's insolvency and certain cross-defaults.
Swiss Bank may terminate the Master Operating Agreement and certain EPI
Agreements for cause, the Company's insolvency, a change in control of the
Company, the Company's discontinuance of its provision of IT services, certain
cross-defaults, the occurrence of certain significant events at Swiss Bank and
the Company's non-compliance with Swiss Bank's security procedures.
SBC Warburg EPI Agreement
The Amended and Restated Agreement for EPI Operational Management, dated
as of January 1, 1997, between Swiss Bank and the Company (the "SBC Warburg EPI
Agreement"), governs the relationship between Swiss Bank and the Company with
respect to SBC Warburg. The SBC Warburg EPI Agreement requires that Swiss Bank
obtain from the Company SBC Warburg's requirements for the operational
management of its technology resources (including mainframes, desktops, and
voice and data networks), excluding hardware and proprietary software
applications development. The term of the SBC Warburg EPI Agreement is 10 years
beginning January 1, 1997.
The Company's charges for services provided under the SBC Warburg EPI
Agreement are generally based on reimbursement of all costs, other than Company
corporate overhead, incurred by the Company in the performance of services for
SBC Warburg. In addition, the Company will receive an agreed annual amount
subject to bonuses and penalties related to the Company's performance on
certain defined metrics.
PSC Stock Agreement
Pursuant to the Amended and Restated PSC Stock Option and Purchase
Agreement, dated as of April 24, 1997 (the "PSC Stock Agreement"), the Company
issued and sold to Swiss Bank options (the "SBC Options"), including options to
purchase 3,617,160 shares of the Company's nonvoting Class B Common Stock, par
value $.01 per share ("Class B Common Stock," and such shares, "Class B
Shares") at a purchase price of $2.25 per option
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share (the "SBC Warburg Options"). The Company also issued and sold to Swiss
Bank 50,000 Class B Shares at a purchase price of $7.30 per share (the "SBC
Warburg Shares"). Subject to regulatory limits, the SBC Warburg Options are
exercisable immediately and from time to time until they expire at an exercise
price of $7.30 per share. The SBC Warburg Options expire five years after they
vest; provided that the five-year periods are tolled during any time that
ownership restrictions prevent Swiss Bank from exercising such options.
The SBC Warburg Options and the SBC Warburg Shares were issued and sold in
connection with the execution and delivery of the SBC Warburg EPI Agreement.
The SBC Warburg Options and the SBC Warburg Shares continue to vest at a rate
of 31,953 shares per month for the first five years of the SBC Warburg EPI
Agreement and at a rate of 29,167 shares per month thereafter. In the event of
termination of the SBC Warburg EPI Agreement for any reason, (i) all unvested
SBC Warburg Options will be terminated and (ii) Swiss Bank will deliver to the
Company, against the payment of the purchase price of $7.30 per share, title to
all unvested SBC Warburg Shares.
Pursuant to the PSC Stock Agreement, the Company also agreed to issue and
sell to Swiss Bank, upon the occurrence of the "SBC Domestic Event", additional
SBC Options (the "SBC Domestic Options") and/or Class B Shares (the "SBC
Domestic Shares"), for an aggregate total of 3,500,000 SBC Domestic Options and
SBC Domestic Shares, in such combination of options and shares to be determined
in the discretion of Swiss Bank. The "SBC Domestic Event" means the entering
into by the Company and Swiss Bank, on or prior to December 31, 1998, of a
definitive agreement, having a term of 10 years and a similar scope and size to
the SBC Warburg EPI Agreement, relating to Swiss Bank apart from SBC Warburg,
including such terms and conditions consistent with those set forth in the SBC
Warburg EPI Agreement as may be agreed upon by the Company and Swiss Bank (the
"SBC Domestic Agreement").
The purchase price for the SBC Domestic Options will be an amount per
share equal to a defined fair value for the SBC Domestic Options as of
the date of the occurrence of the SBC Domestic Event. The exercise price per
share for the SBC Domestic Options will also be the defined fair value per
share as of the date of grant. The SBC Domestic Options expire five years after
they vest; provided that the five-year periods are tolled during any time that
ownership restrictions prevent Swiss Bank from exercising such options.
SBC Domestic Options and SBC Domestic Shares will vest ratably over 10
years commencing on the SBC Domestic Event, and will continue to vest until the
SBC Domestic Agreement is terminated. In the event of termination of the SBC
Domestic Agreement for any reason, (i) all unvested SBC Domestic Options will
be terminated and (ii) Swiss Bank will deliver to the Company, against payment
therefor, per share of the purchase and exercise price for the SBC Domestic
Options, all unvested SBC Domestic Shares.
The SBC Warburg Options and the SBC Domestic Options will generally be
exercisable immediately upon grant. Swiss Bank is, however, subject to certain
regulatory limitations upon its exercise of SBC Options. After giving effect to
any purchase of SBC Options, purchase of Class B Shares and exercise of SBC
Options by
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Swiss Bank, (i) the number of Class B Shares owned by Swiss Bank
(including any Class B Shares then owned by any employee of Swiss Bank),
together with the number of any Class B Shares owned by Swiss Bank at any time
prior to such exercise, may not exceed 10% of the number of shares of Common
Stock outstanding, and (ii) the aggregate purchase and exercise prices paid by
Swiss Bank on the acquisition of Class B Shares and exercise of SBC Options may
not exceed 10% of the consolidated stockholders' equity of the Company. If,
however, on certain specified anniversaries of the date of the PSC Stock
Agreement, beginning in 2004 (each, a "Trigger Date"), the number of Class B
Shares for which SBC Options are exercisable is limited because an insufficient
number of the shares of Common Stock are outstanding, Swiss Bank has, subject
to certain exceptions, the right to initiate certain procedures to eliminate
such deficiency. These procedures may result in the Company issuing additional
Common Stock and Swiss Bank requesting that the Federal Reserve Board approve
an increase in the percentage of Common Stock of the Company that Swiss Bank
may own or the Company purchasing shares of Class B Stock from Swiss Bank at
the then fair market value defined in the SBC Stock Agreement.
Swiss Bank may not sell or otherwise transfer any Options or any Class B
shares that have not vested. In addition, subject to certain exceptions, the
PSC Stock Agreement restricts the right of Swiss Bank to transfer Class B
Shares (i) within certain periods surrounding an IPO or (ii) if the transfer
would contravene applicable banking law. In addition, in certain limited
circumstances, the Company has a right of first refusal to purchase Class B
Shares that Swiss Bank desires to sell.
RELIANCE ON MAJOR CLIENTS
During the year ended December 31, 1996, approximately 28% of the Company's
revenues were earned in connection with services performed on behalf of Swiss
Bank and its affiliates. If certain competitors of Swiss Bank acquire more than
25% of the shares of Class A Common Stock of the Company ("Class A Common
Stock," and such shares, "Class A Shares") or another party (other than an
affiliate of Ross Perot) acquires more than 50% of the Class A Shares and, if
in either case, that acquisition is reasonably likely to have a significant
adverse impact on the performance of or the charges for the services rendered
by the Company, Swiss Bank has the right to terminate the Swiss Bank
Agreements. The loss of Swiss Bank as a client would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "- Swiss Bank Corporation."
The Company's two most significant clients (after Swiss Bank) accounted
for an aggregate of approximately 15% of the Company's contract revenues during
the year ended December 31, 1996. Neither of these clients accounted for more
than 10% of the Company's contract revenues. The loss of one or more of these
clients could have a material adverse effect on the Company's business,
financial condition and results of operations.
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COMPETITION
The Company's markets are intensely competitive and are characterized by
continuous changes in customer requirements and the technology available to
satisfy those requirements. The Company has a small share of the highly
fragmented IT services market. With respect to large contracts, the Company's
principal competitors include International Business Machines Corporation
("IBM"), Andersen Consulting LLP, Computer Sciences Corporation and Electronic
Data Systems Corporation. Each of these companies, as well as some other
competitors, has greater financial, technical, sales and marketing resources,
greater name recognition and a larger customer base than the Company. The
Company expects to see additional competition as it addresses new markets and
as the computing and communications markets converge. The Company competes on
the basis of a number of factors both within and outside of its control,
including price, technological innovation, ability to invest in or acquire
assets of potential customers and strategic relationships with customers and
suppliers. There can be no assurance that the Company will be able to compete
successfully against its current or future competitors with respect to these or
other factors in the future. In addition, there can be no assurance that
competition will not have a material adverse effect on the Company's results of
operations.
MERGERS AND ACQUISITIONS
In the second half of 1996 and the first quarter of 1997, the Company
consummated several acquisitions which contributed technical personnel and
expertise in specific technologies and markets as well as certain in-process
technologies. None of these acquisitions was material in the context of the
Company taken as a whole. The Company continually evaluates the possibility of
further acquisitions and intends to continue to complement its internal growth
through acquisitions and other business affiliations.
INFORMATION REGARDING GEOGRAPHIC REGIONS
For information regarding geographic regions in which the Company
operates, see Note 12 to the Consolidated Financial Statements, "Certain
Geographic Data and Segment Information."
TRADEMARKS, PATENTS AND COPYRIGHTS
The Company owns or has obtained licenses for a number of copyrights and
trademarks relating to its products and services. The Company does not believe
that any particular copyright, trademark or group of copyrights and trademarks
is of material importance to the Company's business taken as a whole.
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EMPLOYEES
As of March 31, 1997, the Company employed approximately 4,900 persons
located in the United States and several other countries. None of the Company's
United States employees are currently employed under an agreement with a
collective bargaining unit. The Company's employees in France and Germany are
generally members of work councils and have worker representatives. These
representatives must be consulted on any major change in operations that
affects such employees. The Company believes that its relations with employees
are good.
ITEM 2. FINANCIAL INFORMATION.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated historical financial data as of and
for the years ended December 31, 1996, 1995, 1994, 1993 and 1992 is unaudited
but has been derived from the Company's Consolidated Financial Statements,
which have been audited by Coopers & Lybrand L.L.P. ("Coopers & Lybrand"),
independent auditors. The Company has retained Coopers & Lybrand as its
auditors for each of the five years listed in the table below. This information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's Consolidated
Financial Statements and the Notes to the Consolidated Financial Statements,
which are included herein.
<TABLE>
<CAPTION>
As of and for the years ended December 31,
1996 1995 1994 1993 (1) 1992
---- ---- ---- -------- ----
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Results:
Contract revenue $ 599.4 $ 342.3 $ 292.2 $ 291.8 $ 247.1
Direct cost of services 465.1 268.6 246.1 251.1 197.7
Operating income (loss) 41.4 20.9 10.9 (19.7) 20.2
Net income (loss) 20.5 10.8 6.3 (14.7) 10.7
Primary and full diluted earnings
(loss) per common share 0.40 0.30 0.18 (0.51) 0.41
Balance Sheet Data:
Cash and cash equivalents 27.5 17.4 9.2 26.9 15.2
Total assets 232.2 130.5 91.2 122.1 118.9
Long-term debt 5.2 6.1 10.0 18.7 22.9
</TABLE>
(1) During the fourth quarter of 1993, the Company recorded a charge to
earnings reversing amounts previously recognized as recoverable costs
under the percentage-of-completion method of accounting in recognition of
delays and cost overruns related to the development of a software
application for a client.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following commentary should be read in conjunction with the
Consolidated Financial Statements and the Notes to the Consolidated Financial
Statements, which are included herein.
OVERVIEW
The Company is an IT services and business transformation company helping
clients devise, plan, implement and manage business and IT solutions. The
services offered by the Company include systems integration, systems operation
and software development, as well as business and IT consulting. The Company's
clients represent a broad range of industries, including financial services,
healthcare, communications and media, energy, manufacturing and travel and
transportation.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995
Contract revenue increased in 1996 by 75% to $599.4 million from $342.3
million in 1995. The primary growth factor was an increase in revenue from
sales to new clients, including $168.9 million generated by the Swiss Bank
Agreements. In addition, $20.8 million of total contract revenue in 1996
resulted from the expansion of a contract with an existing client that merged
with another entity and $10.7 million of total contract revenue in 1996 was
related to businesses acquired during 1996. The remaining contract revenue
increase of $56.7 million was related to growth in short-term project
engagements, expansion of business with existing clients and the addition of
new clients (other than Swiss Bank).
Domestic contract revenue increased in 1996 by 53% to $365.2 million from
$238.8 million in 1995 due to the recognition of $53.9 million in domestic
Swiss Bank revenue and 30% growth in other domestic business. The growth in
non-Swiss Bank domestic business was due to the factors discussed in connection
with the growth of total contract revenue above. Domestic contract revenue
declined as a percentage of total contract revenue to 61% from 70% in 1995 due
to Swiss Bank contract revenue, of which $159.6 million was earned in Europe
and $9.3 million in Asia.
Non-domestic contract revenue, which included European and Asian
operations, increased in 1996 by 126% to $234.2 million from $103.5 million in
1995, due in large part to the previously discussed Swiss Bank revenue. As a
result, non-domestic contract revenue grew in 1996 to 39% of total contract
revenue in 1996 from 30% in 1995. For additional information on the geographic
breakdown of revenue, see Note 12 to the Consolidated Financial Statements,
"Certain Geographic Data and Segment Information".
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Direct cost of services increased in 1996 by 73% to $465.1 million from
$268.6 million in 1995. The increase in the direct cost of services was
primarily the result of growth in the Company's business. In addition, direct
cost of services were increased by a $4.2 million write-off of software license
transfer rights and a $3.9 million write-off of purchased research and
development expenses in connection with 1996 business acquisitions accounted
for under the purchase method. Selling, general and administrative expenses
("SG&A") increased in 1996 by 76% to $92.9 million from $52.9 million in 1995,
due to the addition of key executives, expansion of the sales force, and staff
growth in administrative support areas such as communications, finance, human
resources, legal, strategy, marketing, resourcing and internal systems.
Operating income nearly doubled in 1996 to $41.4 million from $20.9
million in 1995, reflecting business growth and other factors previously
discussed in connection with revenue, direct cost of services and SG&A.
Operating margin increased in 1996 to 6.9% from 6.1% in 1995 due to a decline
in direct cost of services as a percentage of contract revenue in 1996 to 77.6%
from 78.5% in 1995. The after tax margin increased in 1996 to 3.4% from 3.2% in
1995.
The effective tax rate increased in 1996 to 48.9% from 46.6% in 1995, due
primarily to an increase in non-deductible expense items.
Comparison of the year ended December 31, 1995 to the year ended December 31,
1994
Contract revenue increased in 1995 by 17% to $342.3 million from $292.2
million in 1994, primarily as a result of growth in sales to new clients. This
net increase in contract revenue was reduced by $24.3 million due to the April
1995 restructuring of a facilities management contract with NationsBanc
Services, Inc. ("NBS," and such contract, the "NBS Agreement"). Under the terms
of the NBS Agreement, the Company received $12.0 million as prepayment for
services to be rendered over four years. The Company is recognizing this
prepayment ratably over the four-year term of the contract. In addition, the
Company transferred property, equipment and purchased software to the client
for $5.8 million, representing the approximate net book value of the assets.
Domestic contract revenue increased in 1995 by 23% to $238.8 million from
$193.9 million in 1994. Offsetting a $24.3 million decline in 1995 from the
restructuring of the NBS Agreement, revenue from other domestic contracts
increased by $69.2 million, or 52% due primarily to growth in short-term
project sales to new clients. For 1995 and 1994, domestic contract revenue
represented 70% and 66%, respectively, of total contract revenue.
Non-domestic contract revenue increased in 1995 by 5% to $103.5 million
from $98.3 million in 1994. As a percentage of total contract revenue,
non-domestic contract revenue declined in 1995 to 30% from 34% in 1994,
primarily because two major European software development projects were
completed in 1994, after which the
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Company's services to these clients became more operational in nature. The net
impact of this change on 1995 contract revenue was a decrease of $18.9 million.
For additional information on the geographic breakdown of revenue, see Note 12
to the Consolidated Financial Statements, "Certain Geographic Data and Segment
Information".
Direct cost of services as a percentage of contract revenue declined in
1995 to 78% from 84% in 1994, due to growth in short-term consulting projects,
a larger concentration of operations staff in sales roles, and the
restructuring of the NBS Agreement. SG&A increased as a percentage of revenue
to 15% in 1995, from 14% in 1994, due to a larger use of operations staff in
sales roles.
Operating income nearly doubled in 1995 to $20.9 million from $10.9
million in 1994, despite the fact that 1994 operating income included
recognition of a $6.7 million net gain from fees received in connection with
the December 1993 exercise of an IT services contract termination clause by
First American Bankshares, Inc. and its subsidiary banks ("FAB"). Upon exercise
of FAB's termination clause, the Company received a cash payment of $17.4
million, of which $7.4 million was used to cover 1994 expenses related to the
contract, and $3.3 million was accrued to cover estimated future facility lease
costs. Further, in 1994, the Company was successful in obtaining a more
favorable facility sublease arrangement than originally estimated, thereby
resulting in the recognition of a $6.7 million benefit from the termination
fee.
Operating margin improved in 1995 to 6.1% from 3.7% in 1994 as a result of
the decline in direct cost of services as a percentage of contract revenue.
This was due to growth in higher margin short-term systems integration
projects, more efficient staff utilization and the restructuring of the NBS
Agreement. The after tax margin improved in 1995 to 3.2% from 2.2% in 1994. The
effective income tax rate increased in 1995 to 46.6% from 37.6% in 1994,
attributable primarily to the increase in certain non-deductible items.
LIQUIDITY AND CAPITAL RESOURCES
Driven by Swiss Bank and other general business growth, cash flows from
operating activities increased in 1996 to $53.9 million from $24.0 million in
1995. Key growth factors underlying this increase included net income, accrued
liabilities and deferred revenue, the effects of which were partially offset by
growth in accounts receivable and deferred income taxes. Net income increased
in 1996 to $20.5 million from $10.8 million in 1995, and accrued liabilities
grew to $83.0 million in 1996 from $38.9 million in 1995, due to Swiss Bank
related expense growth. Deferred revenue increased in 1996 to $22.0 million
from $5.9 million in 1995, due to advance payments on new contracts and the
deferred recognition of a $5.1 million contract termination fee received in
1996 which will be recognized in 1997 as expenses associated with the
disposition of the contract are incurred. The impact of these net increases in
cash from operating activities was reduced because accounts receivable grew in
1996 to $113.8 million from $61.2 million in 1995 and because deferred income
taxes increased in 1996
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to $30.5 million from $16.1 million in 1995. The accounts receivable growth
from 1995 to 1996 was due primarily to the significant increase in sales to new
clients, especially to Swiss Bank, which accounted for $26.5 million of the net
change. The increase in deferred income taxes from 1995 to 1996 was due
primarily to growth in accrued expenses not deductible in the current period.
Cash flows from operating activities increased in 1995 to $24.0 million
from $1.3 million in 1994, reflecting business growth and the effect of a $12.0
million advance payment received in 1995, in connection with the restructuring
of the NBS Agreement. Although business growth caused accounts receivable to
grow by $34.2 million, this change was more than offset by related growth in
accrued liabilities, accounts payable and accrued compensation. Also,
depreciation and amortization declined by $6.5 million. Income tax payments
made in 1995 relating to 1994 tax liabilities were $0.2 million compared to
$9.4 million in income tax payments made in 1994 relating to 1993 tax
liabilities.
Net cash used in investing activities increased in 1996 to $41.9 million
from $12.4 million in 1995 due to growth-related increases in capital
expenditures, a decline in asset sales, new businesses acquired and increased
investments in unconsolidated subsidiaries. In 1996, the Company increased its
investment in property, equipment and software to $27.5 million from $18.3
million in 1995, to accommodate overall staff growth of 50%. Cash paid in 1996
for business interests acquired was $15.0 million, of which $9.5 million was
used to acquire 100% equity interests in three IT services companies and one
business consulting firm, and $5.5 million was used to purchase minority
interests in other companies. These entities are expected to contribute
significant knowledge and new expertise to the Company's service offerings,
assist in the development of new products and software applications and to
provide new business opportunities. There can be no assurance that the acquired
businesses will provide new opportunities or that new products or software
applications will be developed or, if developed, successfully brought to
market. The Company is committed to investing a maximum of $16.6 million to
fund additional future capital requirements of the unconsolidated entities. The
actual amounts invested in these businesses will vary depending on their needs
for cash and the opportunities available to them. Cash proceeds on sales of
property, equipment and software declined in 1996 to $0.7 million from $6.0
million in 1995, reflecting no large asset sales in 1996, as opposed to 1995,
in which property, equipment and purchased software valued at $5.8 million was
sold in connection with the restructuring of the NBS Agreement.
Net cash used in investing activities increased in 1995 to $12.4 million
from $10.1 million in 1994, reflecting a business growth related increase of
$8.0 million in capital expenditures, offset by an increase of $5.8 million in
cash proceeds on sales of property, equipment and software related to the
restructuring of the NBS Agreement.
Net cash used in financing activities increased in 1996 to $4.5 million
from $3.6 million in 1995. In 1996, the Company redeemed 100% of its
outstanding Series A
12
<PAGE> 14
Preferred Stock for $8.5 million to eliminate dividends with no tax benefit.
Other significant cash changes included a $4.2 million increase in net proceeds
from the issuance of Class A Common Stock, which reflected a significant
increase in the exercise of stock options by employees in 1996. In addition,
there was a $2.1 million increase in repayments of stockholder notes
receivable, a $0.7 million decrease in debt and capital lease obligation
repayments, and a $0.6 million decrease in dividends paid on preferred stock.
Net cash used in financing activities decreased in 1995 to $3.6 from $9.4
million in 1994, due primarily to reductions in repayments of debt and capital
lease obligations.
Because of growth in its international operations, the Company, in certain
instances, utilizes foreign currency exchange contracts to manage its exposure
and to mitigate the effects of currency fluctuations. See Note 13 to the
Consolidated Financial Statements, "Commitments and Contingencies".
The Company increased its credit line in August 1996 to $40.0 million from
$10.0 million to fund general corporate purposes and potential business
acquisitions. As of December 31, 1996, there were no borrowings outstanding
under this line.
The Company expects that its principal use of funds for the foreseeable
future will be for acquisitions, capital expenditures and working capital. In
addition, the Company expects to use funds for the development of in-process
software applications, which were acquired as part of the 1996 business
combinations. Capital expenditures may consist of purchases of computer and
related equipment and software. The Company anticipates that cash flows from
operating activities and unused borrowing capacity under its existing line of
credit will provide sufficient funds to meet its needs for the remainder of
1997. Significant growth in the Company's business in 1997 and 1998 could
result in the need for private or public offerings of debt or equity
instruments of the Company to provide the funds necessary to support its
growth.
SWISS BANK ALLIANCE
The Company experienced substantial growth in 1996. A significant portion
of that growth resulted from the formation of the Company's strategic alliance
with Swiss Bank in January 1996, which was revised in April 1997. The alliance
includes a long-term contract for the Company to deliver IT services to SBC
Warburg and the grant to Swiss Bank of the SBC Options. Pursuant to the terms
of the Swiss Bank Agreements, the Company also acquired a 40% interest in
Systor. A portion of the Company's interest in Systor will be returned to Swiss
Bank if the SBC Warburg EPI Agreement is terminated. The portion that would be
returned to Swiss Bank upon such a termination declines ratably over a 10-year
period which began on January 1, 1997. During the year ended December 31, 1996,
approximately 28% of the Company's revenues were earned in connection with
services performed on behalf of Swiss Bank and its affiliates. For more
information regarding the Swiss Bank alliance, see "Swiss Bank Corporation".
13
<PAGE> 15
ITEM 3. PROPERTIES.
As of March 31, 1997, the Company had 28 locations in the United States
and five locations in three countries outside the United States. The Company
owns no real estate, and leased properties consist primarily of office and
warehouse facilities. Current leases have expiration dates that range from 1997
to 2012. Upon expiration of its leases, the Company does not anticipate any
significant difficulty in obtaining renewals or alternative space. In addition
to the leased property referred to above, the Company occupies office space at
customer locations throughout the world. Such space is generally occupied
pursuant to the terms of the respective customer contract.
The Company's management believes that its facilities are suitable and
adequate for its business. However, the Company has plans for expansion and is
currently negotiating for expanded facilities for several of its locations. The
Company does not anticipate any difficulty in obtaining sufficient space to
accommodate the planned expansion.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information known to the Company
with respect to beneficial ownership of Class A Shares as of April 2, 1997 for
(i) all persons who are beneficial owners of five percent or more of the
Company's common stock, (ii) each director of the Company, (iii) the Company's
CEO and the other executive officers named in the Summary Compensation Table
below, and (iv) all executive officers and directors as a group:
14
<PAGE> 16
<TABLE>
<CAPTION>
5% Beneficial Owners, Number of Class A Percent
Directors and Executive Officers (1) Shares Beneficially Owned (2) of Class (2)
- ------------------------------------ ----------------------------- ------------
<S> <C> <C>
HWGA, Ltd. (3) 16,000,000 40.8%
Morton H. Meyerson (4) 4,015,200 10.2
James A. Cannavino 2,000,245 5.1
James Champy(5) 500,000 1.3
Guillermo G. Marmol (6) 310,201 *
Donald D. Drobny (7) 764,293 1.9
John E. King (8) 803,406 2.0
David M. Cohen (9) 152,000 *
Steve Blasnik 0 *
Craig Fields (10) 62,000 *
Raymond L. Golden 60,000 *
Carl Hahn 200,000 *
Ross Perot, Jr. (11) 16,000,000 40.8
John L. Segall 60,000 *
All Executive Officers and Directors as a
Group (17 persons) 25,685,181 65.4
</TABLE>
* Less than 1%
(1) The address for Messrs. Meyerson and Cannavino is 12377 Merit Drive, Suite
1100, Dallas, Texas 75251. The address for HWGA, Ltd. is 12377 Merit
Drive, Suite 1700, Dallas, Texas 75251.
(2) Percentages are based on the total number of Class A Shares outstanding at
April 2, 1997, plus the total number of outstanding options and warrants
held by each person that are exercisable within 60 days of such date.
Class A Shares issuable upon exercise of outstanding options and warrants,
however, are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Except as indicated in the
footnotes to this table, other than shared property rights created under
joint tenancy or marital property laws as between the Company's directors
and executive officers and their respective spouses, each stockholder
named in the table has sole voting and investment power with respect to
the Class A Shares set forth opposite such stockholder's name. The Class A
Shares listed include Class A Shares held by the Company's Retirement
Savings Plan and Trust for the benefit of the named individuals. Voting
and investment power over such Class A Shares is held by the trustee of
such trust subject to the direction of the Company's 401(k) Plan
Committee.
(3) Ross Perot is the managing general partner of HWGA, Ltd. ("HWGA"). In
addition, Ross Perot, Jr., a director of the Company, is a general partner
of HWGA. Shares owned by HWGA are also shown in this table as being
beneficially owned by Ross Perot, Jr.
15
<PAGE> 17
(4) Includes 4,000,000 Class A Shares owned by the Meyerson Family Limited
Partnership (the "Meyerson Partnership"), of which Mr. Meyerson is the
sole general partner, and 15,200 Class A Shares held by various trusts
established by Mr. Meyerson (the "Trusts"). As the general partner of the
Meyerson Partnership and the trustee of the each of the Trusts, Mr.
Meyerson has sole voting and investment power with respect to Class A
Shares held by the Meyerson Partnership and the Trusts and, therefore, is
deemed the beneficial owner of such Class A Shares.
(5) Includes 100,000 Class A Shares held by the Champy Family Irrevocable
Trust (the "Champy Trust") of which Mr. Champy is a trustee. As trustee,
Mr. Champy shares voting and investment power with respect to the Class A
Shares held by the Champy Trust and, therefore, is deemed the beneficial
owner of such Class A Shares.
(6) Includes 4,000 Class A Shares held by Mr. Marmol as custodian for his
children.
(7) Includes 80,000 Class A Shares held by Mr. Drobny's son, 80,000 Class A
Shares held by Mr. Drobny's daughter and 2,000 Class A Shares held by Mr.
Drobny's spouse. Mr. Drobny shares voting and investment power with the
respective holders of such Class A Shares.
(8) Includes 2,000 Class A Shares held by Mr. King's spouse with respect to
which Mr. King shares voting and investment power.
(9) Includes 30,000 Class A Shares held of record by Mr. Cohen's children,
with respect to which Mr. Cohen has sole voting and investment power.
(10) Includes 2,000 Class A Shares held by Mr. Fields' spouse, as to which Mr.
Fields disclaims beneficial ownership.
(11) All Class A Shares are held by HWGA, Ltd., a limited partnership of which
Ross Perot, Jr. is a general partner. As a general partner, Ross Perot,
Jr. shares voting and investment power with respect to Class A Shares held
by such partnership and, therefore, may be deemed the beneficial owner of
such Class A Shares.
16
<PAGE> 18
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The Company's Board of Directors (the "Board") currently has nine members,
three of whom are executive officers of the Company. The names, ages and
positions of the Company's directors and executive officers are set forth
below.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Morton M. Meyerson ....... 58 Chairman of the Board
James A. Cannavino ....... 52 President, Chief Executive Officer and Director
Peter Altabef ............ 37 Vice President, General Counsel and Secretary
Terry Ashwill ............ 52 Vice President and Chief Financial Officer
James Champy ............. 55 Vice President and Director
David E. Cohen ........... 48 Vice President
Donald D. Drobny ......... 54 Vice President
Susan Fairty ............. 38 Vice President
John E. King ............. 50 Vice President
Guillermo G. Marmol ...... 44 Vice President
Ron Nash ................. 48 Vice President
Steve Blasnik ............ 39 Director
Craig Fields ............. 50 Director
Raymond L. Golden ........ 59 Director
Carl Hahn ................ 70 Director
Ross Perot, Jr ........... 38 Director
John L. Segall ........... 70 Director
</TABLE>
Directors are elected to serve for one-year terms and until their
successors are elected and qualified. Executive officers serve at the
discretion of the Board. Set forth below is a description of the backgrounds of
the directors and executive officers of the Company.
Morton M. Meyerson has served as Chairman of the Board and a director of
the Company since June 1992. In addition, from June 1992 until September 1996,
Mr. Meyerson also served as Chief Executive Officer of the Company ("CEO").
From May 1986 until June 1992, Mr. Meyerson was a private investor. Prior to
that time, Mr. Meyerson held a variety of positions with Electronic Data
Systems Corporation, most recently as Vice Chairman of the Board. Mr. Meyerson
also serves as a director of Energy Services Company International, Inc. and
Crescent Real Estate Equities, Inc.
James A. Cannavino has served as President and a director of the Company
since October 1995. In addition, he was elected CEO in September 1996. Mr.
Cannavino was also the Chief Operating Officer of the Company from October 1995
until September 1996. Prior to that time, Mr. Cannavino held a variety of
positions during his 32-year career with IBM where he served, from January 1993
until March 1995, as Senior Vice President for Strategy and Development and,
from January 1991 until
17
<PAGE> 19
January 1993, as Senior Vice President and General Manager of IBM's Personal
Systems Group. Mr. Cannavino also serves as a director of 7th Level, Inc.
Peter Altabef joined the Company in June 1993 and was elected Vice
President in June 1995 and Secretary in March 1996. Mr. Altabef became General
Counsel in April 1994. From January 1991 until May 1993, Mr. Altabef was a
partner in the Dallas law firm of Hughes & Luce, L.L.P.
Terry Ashwill joined the Company in January 1997 as a Vice President and
Chief Financial Officer. From August 1991 until January 1997, Mr. Ashwill
served as Executive Vice President, Chief Financial Officer of True North
Communications, Inc.
James Champy joined the Company in August 1996 as Vice President and a
director. Mr. Champy oversees the Company's consulting practice. From 1993
until 1996, Mr. Champy was Corporate Vice President and Chairman -- Consulting
Group of Computer Sciences Corporation. Mr. Champy was one of the founders of,
and from 1969 until 1996 served in a variety of capacities for, Index (a
management consulting firm) and CSC Index (the management consulting arm of
Computer Sciences Corporation formed upon the acquisition of Index by Computer
Sciences Corporation in 1988). Most recently, Mr. Champy was Chairman and Chief
Executive Officer of CSC Index.
David Cohen joined the Company in December 1993 and was elected Vice
President in August 1994. From August 1988 until September 1993, Mr. Cohen was
the Chief Financial Officer and a director of Alexon Group PLC, a clothing
retailer based in the United Kingdom. Mr. Cohen has oversight responsibility
for the Company's finance and several other support and delivery operations in
Europe. Mr. Cohen also oversees the Company's participation in a joint venture
with HCL Corporation in India and Asia.
Donald D. Drobny is one of the Company's founders. Mr. Drobny joined the
Company in June 1988, and was elected a Vice President in April 1989. Mr.
Drobny currently has oversight responsibility for all of the Company's project
offices.
Susan Fairty joined the Company as a Vice President in April 1996. Ms.
Fairty currently serves as the Company's Chief Technology Officer overseeing
the development of the Company's technical competencies and technical
strategies. From June 1981 until March 1996, Ms. Fairty held a variety of
positions with IBM.
John E. King is one of the Company's founders. Mr. King joined the Company
in June 1988, and was elected a Vice President in April 1989. Mr. King
currently has oversight responsibility for the Company's Global Financial
Services group.
Guillermo G. Marmol joined the Company in January 1996 as a Vice
President. Prior to joining the Company, Mr. Marmol held a variety of positions
during an 18-year career with McKinsey & Company, Inc., an international
management consulting firm. He was elected a director (senior partner) in 1991
and most recently held leadership positions in the firm's director election
committee, Dallas office and organization practice.
18
<PAGE> 20
Ron Nash joined the Company in March 1993 and was elected Vice President
in May 1995. From November 1985 until March 1993, Mr. Nash held a variety of
positions with Advanced Telemarketing Corporation and, following its
acquisition by ATC Communications Group, with its parent corporation. From
September 1992 until March 1993, Mr. Nash served as Vice President,
International and a director of ATC Communications Group. Immediately prior to
that time, Mr. Nash served as President, Chief Operating Officer and a director
of Advanced Telemarketing Corporation. Mr. Nash currently has oversight
responsibility for the Company's industry group (which consists of all
industries other than Global Financial Services).
Steve Blasnik was elected a director of the Company in September 1994.
Since 1991, Mr. Blasnik has served as President of Perot Investments, Inc., a
private investment firm and an affiliate of Ross Perot ("PII"). Mr. Blasnik
also serves as a director of Zonagen, Inc.
Craig Fields was elected a director of the Company in November 1992. Mr.
Fields has served as Vice Chairman of Alliance Gaming Corporation since
September 1994. Prior to that time, Mr. Fields was Chairman and Chief Executive
Officer of the Microelectronics and Computer Consortium from May 1990 until
March 1994. Mr. Fields also serves as a director of Energy Services Company
International, Inc., Projectavision, Inc. and Firearms Training Systems, Inc.
Raymond L. Golden was elected a director of the Company in November 1992.
In August 1996, Mr. Golden became Chairman of BT Wolfensohn, a division of BT
Securities Corporation. From March 1995 until August 1996, Mr. Golden was
President of Wolfensohn & Co., Inc., a predecessor of BT Wolfensohn. From
January 1989 until March 1995, Mr. Golden was a shareholder of Wolfensohn, Inc.
Carl Hahn was elected a director of the Company in April 1993. Since June
1996, Mr. Hahn has been a private investor. From June 1993 until June 1996, Mr.
Hahn served as Chairman of the Board of Directors of Saurer Ltd., a
manufacturer of textile machines. Prior to that time, Mr. Hahn served as
Chairman of the Board of Management of Volkswagen AG until December 1992. Mr.
Hahn also serves as a director of PACCAR, Inc., TRW Inc., Thyssen AG, AGIV,
Gerling AG, Volkswagen AG and a number of other European companies.
Ross Perot, Jr. was elected a director of the Company in 1988. Since March
1988, Mr. Perot has served as Chairman of Hillwood Development Corporation, a
real estate development company.
John L. Segall was elected a director of the Company in November 1992. Mr.
Segall served as Vice Chairman of GTE Corporation from March 1991 until March
1994 and has been a private investor since that time. Mr. Segall also serves as
a director of Norwalk Savings and General Data Communications Corporation.
ITEM 6. EXECUTIVE COMPENSATION.
The Summary Compensation Table below shows compensation for the 1996
fiscal year of each person who served in the capacity of CEO during the year
and the four most highly compensated executive officers other than the CEO who
were serving as executive officers at the end of the 1996 fiscal year.
19
<PAGE> 21
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ Awards (1)
----------------------
Other Restricted Securities
Annual Stock Under- All Other
Bonus Compen- Award(s) Lying Compen-
Name and Principal Salary ($) sation (3) (4) Options sation (5)
Position Year ($) (2) ($) ($) (#) ($)
------------------ ---- ------ ----- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Morton H. Meyerson
Chairman & CEO (6) ..... 1996 583,333 180,000 10,507 -- -- 40,216
James A. Cannavino
President & CEO (7) .... 1996 538,542 180,000 189,579 -- -- 17,232
Guillermo G. Marmol
Vice President ......... 1996 400,000 110,000 -- -0- 200,000 6,639
Donald D. Drobny
Vice President ......... 1996 377,195 75,000 6,725 -- -- 17,232
John E. King
Vice President ......... 1996 300,000 85,000 8,543 -- -- 17,232
David M. Cohen
Vice President ......... 1996 269,534 83,334 -- -- -- 15,703
</TABLE>
(1) On January 2, 1996, Mr. Marmol purchased 200,000 restricted Class A
Shares for $1.75 per share (the fair value of such shares on the date
of purchase) and was granted options with an exercise price of $1.75
per share to purchase an additional 200,000 Class A Shares. The
shares and options vest ratably a ten-year period. The first vesting
date was January 2, 1997. On June 17, 1996, Mr. Marmol purchased an
additional 100,000 restricted Class A Shares for $2.50 per share (the
fair value of such shares on the date of purchase). In connection
with the June 17 purchase, Mr. Marmol surrendered options to purchase
100,000 shares of Class A Stock that had been granted on January 2.
All of Mr. Marmol's restricted stock and options will vest ratably
over ten years. The first vesting date remained January 2, 1997.
(2) Bonus amounts shown were earned in 1996 and paid in 1997.
(3) With respect to Mr. Cannavino, represents (i) $182,854 paid in
connection with the maintenance of living quarters and payment of
certain other living expenses pending his permanent relocation and
(ii) $6,725 for the payment of taxes related to the life insurance
policy referenced in Note 5 to this table. With respect to all other
named executive officers, represents the payment of taxes related to
the life insurance policies referenced in Note 5 to this table.
(4) The number of restricted Class A Shares held by the named executive
officers and the value of such Class A Shares (less the amount paid
therefor) at December 31, 1996 is as follows: Mr. Meyerson - 637,500
Class A Shares (held by the Meyerson Partnership), $1,875,000; Mr.
Cannavino - 1,800,000 Class A Shares, $4,950,000; and Mr. Marmol -
300,000 Class A Shares, $525,000.
20
<PAGE> 22
(5) Represents (i) $17,550, $11,232, $693, $11,232 and $11,232 in life
insurance premiums paid for the benefit of Messrs. Meyerson,
Cannavino, Marmol, Drobny and King, respectively; (ii) $6,000 in
Company contributions to the Company's 401(k) plan for the benefit of
each of Messrs. Meyerson, Cannavino, Marmol, Drobny and King; (iii)
$16,666 for the retroactive application of a salary increase for Mr.
Meyerson, which amount relates to compensation for services rendered
in 1995; and (iv) $17,330 contributed to a retirement fund on behalf
of Mr. Cohen by Perot Systems Europe Limited.
(6) Mr. Meyerson served as CEO of the Company until September 1996.
(7) Mr. Cannavino has held the post of CEO since September 1996.
The following table provides information relating to option grants in 1996
to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------
Percent of
Total Potential Realized Value at
Number of Options Assumed Annual Rates of Stock
Securities Granted Price Appreciation For Option
underlying to Term (1)
Options Employees Exercise -------------------------------
Granted in Fiscal Price Expiration
Name (2) Year ($/Sh) Date 5% ($) 10% ($)
- -------------------------- ------------- ------------- ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Morton H. Meyerson........ -0- -- -- -- -- --
James A. Cannavino........ -0- -- -- -- -- --
Guillermo G. Marmol (3)... 200,000 2.8% 1.75 1/2/2007 248,619 648,591
Donald D. Drobny.......... -0- -- -- -- -- --
John E. King.............. -0- -- -- -- -- --
David M. Cohen............ -0- -- -- -- -- --
</TABLE>
(1) These amounts represent assumed rates of appreciation in market value
from the date of grant until the end of the option term, at the rates
set by the Securities and Exchange Commission and, therefore, are not
intended to forecast possible future appreciation, if any, in the
Class A Shares.
(2) Mr. Marmol's options were granted under the Company's 1991 Stock
Option Plan at fair value on the date of the grant. Such options are
exercisable as follows: one-tenth on the first anniversary of the
grant date and an additional one-tenth on each succeeding anniversary
date until such options are fully vested, subject to continued
employment.
(3) On June 17, 1996, Mr. Marmol surrendered options to purchase 100,000
Class A Shares (which options are included in the described grant) in
connection with his purchase of 100,000 restricted Class A Shares.
The remaining options to purchase 100,000 Class A Shares will
continue to vest as described in Note 2.
21
<PAGE> 23
The following table provides information regarding exercises of stock
options by named executive officers during 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options at Options at
Class Fiscal Year- Fiscal Year-
A Shares Value End (#) End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- -------------------------- ------------ -------- --------------- -------------
<S> <C> <C> <C> <C>
Morton H. Meyerson ....... -0- -0- -0-/-0- -0-/-0-
James A. Cannavino ....... -0- -0- -0-/-0- -0-/-0-
Guillermo G. Marmol ...... -0- -0- -0-/100,000 -0-/200,000
Donald D. Drobny ......... -0- -0- -0-/-0- -0-/-0-
John E. King ............. -0- -0- -0-/-0- -0-/-0-
David M. Cohen ........... 150,000 187,500 -0-/250,000 -0-/687,500
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Morton H. Meyerson. Mr. Meyerson's assignee, the Meyerson Partnership,
purchased 4,000,000 Class A Shares from the Company pursuant to the terms of a
stock purchase agreement between Mr. Meyerson and the Company (the "MFLP
Agreement"). Under the MFLP Agreement, the Company has the right to repurchase
a portion of the Class A Shares held by the Meyerson Partnership if Mr.
Meyerson voluntarily resigns as Chairman unless the parties agree to an
arrangement for Mr. Meyerson to remain with the Company. The agreement provides
for a formula to determine how many Class A Shares the Company would have the
right to repurchase. The number of Class A Shares that the Company would have
the right to repurchase declines over five years from the date of the MFLP
Agreement. In June 1997, the Company's right to repurchase Class A Shares held
by the Meyerson Partnership will terminate.
James. A. Cannavino. Mr. Cannavino's employment agreement with the Company
provides for a base salary of $500,000 per year, subject to adjustment from
time to time by the Board of Directors; provided, however, that a decrease in
Mr. Cannavino's base salary is grounds for Mr. Cannavino to terminate his
employment for good reason (as discussed below). Mr. Cannavino's employment
agreement provides for additional benefits, including: (i) cash bonuses that
may be paid in the discretion of the Board of Directors, (ii) payment of life
insurance premiums, (iii) relocation benefits and (iv) certain travel benefits.
Mr. Cannavino's employment agreement also provides that, in the event that the
Company terminates his employment other than for cause (as defined in the
agreement) or he terminates his employment agreement for good reason (as
defined in the agreement), Mr. Cannavino will receive a severance payment equal
to two years'
22
<PAGE> 24
base salary (computed using the highest base salary previously paid to him).
The second year's salary would be reduced by amounts earned by Mr. Cannavino
from other sources during that year unless termination of Mr. Cannavino's
employment occurred within six months of a change in control (as defined in his
employment agreement) of the Company.
The 2,000,000 restricted Class A Shares acquired by Mr. Cannavino pursuant
to his stock option grant vest in equal installments over ten years beginning
on the first anniversary of the commencement of Mr. Cannavino's employment by
the Company. Vesting is contingent on continued employment; provided, however,
that Mr. Cannavino's restricted Class A Shares will continue to vest for
limited periods following the termination of his employment if such termination
is by the Company other than for cause (as defined in his employment agreement)
or by Mr. Cannavino for good reason (as defined in his employment agreement).
If Mr. Cannavino's employment is terminated without cause by the Company or for
good reason by Mr. Cannavino (except, in either case, if the termination is
related to a change in control of the Company (as defined in his employment
agreement)) on or before the vesting date for 1998, Mr. Cannavino's Class A
Shares will continue to vest through that vesting date, as scheduled. In the
event such a termination is not related to a change in control of the Company
and follows the vesting date for 1998, Mr. Cannavino's Class A Shares will
continue to vest through the vesting date following the termination of
employment, as scheduled. In addition, if there is a change in control of the
Company during Mr. Cannavino's employment or Mr. Cannavino's employment is
terminated prior to but in connection with a change in control of the Company,
Mr. Cannavino's Class A Shares will vest as follows: (i) if the termination or
change in control occurs on or before Mr. Cannavino's scheduled vesting date in
1999, all Class A Shares scheduled to vest through his vesting date in the year
2000 will immediately vest upon the change in control or termination or (ii) if
the termination or change in control occurs after Mr. Cannavino's scheduled
vesting date in 1999, all Class A Shares scheduled to vest through the next two
vesting dates will immediately vest upon the change in control or termination.
If the Class A Shares are not publicly traded prior to the year 2010, Mr.
Cannavino has the right to require the Company to repurchase his Class A Shares
at their then fair value.
James Champy. Mr. Champy's associate agreement provides for a base salary
of $500,000 per year, which is to be reviewed at least annually by the Board of
Directors to determine whether such salary should be increased. Mr. Champy's
associate agreement provides for additional benefits, including: (i) a bonus to
be determined in accordance with the then current bonus plan applicable to the
most senior officers of the Company, (ii) payment of life insurance premiums
and (iii) certain travel benefits. Mr. Champy's associate agreement also
provides that, in the event that Mr. Champy is terminated by the Company other
than for cause or substantial misconduct (as defined in his associate
agreement) or Mr. Champy is deemed to have been constructively terminated (as
defined in his associate agreement), Mr. Champy will receive a severance
payment equal to (i) one year of Mr. Champy's then current base salary if such
termination occurs on or before August 12, 1997 or (ii) six months of Mr.
Champy's then current base salary if such termination occurs after August 12,
1997. If Mr. Champy's employment is
23
<PAGE> 25
terminated by either party (other than for cause by the Company) within one
year of a change in control of the Company (as defined in his associate
agreement), Mr. Champy would be entitled to receive a severance payment equal
to (i) one year of Mr. Champy's then current base salary if the change in
control occurs on or before August 12, 1997 or (ii) six months of Mr. Champy's
then current base salary if the change in control occurs after August 12, 1997.
The 500,000 restricted Class A Shares acquired by Mr. Champy pursuant to
his restricted stock agreement vest in equal installments over ten years
beginning on the first anniversary of the commencement of Mr. Champy's
employment by the Company. Vesting is contingent on continued employment;
provided, however, that Mr. Champy's restricted Class A Shares will continue to
vest for limited periods following the termination of his employment if his
employment is terminated by the Company other than for cause or substantial
misconduct (as defined in his associate agreement) or Mr. Champy is deemed to
have been constructively terminated (as defined in his associate agreement). If
Mr. Champy's employment is terminated by the Company other than for cause or
substantial misconduct effective after August 12, 1997 and on or before August
12, 1998 or Mr. Champy is deemed to have been constructively terminated on or
before August 12, 1998, Mr. Champy's restricted Class A Shares will continue to
vest to and including the vesting date in 2000, as scheduled. If Mr. Champy's
employment is terminated by the Company other than for cause or substantial
misconduct or Mr. Champy is deemed to have been constructively terminated after
August 12, 1998, Mr. Champy's restricted Class A Shares will continue to vest
as scheduled for two years following termination of employment. If there is a
change in control of the Company (as defined in his associate agreement) and
Mr. Champy's employment is terminated within one year of such change in control
by either party (other than for cause by the Company), Mr. Champy's Class A
Shares will continue to vest as follows: (i) if the change in control occurs on
or before August 12, 1998, all Class A Shares scheduled to vest to and
including his vesting date in the year 2000 will vest on schedule or (ii) if
the change in control occurs after August 12, 1998, all Class A Shares
scheduled to vest through the next two vesting dates will vest on schedule. In
the event that Mr. Champy is terminated for any reason by either party, Mr.
Champy has the right to require the Company to purchase his shares for their
original cost plus simple interest at the rate of eight percent per year.
DIRECTOR COMPENSATION
Directors receive no cash compensation for their service on the Board of
Directors or any committee of the Board of Directors, except that directors are
reimbursed for their reasonable out-of-pocket expenses associated with
attending Board of Directors and committee meetings. Except for Mr. Hahn, in
the past, upon their election to the Board of Directors, non-employee directors
(other than affiliates of Ross Perot) were offered either (i) the opportunity
to purchase 60,000 restricted Class A Shares or (ii) the grant of an option to
acquire 60,000 Class A Shares at a purchase or exercise price equal to the fair
value of such Class A Shares at the date of purchase or grant, which restricted
shares
24
<PAGE> 26
or options vest ratably over a five-year period. In April 1993, Mr. Hahn
purchased 200,000 restricted Class A Shares at a price equal to the fair value
of such shares at the date of purchase, which shares vest ratably over a
five-year period.
In December 1996, the Company adopted the 1996 Non-Employee Director Stock
Option/Restricted Stock Plan (the "Non-Employee Director Plan"). The
Non-Employee Director Plan provides for the issuance of nonqualified stock
options or restricted stock to non-employee directors of the Company and any of
its majority-owned subsidiaries. The Non-Employee Director Plan is administered
by the Board of Directors, which has the authority to interpret the
Non-Employee Director Plan. Directors eligible to receive awards under the
Non-Employee Director Plan are those who are not employees of the Company
(other than Ross Perot, Jr.). Each eligible existing director will receive
comparable grants at completion of the original vesting schedule for such
director's current options or restricted shares. Grants are made, subject to
the discretion of the Chairman of the Board of Directors, upon election to the
Board of Directors for new directors and, for existing directors, at completion
of the original vesting schedule for the director's existing options or
restricted shares. The Non-Employee Director Plan provides for a grant to each
eligible director of (i) an option to purchase 30,000 Class A Shares or (ii)
the right to purchase 30,000 restricted Class A Shares. The exercise price of
options or the purchase price of restricted Class A Shares awarded under the
Non-Employee Director Plan must be at least equal to 100% of the fair value of
a Class A Share on the date of the award.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of three non-employee
directors, Messrs. Fields, Segall and Ross Perot, Jr.
On September 30, 1996, the Company redeemed the 4,000,000 shares of the
Company's Series A Preferred Stock, all of which was held by Ross Perot, the
managing general partner of HWGA, for a redemption price equal to the par value
of $2.125 per share plus all accrued and unpaid dividends, or an aggregate of
$8,797,500. In addition, effective September 30, 1996, HWGA converted its
16,000,000 shares of the Company's Liquidation Preference Common Stock to
16,000,000 Class A Shares. Ross Perot, Jr. is a general partner of HWGA.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has entered into an agreement with PII pursuant to which the
Company licensed certain software from PII. The Company sublicensed such
software to The Witan Company L.P. ("Witan"). Witan has paid a license fee of
$1,000,000 directly to PII in connection with the license. The Company has a
separate contract with Witan to perform development work on the licensed
software. PII is an affiliate of Ross Perot, the managing general partner of
HWGA. Mr. Blasnik is the President of PII.
25
<PAGE> 27
The Company has loaned funds to each of James A. Cannavino, Susan Fairty,
Ron Nash and Guillermo G. Marmol in connection with the purchase by such
persons of Class A Common Stock from the Company. Each of such loans accrues
interest at the rate of eight percent per annum and is secured by the purchased
stock. As of March 31, 1997, the total amount outstanding for each such loan
(including accrued interest) was $1,546,224, $267,337 and $133,795 for Messrs.
Cannavino, Nash and Marmol, respectively, and $570,380 for Ms. Fairty. Such
amounts were the highest amounts outstanding with respect to such loans since
their inception.
In addition to amounts loaned to Mr. Cannavino in connection with his
purchase of stock, the Company has agreed to loan Mr. Cannavino up to an
additional $2,415,000 secured by his Class A Shares. An initial advance of
$614,587 was made on March 11, 1996 and bears interest at the federal
applicable rate. The initial advance, in general, is non-recourse to Mr.
Cannavino, except with respect to the pledged stock. All advances (other than
the initial advance) are full recourse to Mr. Cannavino. On March 18, 1997, the
Company advanced Mr. Cannavino an additional $125,000 under this arrangement,
which advance bears interest at 7.25% per year. As of March 31, 1996, the total
amount outstanding (including accrued interest) relating to this these loans
was $819,042. During April 1997, the Company advanced Mr. Cannavino an
additional $1,146,685 pursuant to this agreement. Interest will accrue at the
rate of 7.25% per year with respect to these amounts. Any future advances will
bear interest at the greater of 7.25% and the federal applicable rate at the
time of the loan.
The Company has also loaned Mr. Cannavino $1,000,000 in connection with
his purchase of a permanent residence in Dallas. This note is secured by a
mortgage on such residence and bears interest at 7.25% per year.
Messrs. Marmol and Nash, Donald D. Drobny and Peter A. Altabef have
outstanding loans with NationsBank of Texas, N.A. ("NationsBank") in the
respective principal amounts of $350,000, $125,000, $207,868 and $126,400.
Interest accrues on all such loans at the rate of 9.50%. The Company has agreed
that it will, at the request of NationsBank, purchase such loans from
NationsBank for an amount equal to principal plus accrued and unpaid interest
if, by the later of June 30, 1998 or the maturity of the relevant note, the
Company has not had an initial public offering that results in the Class A
Shares being publicly traded. The maturity dates are February 26, 2000, July 1,
1998, July 1, 1998 and July 5, 1998 for amounts borrowed by Messrs. Drobny,
Marmol, Nash and Altabef, respectively. Each loan is secured by a pledge of
Class A Shares.
ITEM 8 LEGAL PROCEEDINGS.
The Company is, from time to time, involved in various litigation matters
arising in the ordinary course of its business. The Company believes that the
resolution of currently pending legal proceedings, either individually or taken
as a whole, will not have
26
<PAGE> 28
a material adverse effect on the Company's consolidated financial position or
results of operations.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
There is no established trading market for the Class A Common Stock or any
other class of the Company's securities. As of April 2, 1997, there were 1,133
holders of the Class A Common Stock and no holders of Class B Common Stock. As
of April 2, 1997, the Company had outstanding options to purchase 16,293,868
Class A Shares and 10,500,000 Class B Shares. Pursuant to the amendment of the
Swiss Bank Agreements on April 24, 1997, the number of outstanding options to
purchase Class B Shares has been reduced to 3,617,160. The Company has not paid
dividends on its Class A Common Stock since the formation of the Company and
does not currently have any intention of doing so.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has issued 4,927,782 Class A Shares and options to purchase an
additional 17,457,434 Class A Shares to employees from January 1, 1994 to March
31, 1997. Class A Shares were sold at the fair value of such shares at the time
of sale and the exercise price of each option was the fair value at the time of
the grant of the option. The fair value ranged from $1.00 per share to $6.75
per share. The Company relied on Rule 701 promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), or Section 4(2) of the Securities
Act with respect to all sales and offers of its securities to its employees and
directors.
During the past 3 years, the Company has also issued 1,650,372 Class A
Shares in connection with the acquisition of a number of businesses by the
Company. The Company relied on Section 4(2) of the Securities Act with respect
to such issuances. Shares were issued at their fair value at the time of the
transaction. Fair value ranged from $3.25 per share to $4.90 per share.
The Company issued SBC Options pursuant to the PSC Stock Agreement to
Swiss Bank in connection with the strategic alliance formed in January 1996.
See Item 1, "Description of Business - Swiss Bank Corporation -PSC Stock
Agreement" for the terms of such options. The Company relied on Section 4(2) of
the Securities Act in connection with the issuance of the options and the offer
of Class B Common Stock in connection therewith.
27
<PAGE> 29
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
CLASS A COMMON STOCK
The Certificate of Incorporation of the Company (the "Certificate of
Incorporation") authorizes 100,000,000 Class A Shares. As of April 2, 1997, the
Company had issued and outstanding 39,245,748 Class A Shares held by 1,133
holders of record.
Holders of Class A Common Stock are entitled to receive such dividends, if
any, as may be declared by the Board out of legally available funds. In the
event of the liquidation, dissolution or winding up of the Company, holders of
Class A Common Stock are entitled to share equally and ratably with the holders
of Class B Common Stock, based on the number of shares held, in the assets, if
any, remaining after payment of all of the Company's debts and liabilities.
Holders of Class A Common Stock are entitled to one vote per share for
each share held of record on any matter submitted to the stockholders for a
vote. Any amendment to the Certificate of Incorporation, merger or
consolidation of the Company, sale, lease or exchange of all or substantially
all of the Company's property and assets or voluntary dissolution of the
Company that requires approval by the Company shareholders under Delaware law
must be approved by the affirmative vote of the holders of at least 66-2/3% of
the outstanding Common Stock of the Company entitled to vote thereon, and the
holders of at least 66-2/3% of the outstanding Common Stock of each class
entitled to vote thereon as a class. Class A Shares are neither redeemable nor
convertible, and the holders thereof have no preemptive rights to subscribe for
or purchase any additional shares of capital stock issued by the Company.
The summary description of the relative rights and limitations of the
Class A Common Stock is qualified in its entirety by reference to the
Certificate of Incorporation and Bylaws of the Company (the "Bylaws").
CLASS B COMMON STOCK
In addition to Class A Common Stock, the Certificate of Incorporation
authorizes 24,000,000 Class B Shares. As of April 2, 1997, the Company had no
Class B Shares issued and outstanding and 10,500,000 Class B Shares were
subject to outstanding options. Pursuant to the amendment of the Swiss Bank
Agreements on April 24, 1997, the number of outstanding options to purchase
Class B Shares has been reduced to 3,617,160. Swiss Bank Corporation is the
beneficial owner of all outstanding options to acquire Class B Common Stock.
For additional information on the potential issuance of Class B Shares pursuant
to the exercise of outstanding options, see Item 1, "Description of Business -
Swiss Bank Corporation -PSC Stock Agreement".
28
<PAGE> 30
Holders of Class B Common Stock will, when such shares are issued, be
entitled to receive such dividends, if any, as may be declared by the Board out
of legally available funds equally and ratably with the Class A Common Stock.
In the event of the liquidation, dissolution or winding up of the Company,
holders of Class B Common Stock are entitled to share equally and ratably with
the holders of Class A Common Stock, based on the number of shares held, in the
assets, if any, remaining after payment of all of the Company's debts and
liabilities.
Class B Shares have no voting rights, except to the extent that the
Delaware General Corporation Law requires a vote of the Class B Common Stock
with respect to an amendment to the Certificate of Incorporation that would
increase or decrease the par value of the Class B Common Stock or alter or
change the powers, preferences or special rights of Class B Shares. The number
of authorized Class B Shares may be increased or decreased by the affirmative
vote of the holders of a majority of voting stock of the Company, voting as a
single class, without any vote by holders of the Class B Common Stock. Class B
Shares are not redeemable, and the holders thereof have no preemptive rights to
subscribe for or purchase any additional shares of capital stock issued by the
Company. Under the terms of the Certificate of Incorporation, Swiss Bank does,
however, have the right to purchase shares of capital stock of the Company in
certain circumstances under the terms of the PSC Stock Agreement.
Each Class B Share is convertible, on a share for share basis, at the
option of the holder thereof, into one fully paid and nonassessable Class A
Share if such Class B Share is sold or otherwise transferred to a person not
affiliated with Swiss Bank and the sale or transfer is made in accordance with
certain conditions described in the Certificate of Incorporation.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A director of the Company may not be personally liable to the Company 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 the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived any improper personal
benefit. The provisions of the Certificate of Incorporation eliminating the
liability of directors for monetary damages do not affect the standard of
conduct to which directors must adhere, nor do such provisions affect the
availability of equitable relief. In addition, such limitations on personal
liability do not affect the availability of monetary damages under causes of
action based on federal law.
The Certificate of Incorporation provides for indemnification of its
officers and directors to the fullest extent permitted by the Delaware General
Corporation Law. In addition, the Company provides director and officer
insurance coverage for the benefit of its directors and officers.
29
<PAGE> 31
In addition to provisions made by the Company, Mr. Blasnik is indemnified
for actions taken in his capacity as a director of the Company as part of his
employment arrangement with PII.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is identified in the section "Index
to Consolidated Financial Statements" on page F-1 hereof and is contained in
the section "Perot Systems Corporation - Consolidated Financial Statements"
attached hereto and such sections are incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The information required by this item is contained in the "Index to
Consolidated Financial Statements" on page F-1 hereof and such information is
incorporated herein by reference.
(b) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation
3.2 Amended and Restated Bylaws
10.1 1991 Stock Option Plan
10.2 Form Option Agreement (1991 Option Plan)
10.3 Restricted Stock Plan
10.4 Form Restricted Stock Agreement (Restricted Stock Plan)
10.5 1996 Non-employee Director Stock Option/Restricted Stock Incentive Plan
10.6 Form Restricted Stock Agreement (Non-Employee Director Stock Option/
Restricted Stock Plan
10.7 Form option Agreement (Non-Employee Stock Option/Restricted Stock Plan)
10.8 Advisor Stock Option/Restricted Stock Incentive Plan
10.9 Form Restricted Stock Agreement (Advisor Stock Option/Restricted Stock
Plan)
10.10 Form Option Agreement (Advisor Stock Option/Restricted Stock Plan)
10.11 Stock Purchase Agreement dated as of August 20, 1992, between the
Company and Meyerson Family Limited Partnership
10.12 Stock Option Grant dated as of June 27, 1995, by the Company in favor
of James A. Cannavino
10.13 Employment Agreement dated as of September 16, 1995, by and between the
Company and James A. Cannavino
10.14 Promissory Note dated December 18, 1995, made by James A. Cannavino in
favor of the Company in the principal amount of $1,400,000
10.15 Promissory Note dated January 1, 1996, made by James A. Cannavino in
favor of the Company in the principal amount of $1,500,000
10.16 Pledge Agreement made as of December 18, 1995, by James A. Cannavino in
favor of the Company
30
<PAGE> 32
10.18 Deed of Trust dated April 15, 1997, made by James A. Cannavino in
favor of the Company
10.19 Promissory Note dated April 14, 1997, made by James A. Cannavino in
favor of the Company
10.20 Associate Agreement dated July 8, 1996, between the Company and James
Champy
10.21 Restricted Stock Agreement dated July 8, 1996, between Company and James
Champy
10.22 Letter Agreement dated July 8, 1996, between James Champy and the
Company
10.23 Promissory Note dated June 17, 1996, made by Guillermo G. Marmol in
favor of the Company
10.24 Pledge dated June 17, 1996, made by Guillermo G. Marmol in favor of the
Company
10.25 Agreement dated June 17, 1996, among the Company, Guillermo G. Marmol
and NationsBank of Texas, N.A.
10.26 Promissory Note dated June 17, 1996, made by Guillermo G. Marmol in
favor of NationsBank of Texas, N.A.
10.27 Agreement dated August 26, 1996, among the Company, Donald D. Drobny
and NationsBank of Texas, N.A.
10.28 Promissory Note dated August 26, 1996, made by Donald D. Drobny in favor
of NationsBank of Texas, N.A.
10.29 Promissory Note dated July 31, 1996, made by the Company in favor of
NationsBank N.A.
10.30 Amended and Restated PSC Stock Option and Purchase Agreement dated as
of April 24, 1997, by and between Swiss Bank Corporation and the
Company
10.31 Amended and Restated Master Operating Agreement dated as of January 1,
1997, between Swiss Bank Corporation and the Company
10.32 Amended and Restated Agreement for EPI Operational Management Services
dated as of January 1, 1997
11 Statement re Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
31
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
PEROT SYSTEMS CORPORATION
(Registrant)
Date April 30, 1997 By /s/ JAMES A. CANNAVINO
-------------------------------------
James A. Cannavino
President and Chief Executive Officer
<PAGE> 34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE
----- ----
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Stockholders' Equity . . . . . . F-5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-7
</TABLE>
<PAGE> 35
Report of Independent Accountants
To the Board of Directors of
Perot Systems Corporation:
We have audited the accompanying consolidated balance sheets of Perot
Systems Corporation and Subsidiaries (the "Company") as of December 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Perot Systems
Corporation and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
McLean, Virginia
April 1, 1997
F-2
<PAGE> 36
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 27,516 $ 17,357
Accounts receivable, net 113,804 61,208
Prepaid expenses and other 9,450 5,660
Deferred income taxes 25,935 13,710
---------- ----------
Total current assets 176,705 97,935
Property and equipment, net 29,335 19,363
Purchased software, net 6,413 6,241
Investments in and advances to unconsolidated affiliates 6,582 114
Deferred income taxes 4,531 2,433
Other assets 8,681 4,387
---------- ----------
Total assets $ 232,247 $ 130,473
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities on capital lease obligations and long-term debt $ 2,377 $ 2,375
Accounts payable 14,081 12,175
Income taxes payable 13,039 7,481
Accrued liabilities 82,973 38,938
Deferred revenue 22,003 5,930
Accrued compensation 20,240 10,097
---------- ----------
Total current liabilities 154,713 76,996
Capital lease obligations and long-term debt, less current maturities 2,796 3,682
Other long-term liabilities 3,976 6,918
---------- ----------
Total liabilities 161,485 87,596
---------- ----------
Commitments and contingencies
Stockholders' equity:
Series A Preferred Stock; par value $2.125; stated at
redemption and liquidation value; authorized and
outstanding 4,000,000 shares in 1995 -- 8,946
Convertible Liquidation Preference Common Stock;
par value $.01 (liquidation preference $20,000); authorized
and outstanding 16,000,000 shares in 1995 -- 160
Class A Common Stock; par value $.01; authorized 100,000,000 shares;
outstanding 39,630,487 and 18,030,562 shares, 1996 and 1995 respectively 396 180
Class B Common Stock; par value $.01; authorized 24,000,000
shares; no shares outstanding -- --
Additional paid-in-capital 51,461 31,099
Retained earnings 27,830 7,778
Cumulative translation adjustment 1,009 (172)
Notes receivable from stockholders (4,286) (3,658)
Contract rights (4,342) --
Deferred compensation (1,306) (1,456)
---------- ----------
Total stockholders' equity 70,762 42,877
---------- ----------
Total liabilities and stockholders' equity $ 232,247 $ 130,473
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 37
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(SHARES AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Contract revenue $ 599,438 $ 342,306 $ 292,155
Costs and expenses:
Direct cost of services 465,140 268,553 246,084
Selling, general and administrative expenses 92,947 52,891 41,853
Contract termination gain -- -- (6,697)
---------- ---------- ----------
Operating income 41,351 20,862 10,915
Interest income 1,540 1,988 1,140
Interest expense (770) (650) (1,141)
Equity in losses of unconsolidated affiliates, net (312) -- --
Other expense (1,658) (1,950) (775)
---------- ---------- ----------
Income before taxes 40,151 20,250 10,139
Provision for income taxes 19,652 9,437 3,810
---------- ---------- ----------
Net income $ 20,499 $ 10,813 $ 6,329
========== ========== ==========
Net income attributed to common shareholders $ 20,052 $ 10,218 $ 5,734
Primary and fully diluted earnings per common share:
Earnings per common share $ 0.40 $ 0.30 $ 0.18
Weighted average common shares
outstanding 51,770 34,526 32,393
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 38
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (PAGE 1 OF 2)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Convertible
Liquidation Preference Retained
Preferred Stock Common Stock Class A Common Stock Additional earnings
Shares Amount Shares Amount Shares Amount paid-in-capital (deficit)
------ ------ ------ ------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 4,000,000 $ 9,293 16,000,000 $ 160 15,021,234 $ 150 $ 26,181 $( 8,174)
Issuance of shares
under incentive plans -- -- -- -- 54,800 -- 142 --
Issuance of shares to
401(k)and U.K. Trust -- -- -- -- -- -- 18 --
Exercise of stock options -- -- -- -- 9,360 -- 7 --
Shares repurchased -- -- -- -- -- -- (13) --
Dividends accrued -- 595 -- -- -- -- -- (595)
Note repayments -- -- -- -- -- -- -- --
Net income -- -- -- -- -- -- -- 6,329
Translation adjustment -- -- -- -- -- -- -- --
--------- -------- ---------- ----- ---------- ----------- ----------- --------
Balance, December 31, 1994 4,000,000 $ 9,888 16,000,000 $ 160 15,085,394 $ 150 $ 26,335 $( 2,440)
Issuance of shares
under incentive plans -- -- -- -- 826,976 10 1,284 --
Issuance of shares to
401(k)and U.K. Trust -- -- -- -- 111,412 -- -- --
Exercise of stock options -- -- -- -- 2,006,780 20 1,980 --
Shares repurchased -- -- -- -- -- -- -- --
Deferred compensation
from options -- -- -- -- -- -- 1,500 --
Amortization of deferred
compensation -- -- -- -- -- -- -- --
Dividends paid -- (1,537) -- -- -- -- -- --
Dividends accrued -- 595 -- -- -- -- -- (595)
Note repayments -- -- -- -- -- -- -- --
Net income -- -- -- -- -- -- -- 10,813
Translation adjustment -- -- -- -- -- -- -- --
--------- -------- ---------- ----- ---------- ----------- ----------- --------
Balance, December 31, 1995 4,000,000 $ 8,946 16,000,000 $ 160 18,030,562 $ 180 $ 31,099 $ 7,778
Issuance of shares
for businesses acquired -- -- -- -- 1,460,372 $ 15 $ 6,530 --
Issuance of shares
under incentive plans -- -- -- -- 2,420,667 24 5,844 --
Issuance of shares
to 401(k)and U.K. Trust -- -- -- -- 168,468 3 676 --
Exercise of stock options -- -- -- -- 1,550,418 14 1,167 --
Shares repurchased -- -- -- -- -- -- -- --
Redemption of preferred
stock (4,000,000) (8,500) -- -- -- -- -- --
Shares converted to
Class A common -- -- (16,000,000) (160) 16,000,000 160 -- --
Amortization of deferred
compensation -- -- -- -- -- -- -- --
Options issued for
contract rights -- -- -- -- -- -- 4,544 --
Amortization of contract
rights -- -- -- -- -- -- -- --
Dividends paid -- (893) -- -- -- -- -- --
Dividends accrued -- 447 -- -- -- -- -- (447)
Note repayments -- -- -- -- -- -- -- --
Equity investment -- -- -- -- -- -- 706 --
Tax benefit of employee
options exercised -- -- -- -- -- -- 895 --
Net income -- -- -- -- -- -- -- 20,499
Translation adjustment -- -- -- -- -- -- -- --
--------- -------- ---------- ----- ---------- ----------- ----------- --------
Balance, December 31, 1996 -- -- -- -- 39,630,487 $ 396 $ 51,461 $ 27,830
========= ======== ========== ===== ========== =========== =========== ========
</TABLE>
<PAGE> 39
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (PAGE 2 OF 2)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Total
Cumulative Notes receiv- stock-
translation Treasury stock able from Contract Deferred holders'
adjustment Shares Amount stockholders rights compensation equity
---------- ---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $( 226) -- -- $( 1,455) -- -- $ 25,929
Issuance of shares
under incentive plans -- 339,000 242 (315) -- -- 69
Issuance of shares
to 401(k)and U.K. Trust -- 70,134 70 -- -- -- 88
Exercise of stock options -- 23,400 23 -- -- -- 30
Shares repurchased -- (889,998) (652) 671 -- -- 6
Dividends accrued -- -- -- -- -- -- --
Note repayments -- -- -- 212 -- -- 212
Net income -- -- -- -- -- -- 6,329
Translation adjustment 5 -- -- -- -- -- 5
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 $( 221) (457,464) $( 317) $( 887) -- -- $ 32,668
Issuance of shares
under incentive plans -- 600,904 397 (901) -- -- 790
Issuance of shares
to 401(k)and U.K. Trust -- -- -- -- -- -- --
Exercise of stock options -- 9,560 14 (2,000) -- -- 14
Shares repurchased -- (153,000) (94) -- -- -- (94)
Deferred compensation
from options -- -- -- -- -- (1,500) --
Amortization of deferred
compensation -- -- -- -- -- 44 44
Dividends paid -- -- -- -- -- -- (1,537)
Dividends accrued -- -- -- -- -- -- --
Note repayments -- -- -- 130 -- -- 130
Net income -- -- -- -- -- -- 10,813
Translation adjustment 49 -- -- -- -- -- 49
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 $( 172) -- -- $( 3,658) -- $( 1,456) $ 42,877
Issuance of shares
for businesses acquired -- -- -- -- -- -- 6,545
Issuance of shares
under incentive plans -- -- -- (3,065) -- -- 2,803
Issuance of shares
to 401(k)and U.K. Trust -- -- -- -- -- -- 679
Exercise of stock options -- 204,330 313 -- -- -- 1,494
Shares repurchased -- (204,330) (313) 225 -- -- (88)
Redemption of preferred
stock -- -- -- -- -- -- (8,500)
Shares converted to
Class A common -- -- -- -- -- -- --
Amortization of deferred
compensation -- -- -- -- -- 150 150
Options issued for
contract rights -- -- -- -- (4,544) -- --
Amortization of contract
rights -- -- -- -- 202 -- 202
Dividends paid -- -- -- -- -- -- (893)
Dividends accrued -- -- -- -- -- -- --
Note repayments -- -- -- 2,212 -- -- 2,212
Equity investment -- -- -- -- -- -- 706
Tax benefit of employee
options exercised -- -- -- -- -- -- 895
Net income -- -- -- -- -- -- 20,499
Translation adjustment 1,181 -- -- -- -- -- 1,181
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 $ 1,009 -- -- $( 4,286) $( 4,342) $( 1,306) $ 70,762
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 40
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 20,499 $ 10,813 $ 6,329
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,715 14,083 20,539
Contract termination benefit -- -- 6,697
Write-off of software license transfer rights 4,156 -- --
Write-off of purchased research and development 3,948 -- --
Equity in losses of unconsolidated affiliates, net 312 -- --
Change in deferred income taxes (17,776) (8,372) 7,827
Loss/(gain) on sale of property, equipment and software 360 (47) 37
Provision for bad debt expense 5,953 920 264
Other 500 -- (162)
Changes in assets and liabilities (net of effects
from acquisition of businesses):
Accounts receivable (49,137) (34,183) (2,978)
Prepaid expenses and other (4,037) 6,760 (5,074)
Other assets 895 196 533
Accounts payable 290 4,276 (304)
Accrued liabilities 39,111 13,514 (17,317)
Income taxes payable 7,998 6,873 (4,345)
Deferred revenue 15,388 (4,685) (8,676)
Accrued compensation 9,852 7,155 (1,611)
Other long-term liabilities (3,095) 6,746 (486)
-------- -------- --------
Total adjustments 33,433 13,236 (5,056)
-------- -------- --------
Net cash provided by operating activities 53,932 24,049 1,273
-------- -------- --------
Cash flows from investing activities:
Purchase of property, equipment and software (27,534) (18,342) (10,312)
Proceeds from sale of property, equipment and software 713 5,975 175
Investments in and advances to unconsolidated affiliates (5,536) -- --
Acquisition of businesses, net of cash acquired of $149 (9,520) -- --
-------- -------- --------
Net cash used in investing activities (41,877) (12,367) (10,137)
-------- -------- --------
Cash flows from financing activities:
Principal payments on debt and
capital lease obligations (2,162) (2,896) (9,780)
Proceeds from issuance of common stock 4,686 528 155
Repayment of stockholder notes receivable 2,212 130 212
Proceeds from issuance of treasury stock 197 273 39
Purchase of treasury stock (88) (94) --
Redemption of preferred stock (8,500) -- --
Dividends paid on preferred stock (893) (1,537) --
-------- -------- --------
Net cash used in financing activities (4,548) (3,596) (9,374)
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents 2,652 28 629
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 10,159 8,114 (17,609)
Cash and cash equivalents at beginning of year 17,357 9,243 26,852
-------- -------- --------
Cash and cash equivalents at end of year $ 27,516 $ 17,357 $ 9,243
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 41
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. Nature of Operations and Summary of Significant Accounting Policies
Perot Systems Corporation (the "Company") was originally
incorporated in the state of Texas in 1988 to provide systems
outsourcing, systems integration, software development, consulting, and
other information technology services. On December 19, 1995, the Company
reincorporated in the state of Delaware. The significant accounting
policies of the Company are described below. Dollar amounts presented
are in thousands, except as otherwise noted.
Principles of consolidation
The consolidated financial statements include the accounts of
the Company and all domestic and foreign subsidiaries that are
more than 50% owned and controlled. All significant intercompany
balances and transactions have been eliminated.
The Company's investments in 20% to 50% owned companies in
which it has the ability to exercise significant influence over
operating and financial policies are accounted for by the equity
method. Accordingly, the Company's share of the earnings (losses)
of these companies is included in consolidated net income.
Investments in unconsolidated companies and limited partnerships
that are less than 20% owned, where the Company has virtually no
influence over operating and financial policies, are carried at
cost.
The Company periodically evaluates whether impairment losses
must be recorded on each investment by comparing the projection of
the undiscounted future operating cash flows to the carrying
amount of the investment. If this evaluation indicates that
future undiscounted operating cash flows are less than the
carrying amount of the investments, the underlying assets are
written down by charges to expense so the carrying amount equals
the future discounted cash flows.
F-7
<PAGE> 42
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expense during the reporting
period. These estimates involve judgments with respect to, among
other things, various future economic factors which are difficult
to predict and are beyond the control of the Company. Therefore,
actual amounts could differ from these estimates.
Cash equivalents
All highly liquid investments with original maturities of
three months or less are considered to be cash equivalents.
Revenue recognition
Revenue from contracts is generally recognized based on the
performance of tasks as defined in the contracts. Revenue and
fees on certain cost reimbursable contracts are recognized as
costs are incurred. Revenue from certain long-term contracts has
been recognized by the percentage-of-completion method of
accounting. Provisions for estimated losses on contracts are
recorded when identified. Billings for services or products
acquired for clients when the Company acts as an agent on behalf
of the client are excluded from revenue.
Deferred revenue is comprised of payments from customers for
which services have not yet been performed, or prepayments against
development work in process. These unearned revenues are deferred
and recognized as future contract costs are incurred and contract
services are rendered.
F-8
<PAGE> 43
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Property and equipment
Property and equipment are stated at cost. Property and
equipment under capital leases are recorded at the lower of their
fair market value or the present value of future minimum lease
payments determined at the inception of the lease.
Depreciation and amortization are calculated on a
straight-line basis, using estimated useful lives of two to seven
years. Leasehold improvements are amortized over the shorter of
the lease term or the estimated useful life of the improvement.
Property and equipment recorded under capital leases are amortized
on a straight-line basis over the lease term.
Upon sale or retirement of property and equipment, the costs
and related accumulated depreciation are eliminated from the
accounts, and any gain or loss on such disposition is reflected in
the statement of operations. Expenditures for repairs and
maintenance are charged to operations as incurred.
Software, goodwill and other intangibles
Software purchased by the Company and utilized in providing
contract services is capitalized at cost and amortized on a
straight-line basis over the lesser of three to five years or the
term of the related contract.
The cost of acquired entities is allocated first to
identifiable assets based on estimated fair values. The excess of
the purchase price over the fair value of identifiable assets
acquired, net of liabilities assumed, is recorded as goodwill and
amortized on a straight-line basis over the estimated productive
life of the assets acquired. Due to the fact that acquired skills
and technological advantages are subject to rapid obsolescence,
and thus continuous reinvestment, the Company's general policy is
to amortize goodwill over a three to five year period.
F-9
<PAGE> 44
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The Company periodically evaluates the carrying amount of
software, goodwill, other intangibles and other long-lived assets,
as well as the related amortization periods, to determine whether
adjustments to these amounts or useful lives are required based on
current events and circumstances. The evaluation is based on the
Company's projection of the undiscounted future operating cash
flows of the acquired operation over the remaining useful lives of
the related intangible assets. To the extent such projections
indicate that future undiscounted cash flows are not sufficient to
recover the carrying amounts of related intangibles, the
underlying assets are reduced by charges to expense so that the
carrying amount is equal to future discounted cash flows.
Income taxes
The Company uses the liability method to compute the income
tax provision. Under this method, deferred income taxes are
determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
reverse. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
Income tax expense consists of the Company's current provision
for federal and state income taxes and the change in the Company's
deferred income tax assets and liabilities.
The Company does not provide for foreign withholding and
income taxes on the undistributed earnings amounting to $30,304
through 1996, cumulatively, for its foreign subsidiaries, as such
earnings are intended to be permanently invested in those
operations. The ultimate tax liability related to repatriation of
such earnings is dependent upon future tax planning opportunities
and is not estimable at the present time.
Foreign operations
The consolidated balance sheets include foreign assets and
liabilities of $101,481 and $77,914, respectively as of December
31, 1996, and $37,760 and $34,459, respectively, as of December
31, 1995.
F-10
<PAGE> 45
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Assets and liabilities of subsidiaries located outside the
United States are translated into U.S. dollars at current exchange
rates as of the balance sheet date, and revenue and expenses are
translated at average exchange rates during each reporting period.
Translation gains and losses are recorded as a separate component
of stockholders' equity.
The Company periodically enters into foreign exchange forward
contracts to hedge certain foreign currency transactions for
periods consistent with the terms of the underlying transactions.
The forward exchange contracts generally have maturities that do
not exceed one year.
The net foreign currency transaction losses reflected in
other expense were $1,715, $892 and $433 for the years ended
December 31, 1996, 1995 and 1994, respectively.
Earnings per common share
Earnings per common share has been computed by dividing net
income, less preferred stock dividend requirements, by the
weighted average number of shares of common stock and common stock
equivalents outstanding, when dilutive. Common stock equivalents
include the weighted average number of shares issuable upon the
assumed exercise of outstanding stock options, assuming the
applicable proceeds from such exercise, increased by the estimated
tax benefit of assumed option exercises, are used to acquire
outstanding shares. In accordance with the modified treasury
stock method, shares assumed acquired were limited in each period
to 20% of the shares outstanding at the end of the period. Excess
proceeds not utilized to repurchase shares are assumed invested at
a yield of 5.1%, the 1996 average short term investment rate, and
net income is increased by the interest assumed earned, net of
tax, under this provision for the purpose of calculating earnings
per share. Fully diluted earnings per share are the same as
primary earnings per share for all periods presented.
F-11
<PAGE> 46
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Concentrations of credit risk
Financial instruments which potentially subject the Company
to concentrations of credit risk consist of cash and cash
equivalents and accounts receivable. The Company's cash
equivalents consist primarily of short-term money market deposits.
The Company has deposited its cash and cash equivalents with
reputable financial institutions, from which the Company believes
the risk of loss to be remote. The Company has accounts
receivable from its customers who are engaged in the banking,
insurance, healthcare, manufacturing, communications, travel and
energy industries, and are not concentrated in any specific
geographic region. These specific industries may be affected by
economic factors, and, therefore, accounts receivable may be
impacted. Generally, the Company does not require collateral from
its customers, since the receivables are supported by long-term
contracts. Management does not believe that any single customer,
industry or geographic area represents significant credit risk.
At December 31, 1996, one customer accounted for 27% of the
Company's accounts receivables. At December 31, 1995, no customers
exceeded 10% of the Company's accounts receivables.
Financial instruments
The fair value of the Company's financial instruments is
estimated using bank or market quotes or discounted cash flows at
year-end foreign exchange and interest rates. The fair value of
the financial instruments is disclosed in the relevant notes to the
financial statements. The carrying amount of short-term financial
instruments (cash and cash equivalents, accounts receivable, and
certain other liabilities) approximates fair value due to the short
maturity of those instruments.
Treasury stock
Treasury stock transactions are accounted for under the cost
method.
Reclassifications
Certain of the 1995 and 1994 amounts in the accompanying
financial statements have been reclassified to conform to the
current presentation.
F-12
<PAGE> 47
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Accounting for Stock Based Compensation
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock Based Compensation", effective for fiscal years beginning
after December 15, 1995. SFAS 123 allows companies which grant
employee stock options a choice to either continue current
accounting treatment under Accounting Principles Board Opinion No.
25 ("APB 25"), "Accounting for Stock Issued to Employees", or adopt
a new set of fair value accounting rules for recognizing
compensation expense related to employee stock and stock option
awards. The Company elected to continue reporting pursuant to the
provisions of APB 25.
Accounting standard issued
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share", effective for fiscal years ending after
December 15, 1997. SFAS 128 replaces the presentation of primary
earnings per common share with basic earnings per share, with the
principal difference being that common stock equivalents are not
considered in computing basic earnings per share. SFAS 128 also
eliminates the modified treasury stock method, and requires
reconciliation of the numerator and denominator used in computing
basic and diluted earnings per share. The Company has not yet
determined the effect of SFAS 128 on the Company's earnings per
share.
F-13
<PAGE> 48
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
2. Accounts Receivable
Accounts receivable consist of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Amounts billed $ 88,577 $43,383
Amounts to be invoiced 13,548 11,665
Recoverable costs and profits 7,744 3,183
Rebillable costs 8,436 2,929
Other 2,286 1,400
Allowance for doubtful accounts (6,787) (1,352)
-------- -------
$113,804 $61,208
======== =======
</TABLE>
With regard to amounts billed, allowances for doubtful accounts are
provided based on specific identification where less than full recovery
of accounts receivable is expected. Amounts to be invoiced represent
revenue contractually earned for services performed, which are invoiced
to the customer in the following month. Recoverable costs and profits
represent amounts previously recognized as revenue, that have not yet
been billed, in accordance with the contract terms. In certain cases,
the period of recovery may extend beyond one year. However,
classification of these amounts within current assets has been made in
accordance with common industry practice. It is anticipated that $6,892
of the recoverable costs and profits as of December 31, 1996 will be
billed in 1997 and $852 will be billed in 1998. Rebillable costs are
amounts paid by the Company for goods and services on behalf of its
customers.
F-14
<PAGE> 49
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
3. Property and Equipment and Purchased Software
Property and equipment and purchased software consist of the
following as of December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Owned assets:
Computer equipment $ 48,500 $ 26,054
Furniture and equipment 15,760 12,670
Leasehold improvements 5,897 5,590
70,157 44,314
Less accumulated depreciation
and amortization (41,276) (26,950)
-------- --------
28,881 17,364
-------- --------
Assets under capital leases:
Computer equipment 3,930 5,114
Furniture and equipment 1,581 2,871
-------- --------
5,511 7,985
Less accumulated amortization (5,057) (5,986)
454 1,999
-------- --------
Property and equipment, net $ 29,335 $ 19,363
======== ========
Purchased software $ 21,322 $21,135
Less accumulated amortization (14,909) (14,894)
-------- --------
Purchased software, net $ 6,413 $ 6,241
======== ========
</TABLE>
The significant increase in computer equipment in 1996 is attributed
to the investment in new integrated corporate information systems and
general business growth throughout the year. The decrease in software in
1996 is attributable to the write-off of assets placed into service from
the Company's March 1993 software license transfer rights agreement.
F-15
<PAGE> 50
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
4. Acquisitions
During 1996, the Company acquired all of the equity interests in
four companies: RothWell International, Inc. ("RothWell"), based in
Houston, Texas, an object-oriented programming company; Doblin Group,
Inc. ("Doblin"), a Chicago-based consulting company, engaging in
strategic design planning and consulting for breakthrough products and
services; CommSys Corporation ("CommSys"), located in Reston, Virginia, a
developer of billing systems for telecommunication companies; and The
Technical Resource Connection, Inc. ("TRC"), based in Tampa, Florida,
specializing in object-oriented programming and software development.
The four acquisitions were recorded under the purchase method of
accounting; and accordingly, the results of operations of RothWell,
Doblin, CommSys, and TRC for the periods from the date of the acquisition
agreements to December 31, 1996 are included in the accompanying 1996
consolidated statement of operations. The dates of the acquisition
agreements for RothWell, Doblin, CommSys, and TRC were August 2,
September 10, September 16 and October 25, respectively. The purchase
prices have been allocated to assets acquired and liabilities assumed
based on the estimated fair values at the dates of acquisition. In
addition, a portion of the CommSys purchase price and the TRC purchase
price was allocated to in-process product development that had not
reached technological feasibility and had no probable alternative future
uses, which the Company recorded as direct cost of services at the date
of acquisition.
Under the terms and conditions of the various acquisition
agreements, the Company paid a total of $9,669 in cash and issued
1,460,372 shares of the Class A Common Stock valued at $6,545 for a total
purchase price of $16,214. The Company allocated the total purchase
price to $4,286 of the tangible net assets acquired, $3,948 of expensed
in-process product development and $7,980 of goodwill.
F-16
<PAGE> 51
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The following table reflects unaudited pro forma combined results of
operations of the Company and RothWell, Doblin, CommSys, and TRC on the
basis that the acquisitions had taken place and the related product
development expense was recorded at the beginning of the calendar year
for each of the periods presented:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Contract revenue $628,585 $368,933
Net income 19,079 4,889
Primary and fully diluted earnings per common share 0.37 0.12
</TABLE>
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have
occurred had the acquisitions been consummated at the beginning of 1996
and 1995, respectively or of future operations of the combined companies
under the ownership and management of the Company.
5. Investments in Unconsolidated Affiliates
At December 31, 1996, investments in and advances to unconsolidated
affiliates include two equity investments made in 1996. On January 5,
1996, the Company acquired 40% of the equity interest in Systor AG
("Systor"), a Swiss information services company, from Swiss Bank
Corporation as part of a larger services agreement. On March 26, 1996,
the Company entered into a joint venture with HCL Corporation Limited and
HCL Europe Limited whereby the Company owns 49% of HCL Perot Systems NV
("HCL"), an information services company based in India. The Company is
required to contribute additional capital to HCL up to a limit of $6,900,
on a call basis. The Company's investment in HCL and Systor at December
31, 1996 was $524 and $2,266, respectively. No dividends or
distributions were received from investments in unconsolidated affiliates
in 1996 or 1995.
In May 1996, the Company purchased 1,471,000 shares of a class of
preferred stock for $2,500, which currently represents a 12% equity
interest in a software company. As part of the purchase agreement, the
Company is subject to a call option which, if exercised, would require
the Company to purchase additional shares for a total commitment of up to
$1,000.
F-17
<PAGE> 52
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
In April 1996, the Company entered into an agreement to join a
limited partnership venture capital fund. The Company has committed to
invest up to a total of $10,000, or a 2.75% interest, over a five-year
period in connection with this agreement. As of December 31, 1996,
$1,292 in capital contributions have been made by the Company. Capital
contributions are used to fund the partnership's investment in companies
specializing in information technology, telecommunications, and travel
and leisure.
6. Other Assets
Software license transfer rights
In March 1993, the Company entered into an agreement to obtain
software license transfer rights for the purpose of lowering its future
direct costs of service relating to the acquisition, operation or
transfer of mainframe data-processing contracts. The original cost of
the transfer rights was $7,552. The cost of the rights was divided into
five equal assets, whereby one-fifth of the original cost would be placed
in service each year over a five year period. As of December 31, 1995,
$4,530 of the rights had been placed in service. During 1996, an
additional $1,511 was placed into service with $1,511 of software license
transfer rights remaining.
In July 1996, the Company determined that these rights and assets
placed in service were impaired due to the market shift from mainframe
systems to client/server and network based systems. In addition, the
Company's business mix had gradually shifted from outsourcing to
application development, systems integration, and consulting. As a
result, the $7,552 of transfer rights and assets in service and the
$3,396 of related accumulated amortization were written off resulting in
a loss of $4,156 classified as direct cost of services.
Goodwill
Total goodwill related to the Company's acquisitions of $7,294, net
of accumulated amortization of $686, is recorded as other noncurrent
assets as of December 31, 1996.
F-18
<PAGE> 53
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
7. Line of Credit
Effective July 31, 1996, the Company established a bank line of
credit, which allows borrowings up to $40,000 at either the adjusted
Eurodollar rate plus 1%, or the bank's prime lending rate. There were no
borrowings outstanding under the line at December 31, 1996. This
facility expires July 31, 1998.
8. Accrued Liabilities
Accrued liabilities consist of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Operating expenses $53,533 $19,314
Taxes other than income, insurance,
rents, licenses and maintenance 3,519 2,914
Other contract-related 25,921 16,710
------- -------
$82,973 $38,938
======= =======
</TABLE>
Operating expenses
The largest increase in operating expense related accrued
liabilities was due to Swiss Bank which, as of December 31, 1996 and
1995, accounted for $26,696 and $363, respectively.
Other contract-related
Other contract-related accrued liabilities represent provisions to
match contract-related liabilities in the period in which revenues from
those contracts are recognized. These include claims made by the
customer for services that require additional effort and costs by the
Company to satisfy contractual requirements.
F-19
<PAGE> 54
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
In 1993, a client was acquired by another entity, whose management
chose to exercise the termination clause in the client's contract with
the Company. As a result, the Company received a cash payment of $17,400
in December of 1993. As of December 31, 1993, the Company established an
accrual for estimated future lease, service contract and asset
disposition costs in the amount of $16,224 by deferring recognition of
the cash termination payment. During 1994, $7,433 of the cash
termination payment was utilized to offset expenses related to the
contract. Further, in 1994, the Company was successful in obtaining a
more favorable facility sublease arrangement than originally estimated,
thereby resulting in the recognition of a $6,697 benefit from the
termination fee.
9. Capital Lease Obligations and Long-Term Debt
Capital lease obligations and long-term debt consist of the
following as of December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Computer equipment capital leases containing
various payment terms through
March 2000 with implicit interest rates
ranging from 9.14% to 17.40% $ 666 $ 985
Furniture capital leases containing payment
terms through August 2001 with implicit
interest rates ranging from 9.14% to 13.12% 1,111 1,276
Note payable for software license transfer
rights, financed at 8.35%, payable in monthly
installments through March 1998 2,197 3,796
Note payable for software financed at
10.23%, payable monthly through July 2001 1,199 -
------- -------
5,173 6,057
Less current maturities (2,377) (2,375)
------- -------
$ 2,796 $ 3,682
======= =======
</TABLE>
F-20
<PAGE> 55
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Capital lease payments and long-term debt maturities for years
ending after December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Capital lease Long-term
obligations debt
------------- ---------
<S> <C> <C>
1997 $ 727 $1,955
1998 570 697
1999 472 265
2000 210 293
2001 and thereafter 87 186
------------ ---------
Total minimum lease payment and
long-term debt maturities $2,066 $3,396
=========
Less amounts representing interest (289)
------------
Present value of net minimum
capital lease payments $1,777
============
</TABLE>
10. Stockholders' Equity
Preferred stock
At December 31, 1995, the Company had 4,000,000 shares of $2.125 par
value Series A Preferred Stock outstanding. The shareholders were
entitled to receive cumulative cash dividends at the rate of 1.75%
quarterly, and had equal voting rights with holders of the common stock
on all matters submitted to a vote of the Company's shareholders. The
Company had the option at any time to redeem the outstanding shares at
par value, plus unpaid dividends, and were required to redeem when the
book value of stockholders' equity exceeded $250,000. In 1996 the
Company exercised its right to redeem the 4,000,000 shares of Series A
Preferred Stock for $8,500 cash, plus accrued dividends of $298.
F-21
<PAGE> 56
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Common stock and convertible liquidation preference common stock
Class A Common Stock ("Class A") of the Company consists of
100,000,000 authorized shares of $0.01 par value common stock, of which
there are 39,630,487 shares issued and outstanding as of December 31,
1996. In 1996, at the initiation of the holder, and under the terms of
the Company's Certificate of Incorporation, the 16,000,000 outstanding
shares of Convertible Liquidation Preference Common Stock were converted
on a one-for-one basis into fully paid and non-assessable shares of Class
A Common Stock. The Company is authorized to issue, under its existing
stock plans, up to 37,400,000 shares of Class A Common Stock, of which
23,630,487 are outstanding at year end. In addition, 24,000,000 Class A
shares are reserved for future conversion of Class B shares.
Class B Common Stock ("Class B") of the Company consists of
24,000,000 authorized shares of $0.01 par value common stock, of which
none were issued at year end. The Class B shares were authorized in
conjunction with the provisions of a major new contract, which was signed
in January 1996. Class B shares are non-voting and convertible, but
otherwise are equivalent to the Class A shares.
Each share of Class B Common Stock shall be converted, at the option
of the holder, on a share for share basis, into a fully paid and
non-assessable share of Class A Common Stock, upon sale of the share to a
third-party purchaser under one of the following circumstances: 1) in a
widely dispersed offering of the Class A Common Stock; 2) to a purchaser
of Class A Common Stock who prior to the sale holds a majority of the
Company's stock; 3) to a purchaser that after the sale holds less than 2%
of the Company's stock; 4) in a transaction that complies with Rule 144
under the Securities Act of 1933, as amended; or 5) any sale approved by
a certain regulatory agency of the U.S. Government.
F-22
<PAGE> 57
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Restricted Stock Plan
In 1988, the Company adopted a Restricted Stock Plan, which was
amended in 1993, to attract and retain key employees, and to reward
outstanding performance. Employees selected by management may elect to
become participants in the plan by entering into an agreement that
provides for vesting of the Class A Common Stock over a five to ten year
period and establishes a two-year holding period on one-half of the
shares prior to the sale of vested common stock. Each participant has
voting, dividend and distribution rights with respect to all shares of
both vested and unvested common stock. Prior to an underwritten public
offering of its Class A Common Stock registered with the Securities and
Exchange Commission, the Company retains the right of first refusal to
buy the employees' vested and unvested shares at a formula price set
forth in each agreement, based on fair value, book value or the
employees' cost plus interest at 8%. After such an offering, the right
of first refusal no longer exists. The Company may repurchase unvested
shares, and under certain circumstances, vested shares of participants
whose employment with the Company terminates. The repurchase price under
these provisions is determined by the underlying agreement, generally the
employees' cost plus interest at 8%, or fair value. Common stock issued
under the Restricted Stock Plan has been purchased by the employees at
varying prices, determined by the Board of Directors and estimated to be
the fair value of the shares based upon an independent third-party
appraisal. The Company has from time to time financed the issuance of
shares under the Restricted Stock Plan by executing promissory notes with
the employees, with repayment terms ranging from one to fifteen years.
These notes bear interest at 8%, payable at least annually, and are with
recourse. Principal and interest payments vary from monthly to 5 years,
and the loans are collateralized by the shares financed by the notes.
The balance of the outstanding notes is included as a reduction to
stockholders' equity.
F-23
<PAGE> 58
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1991 Stock Option Plan
In 1991, the Company adopted the 1991 Stock Option Plan (the "1991
Plan"), which was amended in 1993. Pursuant to the 1991 Plan, options to
purchase the Company's Class A Common Stock can be granted to eligible
employees. The stock options are granted at a price not less than 100%
of the fair value of the Company's Class A Common Stock, as determined by
the Board of Directors, based upon an independent third-party valuation.
The stock options vest over a three to ten year period based on the
provisions of each grant, and in some cases can be accelerated through
attainment of financial performance criteria. All stock options require
a two-year holding period for one half of the shares purchased once the
options are exercised, and are usually exercisable from the vesting date
until the eleventh anniversary from the date of grant, and unvested
options are canceled following the expiration of a certain period after
the employee leaves the employment of the Company. Prior to an
underwritten public offering of its common stock, the Company has certain
rights of first refusal to repurchase employees' shares obtained through
exercise of the stock options at either fair value or the employees' cost
plus 8%. Options issued after April 1, 1996 may not be exercised until
the earlier of an initial public offering of the Company's common stock,
or January 1, 1999.
Advisor Stock Option/Restricted Stock Incentive Plan
In 1992, the Company adopted the Advisor Stock Option/Restricted
Stock Incentive Plan (the "Advisor Plan"), which was modified in 1993, to
enable non-employee directors and advisors to the Company and consultants
under contract with the Company to acquire shares of the Company's Class
A Common Stock, at a price not less than 100% of the fair value of the
Company's common stock, as determined by the Board of Directors, based
upon an independent third-party valuation. The options and shares are
subject to a vesting schedule and restrictions associated with their
transfer. Under certain circumstances, the shares can be repurchased by
the Company at cost plus 8% from the date of issuance.
In 1996, the Board approved the 1996 Non-Employee Director Stock
Option/Stock Incentive Plan and the 1996 Advisor and Consultant Stock
Option/Stock Incentive Plan, which together supersede and replace the
Advisor Plan. Provisions of the Advisor Plan will remain in effect for
outstanding stock and options but no new issuances will be made pursuant
to the plan.
F-24
<PAGE> 59
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1996 Non-Employee Director Stock Option/Stock Incentive Plan
In 1996, the Company adopted the 1996 Non-Employee Director Stock
Option/Stock Incentive Plan (the "Director Plan"). The Director Plan
provides for the issuance of up to 400,000 Class A common shares or
options to Board members who are not employees of the Company. Shares or
options issued under the plan would be subject to five year vesting, with
options expiring after an eleven year term. The purchase price for
shares issued and exercise price for options issued will be the fair
value of the shares at the date of issuance. Other restrictions would be
established upon issuance. There were no issuances under the Director
Plan in 1996.
1996 Advisor and Consultant Stock Option/Stock Incentive Plan
In 1996, the Company adopted the 1996 Advisor and Consultant Stock
Option/Stock Incentive Plan (the "Consultant Plan"). The Consultant Plan
provides for the issuance of Class A common shares or options to advisors
or consultants who are not employees of the Company, subject to
restrictions established at time of issuance. The option exercise price
will be the fair value of the shares on the date of grant. The purchase
price for share issuances will be determined by a committee appointed by
the Board of Directors. The fair value of issuances under the plan will
be estimated at the time of issuance and amortized ratably over the
vesting period as compensation expense. There were no issuances under
the Consultant Plan in 1996.
F-25
<PAGE> 60
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Other stock and option activity
During 1995, options for the purchase of 2,000,000 shares of Class A
Common Stock, with an exercise price of $1.00 per share, were granted to
an officer of the Company when the fair value of the stock was estimated
to be $1.75 per share. This resulted in deferred compensation of $1,500,
which is recorded as a reduction to stockholders' equity and is being
amortized as compensation expense over the vesting period of ten years.
These options were exercised in 1995, whereby the Company received cash
of $600, and a promissory note for $1,400 in consideration for the
shares, under the terms of the original grant. The note bears interest
at 8% or a market rate defined in the agreement, whichever is greater,
and with principal and interest due in full on the earlier of: 1) the
fifteenth anniversary of the effective date; 2) three years after the
stock is publicly traded; or 3) when the fair value of the vested shares
is equal to or greater than two times the outstanding principal and
interest balance of the promissory note. The agreement provides for
vesting ratably over a ten year period and establishes a two-year holding
period on one-half of the shares prior to the sale of vested shares.
The shareholder has voting, dividend and distribution rights with
respect to both vested and unvested shares. Prior to an underwritten
public offering of its common stock, the Company retains the right of
first refusal to buy back the vested shares for cash at a purchase price
equal to fair value, and the unvested shares at the cost paid by the
shareholder. After such an offering, the right of first refusal no
longer exists. The Company has the right, under certain circumstances, to
repurchase certain shares at cost if employment with the Company
terminates.
F-26
<PAGE> 61
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
On January 5, 1996, the Company entered into a series of agreements
with Swiss Bank. These agreements included an information processing, a
stock option and a stock purchase agreement, among the various associated
contracts, all of which were effective as of January 1, 1996. Under the
terms and conditions of the stock option agreement, the Company granted
the customer an option to acquire 10,500,000 shares of Class B Common
Stock at a price of $2.50 per share. In return, the company received a
twenty-five year information processing agreement, a 40% interest in the
voting common stock of the customer's information systems subsidiary
("Systor"), the right to utilize certain infrastructure and restricted
applications to process other third party contracts, and a commitment for
future project work for the customer. Stock options to acquire 9,000,000
shares vest ratably over 13 years beginning on January 1, 1998. The
start date of this 13 year vesting period can potentially be adjusted to
either January 1, 1996, or January 1, 1994, upon termination of the
contract by certain defaults of the Company. Either early vesting
scenario would accelerate the overall vesting of shares, but would not
change the length of the vesting period or the annual rate of vesting.
Stock options to acquire the remaining 1,500,000 shares vest ratably over
13 years beginning on January 1, 1996, with no adjustment of the vesting
period possible. In the event of a termination of the information
processing agreement, the Company will return a portion of the Systor
shares based on the time elapsed since the signing of the information
processing agreement. The number of shares to be returned to Swiss Bank
declines ratably over a period of thirteen years beginning January 1,
1996. The Company believes that the likelihood of a termination of the
information processing agreement is remote.
The stock option agreement provides that the Company will pay to
Swiss Bank the excess of (a) the aggregate exercise price paid by Swiss
Bank (up to $5.00 per share) for all shares purchased by Swiss Bank prior
to the eighth, eleventh, fourteenth, seventeenth and twentieth
anniversary dates ("Trigger Dates") of the stock option agreement and
subsequent to the immediately preceding Trigger Date (or, in the case of
the first Trigger Date, subsequent to the execution of the stock option
agreement) (a "Trigger Date Period") over (b) the (i) number of the
Calculation Base Shares (as defined below) times (ii) a defined fair
value. Swiss Bank will pay to the Company the excess of (a) (i) the
number of the Calculation Base Shares (as defined below), multiplied by
(ii) the defined fair value of a share of Class A Common Stock of the
Company ("Class A Common Stock", and such shares, "Class A Shares") over
(b) the aggregate exercise price paid by Swiss Bank (up to $5.00 per
share) for all shares purchased by Swiss Bank
F-27
<PAGE> 62
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
during the relevant Trigger Date Period. "Calculation Base Shares" means
five percent of such shares purchased by Swiss Bank during the Trigger
Date Period ending on such Trigger Date.
The value of the options granted was estimated to be $5,250, based
upon an independent third-party appraisal. Based upon their respective
fair values, $706 was allocated to the equity interest acquired in
Systor, and $4,544 to the value of contract rights received. The
contract rights are recorded as a reduction to stockholders' equity, and
are being amortized ratably over the fifteen year vesting period. Upon
award, the underlying book value of the Company's acquired interest in
Systor approximated $2,614, which exceeded the original estimated
carrying value of $706. The excess of $1,908 is being amortized as a
reduction of direct expense over a three year period. The full value of
the options granted of $5,250 is recorded in additional paid-in-capital.
The Company also granted the customer additional stock options to
acquire up to 9,420,900 shares of Class B Common Stock if certain other
information technology service agreements were executed on or before
December 31, 1996. As the agreements were not executed, the options
expired December 31, 1996.
Pursuant to the Bank Holding Company Act of 1965 (the "Act") and
subsequent regulations and interpretations put forth by the Federal
Reserve Board, the customer's holdings in terms of shares of the
Company's common stock may not reach or exceed 10% of the total of all
classes of the Company's common stock. Similarly, the total
consideration paid by the customer for the exercising its stock options
may not at any time reach or exceed 10% of the Company's consolidated
stockholders' equity as determined in accordance with generally accepted
accounting principles.
If on the eighth, eleventh, fourteenth, seventeenth, or twentieth
anniversary date ("Trigger Dates") of the stock option agreement, the
number of Class B shares for which the options are exercisable but
limited from exercise by the Act, the Company will, within three years
from the Trigger Date, issue additional shares to cure the limitation or
purchase the shares which are limited at the fair value on the required
date of payment.
F-28
<PAGE> 63
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
If, during the term of the SBC Warburg EPI Agreement, Swiss Bank
desires to sell its shares, Swiss Bank must first offer such Class B
shares or options in respect thereof to the Company for a price specified
in writing. If the Company does not accept such offer within 20 days of
its such offer, Swiss Bank will be entitled to offer and sell the Class B
shares for at least the price and other terms specified to the Company
within three months of the date of the notice to the Company.
Activity in Liquidation Preference Common and Class A Common Stock:
<TABLE>
<CAPTION>
Weighted
Restricted Advisor Option Liquidation Average
Plan Plan Plans Other Preference Share Total Price
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 Beginning shares 9,237,982 410,000 464,636 4,908,616 16,000,000 31,021,234 0.85
Issuance 363,800 30,000 - 70,134 - 463,934 1.02
Option Exercise - - 32,760 - - 32,760 0.92
Repurchase (883,198) - - (6,800) - (889,998) 0.75
----------- ------- --------- ---------- ---------- ----------
December 31, 1994 8,718,584 440,000 497,396 4,971,950 16,000,000 30,627,930 0.86
Issuance 1,300,202 60,000 67,678 111,412 - 1,539,292 1.10
Option Exercise - - 2,016,340 - - 2,016,340 1.00
Repurchase (153,000) - - - - (153,000) 0.61
----------- ------- --------- ---------- ---------- ----------
December 31, 1995 9,865,786 500,000 2,581,414 5,083,362 16,000,000 34,030,562 0.88
Issuance 2,367,359 - - 1,682,148 - 4,049,507 3.23
Option Exercise - - 1,754,748 - - 1,754,748 0.85
Conversion - - - 16,000,000 16,000,000) -
Repurchase (204,330) - - - - (204,330) 1.53
----------- ------- --------- ---------- ---------- ----------
December 31, 1996 12,028,815 500,000 4,336,162 22,765,510 - 39,630,487 1.12
=========== ======= ========= ========== ========== ==========
</TABLE>
F-29
<PAGE> 64
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Activity in Options for Class A Common Stock:
<TABLE>
<CAPTION>
Weighted
Average
1991 Plan Advisor Plan Other Options Total Exercise Price
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 Outstanding at beginning of year 6,111,460 160,000 6,800 6,278,260 0.82
Granted 2,753,300 - - 2,753,300 1.00
Exercised (32,760) - - (32,760) 0.67
Forfeited (941,708) - (4,800) (946,508) 0.98
------------------------------------------------------------
Outstanding at December 31, 1994 7,890,292 160,000 2,000 8,052,292 0.87
Granted 2,846,100 - 2,000,000 4,846,100 1.15
Exercised (14,340) - (2,002,000) (2,016,340) 1.00
Forfeited (435,232) - - (435,232) 0.95
------------------------------------------------------------
Outstanding at December 31, 1995 10,286,820 160,000 - 10,446,820 0.97
Granted 7,227,632 - - 7,227,632 2.71
Exercised (1,754,748) - - (1,754,748) 0.85
Forfeited (1,431,892) - - (1,431,892) 1.52
------------------------------------------------------------
Outstanding at December 31, 1996 14,327,812 160,000 - 14,487,812 1.81
============================================================
Exercisable at December 31, 1996 1,465,594 108,000 - 1,573,594 0.88
</TABLE>
F-30
<PAGE> 65
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The following table summarizes information about options for Class A
common shares outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Weighted-Average
Exercise Number Remaining Number
Price Outstanding Contractual Life Exercisable
-------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.50 457,192 5.2 92,821
$0.75 1,576,360 5.9 686,480
$1.00 4,873,420 8.1 756,660
$1.75 1,032,404 6.6 35,233
$2.50 5,079,096 10.4 2,400
$3.75 1,469,340 9.3 -
----------- -----------
$1.81 14,487,812 8.6 1,573,594
=========== ===========
</TABLE>
Weighted average exercise price of exercisable options $0.88
As previously noted, the Company has continued to account for its
stock option activity under APB 25. Had the Company elected to adopt
SFAS 123, the pro forma impact on net income and earnings per share would
have been as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net income
As reported $20,499 $10,813
Pro forma $20,063 $10,734
Primary and fully diluted earnings per share
As reported $ 0.40 $ 0.30
Pro forma $ 0.40 $ 0.29
</TABLE>
F-31
<PAGE> 66
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
All options issued by the Company in 1996 and 1995 were issued at
the estimated fair value in effect at the date of issuance, vest ratably
over the vesting period, and expire one year after the final vesting
date. The fair value of each option grant was estimated on the date of
grant using the Minimum Value option pricing model with the following
assumptions for 1996 and 1995, respectively; risk free weighted average
interest rates of 6.8% for both years; dividend yield and volatility of
zero for both years. The expected life for each issuance was equal to the
midpoint of the vesting period, plus one year. For example, an option
vesting ratably over ten years has an expected life of 6 years. The
weighted-average grant-date fair value of options issued in 1996 and 1995
was $5,938 and $1,916, respectively. The Company expects that the impact
of future option issuances will be to increase overall pro forma
compensation expense, thereby reducing pro forma net income reported in
future periods.
11. Income Taxes
Income before taxes for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Domestic $10,151 $12,518 $ 7,304
Foreign 30,000 7,732 2,835
------- ------- -------
$40,151 $20,250 $10,139
======= ======= =======
</TABLE>
F-32
<PAGE> 67
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The provision for income taxes charged to operations was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
U.S. Federal $ 21,794 $ 4,444 $(4,268)
State and local 3,583 766 (384)
Foreign 10,319 7,825 742
------- ------- -------
Total current 35,696 13,035 (3,910)
------- ------- -------
Deferred:
U.S. Federal (14,400) (4) 6,780
State and local (2,242) 32 929
Foreign 598 (3,626) 11
-------- ------- -------
Total deferred (16,044) (3,598) 7,720
-------- ------- -------
Total provision for income taxes $ 19,652 $ 9,437 $ 3,810
======== ======= =======
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at
December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred compensation $ 536 $ 615
Conversion of acquired entity from
cash basis to accrual basis of
accounting 989 -
Amortization 178 -
Other 315 25
--------- ---------
Gross deferred tax liabilities 2,018 640
--------- ---------
Depreciation (5,557) (1,751)
Accrued liabilities (21,233) (10,701)
Equity investments (517) -
Amortization (171) -
Deferred revenue (4,877) (3,998)
Other (129) (333)
--------- ---------
Gross deferred tax assets (32,484) (16,783)
--------- ---------
Net deferred tax asset $ (30,466) $ (16,143)
========= =========
</TABLE>
F-33
<PAGE> 68
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
A valuation allowance has not been established for the net deferred
tax asset as of December 31, 1996 or 1995, due to a significant contract
backlog and the availability of loss carrybacks.
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax
rate to income before taxes, as a result of the following differences:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S. tax rates $14,053 35.0% $7,087 35.0% $3,447 34.0%
Non-deductible items 3,017 7.5 1,829 9.0 181 1.8
State and local taxes 609 1.5 751 3.7 545 5.4
Nondeductible
amortization and write -
off of intangible assets 1,900 4.7 - - - -
Effect of foreign operations 79 0.2 - - - -
Net operating loss carryover - - - - 132 1.3
Reversal of accrued liability - - - - (404) (4.0)
Other (6) - (230) (1.1) (91) (0.9)
------- ---- ------ ---- ------ ----
Total provision for
income taxes $19,652 48.9% $9,437 46.6% $3,810 37.6%
======= ===== ====== ===== ====== =====
</TABLE>
12. Certain Geographic Data and Segment Information
The Company operates in one industry segment which includes the
development, implementation, operation and management of information
systems. Services are provided through the parent company in the United
States, and through a worldwide network of subsidiaries located in the
United Kingdom, Germany, France, Switzerland, the Netherlands, Monaco,
Singapore, Hong Kong and Japan. Financial information by geographic
region is as follows:
F-34
<PAGE> 69
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
United States:
Total revenue $365,211 $238,783 $193,828
Operating income 11,019 12,802 7,230
Identifiable assets at December 31 130,766 90,632 67,298
Europe and Asia:
Total revenue 234,227 103,523 98,327
Operating income 30,332 8,060 3,685
Identifiable assets at December 31 101,481 39,841 23,035
Consolidated:
Total revenue 599,438 342,306 292,155
Operating income 41,351 20,862 10,915
Identifiable assets at December 31 232,247 130,473 90,333
</TABLE>
Greater than 10% of the Company's contract revenue was earned from
one customer for the year ended December 31, 1996, two customers for the
year ended December 31, 1995, and four customers for the year ended
December 31, 1994. Revenue from these customers comprised 28% of total
revenue in 1996, 12% and 10% of total revenue in 1995, and 20%, 15%, 15%
and 11% of total revenue in 1994, respectively.
13. Commitments and Contingencies
Deferred revenue
In 1996 a client was acquired by another entity, and the
contract with the Company was terminated. The Company received a
cash payment of $5,100. This payment was recorded as deferred
revenue which will be recognized in 1997 as expenses associated
with the disposition of the contract are incurred.
In April 1995, one of the Company's major contracts was
renegotiated. Under the terms of the new agreement, the Company
received $12,000 as prepayment for services to be rendered over
the four year term of the new agreement. This prepayment is being
recognized as contract revenue ratably over the term of the
contract.
F-35
<PAGE> 70
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Operating leases and maintenance agreements
The Company has commitments related to data processing
facilities, office space and computer equipment under
non-cancelable operating leases and fixed maintenance agreements
for periods ranging from one to ten years. Future minimum
commitments under these agreements as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Year ending Lease and Maintenance
December 31: Commitments
------------ -----------
<S> <C>
1997 $17,037
1998 8,873
1999 6,083
2000 4,002
2001 and thereafter 7,754
-------
Total $43,749
=======
</TABLE>
The Company is obligated under certain operating leases for
its pro rata share of the lessors' operating expenses. Rent
expense was $18,212, $23,731 and $41,927 for 1996, 1995 and 1994,
respectively.
Letters of credit
The Company had $1,217 in irrevocable letters of credit as of
December 31, 1996. The letters of credit were issued in
conjunction with the provisions of certain contracts. The fair
value of these letters of credit is estimated to be equal to the
face values of the letters of credit, based on the nature of the
fee arrangements with the issuing banks.
F-36
<PAGE> 71
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
Financial instruments with off-balance sheet risk
Interest rate swap
In December 1993, the Company entered into an agreement with
a customer to reduce future monthly billings in exchange for a
non-refundable payment for work performed involving the
development and installation of a major new system. Under the
terms of this agreement, the Company is required to make an
interest sensitive payment to the customer if a defined variable
interest rate ("Rate") exceeds 8.5% based upon a declining
notional amount ($67,716 and $82,686 as of December 31, 1996 and
1995, respectively) over the term of the contract. If the Rate is
less than 8.5%, the customer is required to pay the Company for
the difference in the interest rates based upon the same declining
notional amount.
In January 1994, the Company entered into an interest rate
swap agreement with a bank to eliminate its exposure to the
interest sensitive payment. Under the terms of the swap
agreement, the Company is required to pay a fixed interest rate of
7.32% to a bank in exchange for being paid the Rate.
The differences to be paid or received on the interest
sensitive payment and swap are included as an adjustment to direct
cost of services. The Company recorded a reduction to direct cost
of services of $852 and $1,008 for the years ended December 31,
1996 and 1995, respectively. Based on anticipated cash flows,
discounted at the U.S. prime lending rate of 8.5%, the fair value
of these instruments was estimated to be a $1,877 benefit as of
December 31, 1996. The Company's remaining risk associated with
these transactions is risk of default by the customer or the bank,
which the Company believes to be remote.
Foreign currency exchange forward contracts
At December 31, 1996, the Company had one forward exchange
contract maturing in January 1997. This British pounds to U.S.
dollar trade totaled $4,551 as of December 31, 1996.
F-37
<PAGE> 72
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
The estimated fair value of the Company's forward exchange
contract using bank or market quotes and the year end foreign
exchange rates was a net liability of $117 as of December 31,
1996. The Company's remaining risk associated with this
transaction is the risk of default by the bank, which the Company
believes to be remote.
Contingent put rights
Under the terms of various stock agreements, a total of
2,905,372 shares of Class A Common Stock are subject to contingent
put rights. For 2,000,000 and 325,372 of these shares, the
holders may require the Company to repurchase the shares at fair
value in the event the Company's Class A Common Stock is not
publicly traded by the years 2010 and 2000, respectively. For
580,000 of these shares, the holders may require the Company to
repurchase the shares at the original cost plus 8% interest,
accrued from the date of purchase, in the event the holders'
employment or directorship terminates.
Litigation
There are various claims and pending actions against the
Company arising in the ordinary course of the conduct of its
business. The Company believes that these claims and actions will
have no material adverse effect on the Company's financial
condition, results of operations or cash flows.
F-38
<PAGE> 73
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
14. Retirement Plan and Other Employee Trusts
During 1989, the Company established the Perot Systems 401(k)
Retirement Plan, a qualified defined contribution retirement plan. The
plan year is January 1 to December 31 and allows eligible employees to
contribute between 1% and 15% of their annual compensation, including
overtime pay, bonuses and commissions. The Plan was amended effective
January 1, 1996 to change the Company's contribution from 2% of the
participants' defined annual compensation, to a formula matching
employees' contributions at a two-thirds rate, up to a maximum Company
contribution of 4%. The Company's cash contribution for the years ended
December 31, 1996, 1995 and 1994 amounted to $4,785, $1,919 and $1,680,
respectively. The Company's contribution of common stock for the years
ended December 31, 1996, 1995 and 1994 totaled 6,325, 99,486, and 70,134
shares, respectively, which were allocated to participants' plan accounts
using a formula based on compensation. Compensation expense of $14, $224
and $123, respectively, was recorded as a result of these share
contributions.
In 1992 the company established a European trust, for the benefit of
non-U.S. based employees, to which 11,926 shares were contributed in
1995. Compensation expense of $26 was recorded as a result of this
grant.
In 1996, the company contributed 162,143 shares to several trusts
established for the benefit of employees transitioning to the company
pursuant to certain contracts. Compensation expense of $405 was recorded
related to these grants.
F-39
<PAGE> 74
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
15. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 1,877 $ 671 $ 1,213
======= ====== =======
Income taxes $28,032 $7,031 $ 5,027
======= ====== =======
Non-cash investing and financing activities:
Capital lease obligations incurred for
acquisition of computer equipment $ - $ - $ 274
======= ====== =======
Property, equipment and software financed with
long-term debt and notes payable $ - $ - $ 682
======= ====== =======
Repurchase of shares issued under
Restricted Stock Plan in exchange for
reductions in notes receivable from
stockholders $ 225 $ - $ 646
======= ====== =======
Transfer of assets upon assignment of lease obligation $ - $1,008 $ -
======= ====== =======
Issuance of common stock for acquisition
of businesses $ 6,545 $ - $ -
======= ====== =======
Purchase of shares financed by notes
receivable from stockholders $ 3,065 $ 901 $ 315
======= ====== =======
Stock options issued for contract rights $ 4,544 $ - $ -
======= ====== =======
Stock options issued for investments in
and advances to unconsolidated
affiliates $ 706 $ - $ -
======= ====== =======
</TABLE>
16. Related Party Transactions
During 1996, certain officers financed the purchase of Class A
Common Stock with a bank. In addition, the Company entered into an
agreement with this bank under which, if the Company's Class A common
shares are not publicly traded prior to June 30, 1998 or the maturity
date of the individual loans, the Company will purchase, at the bank's
option, any of these loans. As of December 31, 1996, approximately $809
remain outstanding under these loans. All of these loans bear interest
at a rate of 9.50% and are due at various dates between July 1, 1998 and
February 26, 2000.
In March 1996, the Company loaned $615 to an executive. The note
bears interest at a rate of 5.98% per annum and is payable at the
fifteenth anniversary of
F-40
<PAGE> 75
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
the date of the note or at an earlier date if the Company's common stock
is publicly traded. In April 1997, the Company committed to loan up to
an additional $2,500 to this officer. For these additional loans, up to
$1,500 will be collateralized by Class A Common Shares held by this
officer and up to $1,000 will be collateralized by a mortgage on the
officer's residence. These additional loans will bear interest at the
greater of 7.25% or the applicable federal rate.
The Company has entered into an agreement with Perot Investments,
Inc. ("PII") pursuant to which the Company licensed certain software from
PII. The Company sublicensed such software to The Witan Company, L.P.
("Witan"). Witan has paid a license fee of $1,000 directly to PII in
connection with the license. The Company has a separate contract with
Witan to perform development work on the licensed software. PII is an
affiliate of a stockholder of the Company.
17. Subsequent Event (Unaudited)
Swiss Bank
On April 24, 1997, the Company concluded the renegotiation of the
terms of its strategic alliance with Swiss Bank, initially entered into
in January 1996. The new terms are effective from January 1, 1997 and
involve (i) a 10 year contract for the Company to provide information
technology ("IT") services to SBC Warburg ("SBC Warburg EPI Agreement"),
(ii) separate agreements to provide IT services to other Swiss Bank
operating units and to permit the Company to use certain Swiss Bank
assets, (iii) the sale to Swiss Bank of options to acquire shares of the
Company's Class B Common Stock, (iv) the sale to Swiss Bank of shares of
the Company's Class B Common Stock, and (v) the termination of all
options to acquire shares of the Company's Class B Common Stock granted
under the terms and conditions of prior Swiss Bank agreements. The
Company continues to hold a 40% stake in Systor. In the event of
termination of the SBC Warburg EPI Agreement, a portion of the Company's
interest in Systor would be returned to Swiss Bank. The portion that
would be returned to Swiss Bank upon such a termination declines ratably
over the 10-year period which began on January 1, 1997.
The new terms of the SBC Warburg EPI Agreement require the Company
to provide operational management for SBC Warburg's technology resources
(including mainframes, desktops, and voice and data networks), excluding
F-41
<PAGE> 76
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
hardware and proprietary software applications development. The Company
is to be reimbursed for all costs, excluding corporate overhead, related
to services provided under the SBC Warburg EPI Agreement. In addition,
the Company will receive a management fee, subject to bonuses and
penalties, depending upon the achievement of certain defined performance
criteria.
Under the terms and conditions of the new agreement, the Company
sold to Swiss Bank options to purchase 3,617,160 shares of the Company's
Class B Common Stock at a cash non-refundable purchase price of $2.25 per
option. These shares of the Company's Class B Common Stock are subject to
certain transferability and holding-period restrictions, which lapse over
a defined vesting period. These options are exercisable immediately and
for a period of 5 years after the date that the underlying shares become
vested, at an exercise price of $7.30 per share. In addition, the Company
sold to Swiss Bank 50,000 shares of the Company's Class B Common Stock,
subject to the same transferability and holding-period restrictions, at a
purchase price of $7.30 per share. These options and shares were sold in
connection with the execution and delivery of the 10 year SBC Warburg EPI
Agreement. Both the 50,000 shares of Class B Common Stock and the
3,617,160 shares of Class B Common Stock subject to options vest at a
rate, in the aggregate, of 31,953 shares per month for the first five
years of the agreement, and at a rate of 29,167 shares per month
thereafter. In the event of termination of the SBC Warburg EPI
Agreement, options to acquire unvested shares would be forfeited, and the
Company would have the right to buy back any previously acquired unvested
shares for the original purchase price of $7.30 per share
The Company also agreed to issue and sell to Swiss Bank additional
shares and/or options to purchase shares of the Company's Class B Common
Stock, subject to the same transferability and holding-period
restrictions, up to a maximum of 3,500,000 shares, in such combination of
options and shares that Swiss Bank deems appropriate, provided the
Company and Swiss Bank, on or prior to December 31, 1998, enter into a
second IT services agreement, having a term of 10 years, and being of a
size and scope similar to that of the SBC Warburg EPI Agreement. The
purchase price and exercise price for these options, as well as the
purchase price for these shares will be the defined fair value as of the
date of grant. These shares will vest ratably over 10 years commencing
on the date of execution of the new agreement. In the event of
termination, options to acquire unvested shares would be forfeited, and
the Company would have the right to buy back any previously acquired
unvested shares for the original purchase price.
Pursuant to the Bank Holding Company Act of 1965 and subsequent
regulations and interpretations put forth by the Federal Reserve Board,
(the "regulations") Swiss Bank's holdings in terms of shares of the
Company's common stock may not reach or exceed 10% of the total of all
classes of the Company's common stock. Similarly, the total
consideration paid by Swiss Bank for the purchase of shares plus the
purchase and exercise of options may not at any time reach or exceed
F-42
<PAGE> 77
PEROT SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
10% of the Company's consolidated stockholder's equity as determined in
accordance with generally accepted accounting principles. If, however,
on certain specified anniversaries of the execution date of the new
agreement, beginning in 2004, the number of shares of Class B Common
Stock, for which Swiss Bank's options are exercisable, is limited due to
an insufficient number of shares outstanding, Swiss Bank has the right to
initiate procedures to eliminate such deficiency. These procedures may
involve (i) issuance of additional shares of Class A Common Stock by the
Company, (ii) a formal request to the Federal Reserve Board from Swiss
Bank for authorization to exceed its allowable percentage of ownership,
or (iii) the purchase of shares of Class B Common Stock by the Company
from Swiss Bank at a defined fair value. In addition, the exercise period
for options to purchase vested shares would be increased beyond the normal
5 years to account for any time during such exercise period in which
Swiss Bank is unable to exercise its options as a result of the
regulations.
F-43
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation
3.2 Amended and Restated Bylaws
10.1 1991 Stock Option Plan
10.2 Form Option Agreement (1991 Option Plan)
10.3 Restricted Stock Plan
10.4 Form Restricted Stock Agreement (Restricted Stock Plan)
10.5 1996 Non-employee Director Stock Option/Restricted Stock Incentive Plan
10.6 Form Restricted Stock Agreement (Non-Employee Director Stock Option/
Restricted Stock Plan
10.7 Form option Agreement (Non-Employee Stock Option/Restricted Stock Plan)
10.8 Advisor Stock Option/Restricted Stock Incentive Plan
10.9 Form Restricted Stock Agreement (Advisor Stock Option/Restricted Stock
Plan)
10.10 Form Option Agreement (Advisor Stock Option/Restricted Stock Plan)
10.11 Stock Purchase Agreement dated as of August 20, 1992, between the
Company and Meyerson Family Limited Partnership
10.12 Stock Option Grant dated as of June 27, 1995, by the Company in favor
of James A. Cannavino
10.13 Employment Agreement dated as of September 16, 1995, by and between the
Company and James A. Cannavino
10.14 Promissory Note dated December 18, 1995, made by James A. Cannavino in
favor of the Company in the principal amount of $1,400,000
10.15 Promissory Note dated January 1, 1996, made by James A. Cannavino in
favor of the Company in the principal amount of $1,500,000
10.16 Pledge Agreement made as of December 18, 1995, by James A. Cannavino in
favor of the Company
</TABLE>
<PAGE> 79
<TABLE>
<S> <C>
10.17 Modification Agreement dated as of March 7, 1997, between the Company
and James A. Cannavino
10.18 Deed of Trust dated April 15, 1997, made by James A. Cannavino in
favor of the Company
10.19 Promissory Note dated April 14, 1997, made by James A. Cannavino in
favor of the Company
10.20 Associate Agreement dated July 8, 1996, between the Company and James
Champy
10.21 Restricted Stock Agreement dated July 8, 1996, between Company and James
Champy
10.22 Letter Agreement dated July 8, 1996, between James Champy and the
Company
10.23 Promissory Note dated June 17, 1996, made by Guillermo G. Marmol in
favor of the Company
10.24 Pledge dated June 17, 1996, made by Guillermo G. Marmol in favor of the
Company
10.25 Agreement dated June 17, 1996, among the Company, Guillermo G. Marmol
and NationsBank of Texas, N.A.
10.26 Promissory Note dated June 17, 1996, made by Guillermo G. Marmol in
favor of NationsBank of Texas, N.A.
10.27 Agreement dated August 26, 1996, among the Company, Donald D. Drobny
and NationsBank of Texas, N.A.
10.28 Promissory Note dated August 26, 1996, made by Donald D. Drobny in favor
of NationsBank of Texas, N.A.
10.29 Promissory Note dated July 31, 1996, made by the Company in favor of
NationsBank N.A.
10.30 Amended and Restated PSC Stock Option and Purchase Agreement dated as
of April 24, 1997, by and between Swiss Bank Corporation and the
Company
10.31 Amended and Restated Master Operating Agreement dated as of January 1,
1997, between Swiss Bank Corporation and the Company
10.32 Amended and Restated Agreement for EPI Operational Management Services
dated as of January 1, 1997
11 Statement re Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PEROT SYSTEMS CORPORATION
Perot Systems Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is Perot Systems Corporation.
Perot Systems Corporation was originally incorporated under the same name, and
the Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on December 19, 1995.
2. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Certificate of
Incorporation of this Corporation.
3. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
ARTICLE I
The name of the Corporation is Perot Systems Corporation.
ARTICLE II
The name of the Corporation's registered agent and the address of its
registered office in the State of Delaware is The Corporation Trust Company,
1209 Orange Street, Wilmington, New Castle County, Delaware 19805.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
A. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 124,000,000 shares, consisting of:
(i) 100,000,000 shares of Class A Common Stock, par
value $0.01 per share;
and
(ii) 24,000,000 shares of Class B Common Stock, par value
$0.01 per share.
Page 1
<PAGE> 2
B. Shares of Class B Common Stock will have no voting rights,
except to the extent that the Delaware General Corporation Law requires a vote
of the Class B Common Stock with respect to an amendment to the Certificate of
Incorporation that would increase or decrease the par value of the Class B
Common Stock or alter or change the powers, preferences or special rights of
shares of Class B Common Stock so as to affect them materially and adversely.
No authorization or issuance of any capital stock of the Corporation will be
considered to alter or change the powers, preferences or special rights of
shares of Class B Common Stock. The number of authorized shares of Class B
Common Stock may be increased or decreased (but not below the number of shares
of Class B Common Stock then outstanding or reserved for issuance pursuant to
outstanding options, warrants or similar rights) by the affirmative vote of the
holders of a majority of the voting stock of the Corporation, voting as a
single class, without any vote by holders of the Class B Common Stock.
Any amendment to the Certificate of Incorporation, merger or
consolidation, sale, lease or exchange of all or substantially all of the
Corporation's property and assets or voluntary dissolution of the Corporation
that (in any such case) requires approval by the Corporation's stockholders
under Delaware law must be approved by the affirmative vote of the holders of
at least 66-2/3% of the outstanding stock of the Corporation entitled to vote
thereon, and at least 66- 2/3% of the outstanding stock of each class entitled
to vote thereon as a class.
1. Conversion of Class B Common Stock.
(a) Each share of Class B Common Stock shall be convertible, on a
share for share basis, at the option of the holder thereof, into a fully paid
and nonassessable share of Class A Common Stock upon satisfaction of the terms
of Section 1(b) below for the purpose of the transfer, sale or other
disposition thereof (a "sale") to a third party purchaser that is not an
"affiliate" (as defined in Rule 144(a)(1) under the Securities Act of 1933, as
amended) of the holder thereof (a "Third Party") if such sale is made (a) in a
widely dispersed public offering of the Class A Common Stock; (b) to a Third
Party that, prior to such sale, controls more than 50% of the then outstanding
voting securities (as defined in the Bank Holding Company Act of 1956, as
amended, or in Regulation Y of the Board of Governors of the Federal Reserve
System) of the Corporation; (c) to a Third Party that, after such sale, is the
beneficial owner (directly or indirectly) of not more than two percent (2%) of
the outstanding voting stock of the Corporation having power to elect
directors; (d) in a transaction that complies with Rule 144 (or any successor
thereto) under the Securities Act of 1933, as amended; or (e) by Swiss Bank
Corporation or its affiliates in a transaction approved in advance by the Board
of Governors of the Federal Reserve System as being in compliance with the
requirements of the Bank Holding Company Act of 1956, as amended, and any rules
and regulations or interpretations promulgated by the Board of Governors of the
Federal Reserve System pursuant thereto (each, a "Qualifying Sale").
(b) The conversion of Class B Common Stock into Class A Common
Stock for the purpose of making a Qualifying Sale will be effective only after
receipt by the Corporation of a certificate, executed by the holder of the
Class B Common Stock that is the subject of the sale, stating that the proposed
sale is a Qualifying Sale.
Page 2
<PAGE> 3
(c) As promptly as practicable after receipt by the Corporation of
the certificate referred to in Section 1(b) and delivery to the Corporation of
the certificate or certificates evidencing any shares so converted, duly
endorsed for transfer, the Corporation shall issue and deliver to the Third
Party (or, if necessary for purposes of effecting the Qualifying Sale, to the
holder of the shares to be converted) a certificate or certificates for the
number of shares of Class A Common Stock that are the subject of the Qualifying
Sale. If only a portion of the shares of Class B Common Stock represented by a
certificate are transferred in a Qualifying Sale, the Corporation shall issue
and deliver to the holder of such Class B Common Stock a new certificate
representing the Class B Common Stock retained by such holder.
(d) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Class A Common Stock, solely for the purpose
of effecting the conversion of the Class B Common Stock, the number of shares
of Class A Common Stock deliverable upon the conversion of all Class B Common
Stock from time to time outstanding. The Corporation shall from time to time
(subject to obtaining necessary director and stockholder action), in accordance
with the laws of the State of Delaware, increase the authorized amount of its
Class A Common Stock if at any time the authorized number of shares of its
Class A Common Stock remaining unissued shall not be sufficient to permit the
conversion of all of the shares of Class B Common Stock at the time
outstanding.
ARTICLE V
In furtherance and not limitation of the powers conferred by the laws
of the State of Delaware, the Board of Directors is expressly authorized to
alter, amend or repeal the bylaws of the Corporation or to adopt new bylaws.
ARTICLE VI
A director of the Corporation shall not be personally liable to the
Corporation 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 the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law is
amended after the filing of this 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 shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
Page 3
<PAGE> 4
ARTICLE VII
A. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than permitted prior thereto), against all
expense, liability and loss (including, without limitation, attorneys' fees,
judgments, fines, excise taxes or penalties and amounts paid or to be paid in
settlement) incurred or suffered by such indemnitee in connection therewith and
such indemnification shall continue with respect to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in paragraph (B) hereof with respect to proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding initiated by such indemnitee only if
such proceeding was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article VII shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified
for such expenses under this Article VII or otherwise.
B. Right of Indemnitee to Bring Suit. If a claim under paragraph
(A) of this Article VII is not paid in full by the Corporation within sixty
days after a written claim has been received by the Corporation (except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty days), the indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, the indemnitee shall also be
entitled to be paid the expense of prosecuting or defending such suit. In (i)
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by
the Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the Corporation shall be entitled to recover such expenses upon
a final adjudication that, the indemnitee has not met the applicable standard
of conduct set forth in the Delaware General Corporation Law.
Page 4
<PAGE> 5
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled under this Article VII or otherwise
to be indemnified, or to such advancement of expenses, shall be on the
Corporation.
C. Non-Exclusivity of Rights. The rights to indemnification and
to the advancement of expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or hereafter acquire
under this Certificate of Incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
D. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any indemnitee against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
E. Indemnity of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VII or as otherwise permitted under the Delaware
General Corporation Law with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has
been signed by Peter A. Altabef, its authorized officer this 25th day of April,
1997.
/s/ PETER A. ALTABEF
-----------------------------
Peter A. Altabef
Secretary
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EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
PEROT SYSTEMS CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders may be held
at such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meetings. An annual meeting of stockholders shall
be held on such day in each fiscal year of the corporation and at such time and
place as may be fixed by the Board of Directors, at which meeting the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written or printed notice of
the annual meeting, stating the place, day and hour thereof, shall be given to
each stockholder entitled to vote thereat at such address as appears on the
books of the corporation, not less than ten days nor more than sixty days
before the date of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or the
certificate of incorporation, may be called by the Chairman of the Board or the
President. In addition, special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or the certificate of
incorporation, shall be called by the Chairman of the Board, President or the
Secretary at the request in writing of a majority of the Board of Directors or
at the request in writing of stockholders of record owning at least one-tenth
(1/10) of all shares issued and outstanding and
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entitled to vote at such meeting. Such request shall state the purpose or
purposes of the proposed meeting.
Section 5. Notice of Special Meetings. Written or printed notice of
a special meeting of stockholders, stating the place, day and hour and purpose
or purposes thereof, shall be given to each stockholder entitled to vote
thereat at such address as appears on the books of the corporation, not less
than ten days nor more than sixty days before the date of the meeting.
Section 6. Business at Special Meetings. Business transacted at all
special meetings of stockholders shall be confined to the purpose or purposes
stated in the notice thereof.
Section 7. Stockholder List. At least ten days before each meeting
of stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of voting shares held by each, shall be prepared by
the Secretary. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
such ten day period, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the meeting.
Section 8. Quorum. The holders of a majority of the votes attributed
to the shares of capital stock issued and outstanding and entitled to vote
thereat, represented in person or by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as
otherwise provided by statute, the certificate of incorporation or these
bylaws. The stockholders present may adjourn the meeting despite the absence
of a quorum. When a meeting is adjourned for less than thirty days in any one
adjournment and a new record date is not fixed for the adjourned meeting, it
shall not be necessary to give any notice of the adjourned meeting if the time
and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken, and at the adjourned meeting any business may
be transacted that might have been transacted on the original date of the
meeting. When a meeting is adjourned for thirty days or more, or when after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given as in the case of an original meeting.
Section 9. Majority Vote. When a quorum is present at any meeting,
the vote of the holders of a majority of the shares having voting power
represented in person or by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of
statute, the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 10. Proxies. (a) Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize
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another person or persons to act for him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
(b) Without limiting the manner in which a stockholder
may authorize another person or persons to act for him as proxy pursuant to
subsection (a) of this Section 10, the following shall constitute a valid means
by which a stockholder may grant such authority:
(i) A stockholder may execute a writing
authorizing another person or persons to act for him as proxy.
Execution may be accomplished by the stockholder or his or its
authorized officer, director, employee or agent signing such writing
or causing his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile
signature.
(ii) A stockholder may authorize another person or
persons to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the
proxy to receive such transmission, provided that any such telegram,
cablegram or other means of electronic transmission must either set
forth or be submitted with information from which it can be determined
that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making
that determination shall specify the information upon which they
relied.
(c) Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to
subsection (b) of this Section 10 may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
(d) Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to
subsection (b) of this Section 10 may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Section 11. Voting. Unless otherwise provided by statute or the
certificate of incorporation, each stockholder shall have one vote for each
share of stock having voting power, registered in his name on the books of the
corporation.
Section 12. Consent of Stockholders in Lieu of Meeting. Any action
required to be taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual
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or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and such consent or consents are delivered to
the corporation. Every written consent shall bear the date of signatures of
each stockholder and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent, written consents signed by a sufficient number of holders to
take action are delivered to the corporation. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 13. Inspectors. (a) The corporation may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting
and make a written report thereof. The corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of
shares outstanding and the voting power of each, (ii) determine the shares
represented at a meeting and the validity of proxies and ballots, (iii) count
all votes and ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(c) The date and time of the opening and the closing of
the polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls unless the Delaware Court of Chancery, upon
application by a stockholder, shall determine otherwise.
(d) In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
accordance with Article II, Section 10(b)(ii), ballots and the regular books
and records of the corporation, except that the inspectors may consider other
reliable information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar persons
that represent more votes than the holder of a proxy is authorized by the
record owner to cast, or more votes than the stockholder holds of record. If
the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification
pursuant to subsection (b)(v) of this Section shall specify the precise
information considered by them including the
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person or persons from whom they obtained the information, when the information
was obtained, the means by which the information was obtained and the basis for
the inspector's belief that such information is accurate and reliable.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the corporation shall
be managed by a Board of Directors. The Board may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute,
by the certificate of incorporation or these bylaws directed or required to be
exercised or done by the stockholders.
Section 2. Number of Directors. The number of directors which shall
constitute the whole Board shall be fixed from time to time by resolution of
the Board of Directors, provided that such number shall not be less than one
(1).
Section 3. Election and Term. Except as provided in Section 4 of
this Article III, directors shall be elected at the annual meeting of the
stockholders, and each director shall be elected to serve until the next annual
meeting and until his successor shall have been elected and shall qualify, or
until his death, resignation or removal from office. Directors need not be
stockholders of the corporation.
Section 4. Vacancies and Newly Created Directorships. If the office
of any director or directors becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office, or otherwise, or the number
of directors constituting the whole Board shall be increased, a majority of the
remaining or existing directors, though less than a quorum, may choose a
successor or successors, or the director or directors to fill the new
directorship or directorships, who shall hold office for the unexpired term in
respect to which such vacancy occurred or, in the case of a new directorship
or directorships, until the next annual meeting of the stockholders.
Section 5. Removal. The stockholders may remove a director either
for or without cause at any meeting of stockholders, provided notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
ARTICLE IV
MEETINGS OF THE BOARD
Section 1. First Meeting. The first meeting of each newly elected
Board of Directors shall be held at the location of and immediately following
the annual meeting of stockholders, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to
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constitute the meeting, provided a quorum shall be present; or the Board may
meet at such place and time as shall be fixed by the consent in writing of all
the directors. All meetings of the Board of Directors may be held at such
place, either within or without the State of Delaware, as from time to time
shall be determined by the Board of Directors.
Section 2. Regular Meetings. Regular meetings of the Board may be
held at such time and place and on such notice, if any, as shall be determined
from time to time by the Board.
Section 3. Special Meetings. Special meetings of the Board may be
called by the President or the Chairman of the Board on twenty-four hours'
notice to each director, delivered either personally or by mail or by telegram
or telecopier. Special meetings shall be called by the President or the
Secretary in like manner and on like notice on the written request of one
director.
Section 4. Quorum and Voting. At all meetings of the Board, a
majority of the directors at the time in office shall be necessary and
sufficient to constitute a quorum for the transaction of business; and the act
of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, the certificate of incorporation or these
bylaws. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 5. Telephone Meetings. Directors may attend any meeting of
the Board or any committee thereof by conference telephone, radio, television
or similar means of communication by means of which all persons participating
in the meeting can hear each other, and all members so attending shall be
deemed present at the meeting for all purposes including the determination of
whether a quorum is present.
Section 6. Action by Written Consent. Any action required or
permitted to be taken by the Board or any committee thereof, under the
applicable provisions of any statute, the certificate of incorporation, or
these bylaws, may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all the members of the Board or
committee, as the case may be.
ARTICLE V
COMMITTEES
Section 1. Executive Committee. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate one or more
directors to constitute an Executive Committee, which Committee, to the extent
provided in such resolution, shall have and may exercise all of the authority
of the Board of Directors in the business and affairs of the corporation except
where action by the Board of Directors is expressly required by statute. The
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Executive Committee shall keep regular minutes of its proceedings and report
the same to the Board when required.
Section 2. Other Committees. The Board of Directors may similarly
create other committees for such terms and with such powers and duties as the
Board deems appropriate.
Section 3. Committee Rules; Quorum. Each committee may adopt rules
governing the method of calling and time and place of holding its meetings.
Unless otherwise provided by the Board of Directors, a majority of any
committee shall constitute a quorum for the transaction of business, and the
act of a majority of the members of such committee present at a meeting at
which a quorum is present shall be the act of such committee.
ARTICLE VI
COMPENSATION OF DIRECTORS
The Board of Directors shall have authority to determine, from time to
time, the amount of compensation, if any, which shall be paid to its members
for their services as directors and as members of committees. The Board shall
also have power in its discretion to provide for and to pay to directors
rendering services to the corporation not ordinarily rendered by directors as
such, special compensation appropriate to the value of such services as
determined by the Board from time to time. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
ARTICLE VII
NOTICES
Section 1. Methods of Notice. Whenever any notice is required to be
given to any stockholder, director or committee member under the provisions of
any statute, the certificate of incorporation or these bylaws, such notice
shall be delivered personally or shall be given in writing by mail addressed to
such stockholder, director or committee member at such address as appears on
the books of the corporation, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail with
postage thereon prepaid. Notice to directors and committee members may also be
given by telegram, which notice shall be deemed to be given at the time it is
delivered to the telegraph office, or by telecopy, which notice shall be deemed
to be given at the time it is transmitted or in person, which notice shall be
deemed to be given when received.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any stockholder, director or committee member under the provisions of
any statute, the certificate of incorporation or these bylaws, a waiver thereof
in writing signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent
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to the giving of such notice. Attendance at any meeting shall constitute a
waiver of notice thereof except as otherwise provided by statute.
ARTICLE VIII
OFFICERS
Section 1. Executive Officers. The executive officers of the
corporation shall consist of at least a President and a Secretary, each of whom
shall be elected by the Board of Directors. The Board of Directors may also
elect as officers of the corporation a Chairman of the Board, a President, one
or more Vice Presidents, one or more of whom may be designated Executive or
Senior Vice Presidents and may also have such descriptive titles as the Board
shall deem appropriate, and a Treasurer. Any two or more offices may be held
by the same person.
Section 2. Election and Qualification. The Board of Directors at its
first meeting after each annual meeting of stockholders shall elect the
officers of the corporation.
Section 3. Other Officers and Agents. The Board may elect or appoint
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, and
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
Section 4. Salaries. The salaries of all officers of the corporation
shall be fixed by the Board of Directors except as otherwise directed by the
Board.
Section 5. Term, Removal and Vacancies. The officers of the
corporation shall hold office until their successors are chosen and qualify.
Any officer or agent of the corporation may be removed at any time by the
affirmative vote of a majority of the Board of Directors, or by the President.
Any vacancy occurring in any office of the corporation may be filled by the
Board of Directors or otherwise as provided in this Article VIII.
Section 6. Execution of Instruments. The Chairman of the Board and
the President (and such other officers as are authorized thereunto by
resolution of the Board of Directors) may execute in the name of the
corporation bonds, notes, debentures and other evidences of indebtedness, stock
certificates, deeds, mortgages, deeds of trust, indentures, contracts, leases,
agreements and other instruments, requiring a seal under the seal of the
corporation, and may execute such documents where not requiring a seal, except
where such documents are required by law to be otherwise signed and executed,
and except where the signing and execution thereof shall be exclusively
delegated to some other officer or agent of the corporation.
Section 7. Duties of Officers. The duties and powers of the officers
of the corporation shall be as provided in these bylaws, or as provided for
pursuant to these bylaws, or (except to the extent inconsistent with these
bylaws or with any provision made pursuant hereto) shall be those customarily
exercised by corporate officers holding such offices.
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Section 8. Chairman of the Board. The Chairman of the Board shall
preside when present at all meetings of the Board of Directors. He shall
advise and counsel the other officers of the corporation and shall exercise
such powers and perform such duties as shall be assigned to or required of him
from time to time by the Board of Directors. The Chairman of the Board shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President, and may perform such other duties as requested by
the President.
Section 9. President. The President shall preside at all meetings of
the stockholders and shall be ex-officio a member of all standing committees.
The President shall be the Chief Executive Officer of the corporation and shall
have all powers of any officer of the corporation and general powers of
oversight, supervision and management of the business and affairs of the
corporation, and see that all orders and resolutions of the Board of Directors
are carried into effect. The President shall perform all the duties and have
all the powers of the Chairman of the Board in the absence of the Chairman of
the Board.
Section 10. Vice Presidents. The Vice Presidents, in the order
determined by the Board of Directors, shall, in the absence or disability of
the President, perform the duties and exercise the powers of the President, and
shall perform such other duties as the Board of Directors, the Chairman of the
Board or the President may prescribe.
Section 11. Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record all
votes and the minutes of all proceedings in a book to be kept for that purpose
and shall perform like duties for the committees of the Board of Directors
when required. Except as may be otherwise provided in these bylaws, he shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors and the President. He shall keep
in safe custody the seal of the corporation, if any, and shall have authority
to affix the same to any instrument requiring it, and when so affixed it may be
attested by his signature. The Board of Directors may give general authority
to any other officer to affix the seal of the corporation and to attest the
affixing by his signature. In the absence of the Treasurer and all Assistant
Treasurers, the Secretary shall perform all the duties and have all the powers
of the Treasurer.
Section 12. Assistant Secretaries. The Assistant Secretaries in the
order determined by the Board of Directors shall, in the absence or disability
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties as the Board of Directors, the Chairman of
the Board or the President may prescribe. Assistant secretaries may be
appointed by the President without prior approval of the Board of Directors.
Section 13. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board, taking
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proper vouchers for such disbursements, and shall render to the Board of
Directors, the Chairman of the Board or the President, whenever any of them may
require it, an account of all of his transactions as Treasurer and of the
financial condition of the corporation.
Section 14. Assistant Treasurers. The Assistant Treasurers in the
order determined by the Board of Directors shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties as the Board of Directors, the Chairman of
the Board or the President may prescribe.
ARTICLE IX
SHARES AND STOCKHOLDERS
Section 1. Certificates Representing Shares. Every holder of stock
in the corporation shall be entitled to have a certificate, signed by, or in
the name of the corporation by, the Chairman or Vice Chairman of the Board of
Directors, or the President or a Vice President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation.
The signature of any such officer may be facsimile. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer at
the date of its issuance. If the corporation shall be authorized to issue more
than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General corporation
Law of the State of Delaware, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the corporation
shall issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other
special rights of each class or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Transfer of Shares. Subject to valid transfer
restrictions and to stop-transfer orders directed in good faith by the
corporation to any transfer agent to prevent possible violations of federal or
state securities laws, rules or regulations, or for any other lawful purpose,
upon surrender to the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
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Section 3. Fixing Record Date.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which record date shall not be
more than sixty nor less than ten days before the date of such meeting. If no
record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the date on which
notice is given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by this Section, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken
is delivered to the corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by statute, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to receive any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 4. Registered Stockholders. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of any share or shares to receive dividends, and to vote as such
owner, and for all other purposes as such owner; and the
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corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
Section 5. Lost Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE X
INDEMNIFICATION
(a) Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director or officer of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director or officer
or in any other capacity while serving as a director or officer, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than permitted prior thereto), against all expense,
liability and loss (including, without limitation, attorneys' fees, judgments,
fines, excise taxes or penalties and amounts paid or to be paid in settlement)
incurred or suffered by such indemnitee in connection therewith and such
indemnification shall continue with respect to an indemnitee who has ceased to
be a director or officer and shall inure to the benefit of the indemnitee's
heirs, executors and administrators; provided, however, that, except as
provided in paragraph (b) of this Article X with respect to proceedings to
enforce rights to indemnification, the corporation shall indemnify any such
indemnitee in connection with a proceeding initiated by such indemnitee only if
such proceeding was authorized by the Board of Directors of the corporation.
The right to indemnification conferred in this Article X shall be a contract
right and shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General corporation Law requires, an advancement of expenses incurred
by an indemnitee shall be made only upon delivery to the corporation of an
undertaking (hereinafter an
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"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Article X or otherwise.
(b) If a claim under paragraph (a) of this Article X is not paid
in full by the corporation within sixty days after a written claim has been
received by the corporation (except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be twenty days), the
indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, the indemnitee shall also be entitled to be paid the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the corporation shall be
entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General corporation Law. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General corporation Law, nor an actual determination by the
corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses
hereunder or by the corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the burden of proving that the indemnitee is
not entitled under this Article X or otherwise to be indemnified, or to such
advancement of expenses, shall be on the corporation.
(c) The rights to indemnification and to the advancement of
expenses conferred in this Article X shall not be exclusive of any other right
which any person may have or hereafter acquire under the certificate of
incorporation or any bylaw of the corporation, agreement, vote of stockholders
or disinterested directors or otherwise.
(d) The corporation may maintain insurance, at its expense, to
protect itself and any indemnitee against any expense, liability or loss,
whether or not the corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General corporation
Law.
(e) The corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the corporation to the
fullest extent of the provisions of this Article X or as otherwise permitted
under the Delaware General corporation Law with respect to the indemnification
and advancement of expenses of directors and officers of the corporation.
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ARTICLE XI
GENERAL
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, or of the resolutions, if any, providing for any series of stock, may be
declared by the Board of Directors at any meeting thereof, or by the Executive
Committee at any meeting thereof. Dividends may be paid in cash, in property
or in shares of the capital stock of the corporation, subject to the provisions
of the certificate of incorporation or of the resolutions, if any, providing
for any series of stock.
Section 2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose or purposes as the Board of Directors
shall think conducive to the interests of the corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Shares of Other corporations. Each of he Chairman of the
Board, the President and any Vice President is authorized to vote, represent
and exercise on behalf of the corporation all rights incident to any and all
shares of any other corporation or other entity standing in the name of the
corporation. The authority herein granted to said officer may be exercised
either by said officer in person or by any person authorized so to do by proxy
or power of attorney duly executed by said officer. Notwithstanding the above,
however, the Board of Directors, in its discretion, may designate by resolution
any additional person to vote or represent said shares of other corporations
and other entities.
Section 4. Checks. All checks, drafts, bills of exchange or demands
for money of the corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from time to time
designate.
Section 5. Corporate Records. The corporation shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders giving the names and
addresses of all stockholders and the number and class and series, if any, of
shares held by each. All other books and records of the corporation may be
kept at such place or places within or without the State of Delaware as the
Board of Directors may from time to time determine.
Section 6. Fiscal Year. The fiscal year of the corporation shall be
fixed by the Board of Directors; if not so fixed, it shall be the calendar
year.
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ARTICLE XII
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted at any annual meeting of the stockholders or at any special meeting of
the stockholders at which a quorum is present or represented, by the
affirmative vote of the holders of a majority of the shares entitled to vote at
such meeting and present or represented thereat, or by the affirmative vote of
a majority of the whole Board of Directors at any regular meeting of the Board
or at any special meeting of the Board, provided notice of the proposed
alteration, amendment or repeal or the adoption of new bylaws is set forth in
the notice of such meeting.
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EXHIBIT 10.1
PEROT SYSTEMS CORPORATION
1991 STOCK OPTION PLAN
This Stock Option Plan, as amended, of Perot Systems Corporation is
for the purpose of attracting and retaining outstanding employees of Perot
Systems and any of its majority-owned subsidiaries and providing them with a
strong incentive to contribute to the success of the Company by granting them
options to acquire shares of Common Stock, $0.01 par value, of Perot Systems in
accordance with the provisions of the Plan, as set forth below.
Certain capitalized terms used in this Plan are defined at the end of
the Plan. Other terms used in the Plan are defined in the text as they occur
and have the meanings there indicated.
1. Term and Amendments.
The Plan is effective when approved by the Board of Directors of Perot
Systems. Either the Board of Directors or the shareholders may amend or
terminate the Plan in their sole discretion. Neither the Board of Directors
nor the shareholders, however, may amend or terminate the Plan in a way that
adversely affects any rights relating to stock options granted under the Plan
before the amendment or termination without the consent of the person whose
rights are adversely affected.
2. Administration.
The Board of Directors is required to appoint a Committee of at least
three members of the Board of Directors which will be responsible for
administering and interpreting the Plan. The Committee may from time to time
adopt, amend, waive, and rescind such procedures for the administration of the
Plan as it deems advisable, consistent with the provisions of the Plan. To the
extent permitted by law, any determination made by the Committee in
administering or interpreting the Plan is conclusive.
3. Available Shares.
The Board of Directors shall reserve for issuance not more than six
million shares of Common Stock to be available for issue pursuant to stock
options granted under the Plan. The Board will take steps to assure that
offerings and sales of securities under the Plan qualify under Rule 701 under
the Securities Act of 1933, including Rule 701's limit on the amount of
securities that can be offered and sold. Shares made available upon the
exercise of stock options granted under the Plan may be either treasury shares
or
<PAGE> 2
authorized but unissued shares or a combination of the two. If any change is
made in the shares of Common Stock (including, but not limited to, by stock
dividend, stock split, or merger or consolidation, but not including the
issuance of additional shares for consideration), the Board of Directors or the
Committee, as appropriate, will make such adjustments in the number and kind of
shares (which may consist of shares of a surviving corporation to a merger)
that may thereafter be optioned and sold under the Plan and the number and kind
of shares (which may consist of shares of a surviving corporation to a merger)
and purchase price per share of shares subject to outstanding Stock Option
Agreements under the Plan as the Board of Directors or the Committee determines
are equitable to preserve the respective rights of the Participants in the
Plan.
4. Participants; Stock Option Agreements.
The Committee shall select the employees of the Company who will be
granted stock options under the Plan and shall determine the terms of the stock
options to be granted to each selected employee, including (i) the number of
shares of Common Stock to be covered by each option; (ii) the purchase price
per share of the Common Stock (consistent with applicable law) covered by each
option, which must be at least equal to the fair market value of the Common
Stock at the time of the grant; (iii) the term of each option, which may not
exceed 11 years; (iv) the vesting schedule for each option; (v) any holding
period or other restriction applicable to shares of Common Stock purchased
pursuant to each option; and (vi) any other terms deemed appropriate by the
Committee. Each such employee may elect to become a Participant in the Plan by
entering into a Stock Option Agreement approved by the Committee. The
Committee and the Participant may thereafter amend, modify, or waive the
provisions of the Stock Option Agreement by mutual written agreement. The
Stock Option Agreement will contain provisions to reflect and enforce the
applicable provisions of the Plan and any other provisions deemed appropriate
by the Committee, including the following:
(a) Payment of Purchase Price Upon Exercise.
Each Stock Option Agreement will provide that the purchase
price of the shares as to which an option is exercised must be paid to
Perot Systems at the time of exercise either in cash or in such other
consideration as the Committee may approve having a total fair market
value, as determined by the Committee, equal to the purchase price, or
a combination of cash and such other consideration. Other
consideration may include shares of Common Stock already held by a
Participant or Common Stock withheld upon the exercise of the option,
which will be accepted at Market Value.
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(b) Investment Representation.
Each Stock Option Agreement will provide that, upon demand by
the Committee, any person exercising a stock option under the Plan may
be required to deliver to the Committee, at the time of any exercise
of the option, a written representation that the shares acquired upon
the exercise are being acquired for investment and not for resale or
with a view to distribution.
5. Payment of Taxes with Common Stock.
If the Common Stock is not Publicly Traded within five years of the
effective date of the Plan, the Committee may elect to assist Participants in
satisfying an obligation to pay or withhold taxes required as a result of the
exercise of an option by accepting shares of Common Stock at Market Value to
satisfy the tax obligation. The shares of Common Stock accepted may be either
shares withheld upon the exercise of an option or other shares already owned by
the Participant. In determining whether to approve acceptance of shares of
Common Stock to satisfy a tax obligation, the Committee may consider whether
the shares proposed to be accepted are subject to any holding period or other
restrictions on transfer and may waive or arrange for the waiver of any such
restrictions.
6. Restrictions and Conditions Applicable to Stock Options and Purchased
Stock.
All stock options granted to a Participant pursuant to a Stock Option
Agreement and shares of Purchased Stock shall, except as otherwise provided in
the Stock Option Agreement, be subject to the following restrictions and
conditions:
(a) Non-transferability of Options.
No option granted under the Plan may be sold or otherwise
transferred other than by will or by the laws of descent and
distribution upon the Participant's death. During the lifetime of the
Participant, the option is exercisable only by the Participant.
(b) Restricted Stock.
Unless Perot Systems otherwise agrees in writing, shares of
Purchased Stock may not be sold or otherwise transferred, other than
by will or under the laws of descent and distribution upon the
Participant's death, until and unless (i) any holding period or other
restriction on such a sale or other transfer specified in the Stock
Option Agreement has expired, and (ii) Perot Systems has waived in
writing any option to buy back such shares that it may have under the
Stock Option Agreement.
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(c) Buyback of Purchased Stock and Payback of Certain
Profits.
Perot Systems will have the right to buy back from a
Participant any Purchased Stock then owned by the Participant and the
right to require a Participant to pay back to Perot Systems the amount
of the Participant's Net Investment Proceeds with respect to shares of
Purchased Stock that have been sold or otherwise transferred by the
Participant in the circumstances and on the terms and conditions
specified in the Participant's Stock Option Agreement.
7. Valuation.
The Board of Directors will determine the Market Value of shares of
Purchased Stock as of each Valuation Date.
8. Stock Certificates; Rights as Shareholder.
A Stock Option Agreement may provide that Perot Systems will retain
for safekeeping all certificates representing shares of Purchased Stock issued
under the agreement. Each such certificate may bear such legends as the
Committee determines are necessary or appropriate. Whether or not certificates
representing such shares have been issued or delivered, each Participant upon
purchasing such shares will have all the rights of a shareholder of Common
Stock, including voting, dividend, and distribution rights, with respect to all
shares of Purchased Stock owned by the Participant, except as may otherwise be
provided in the Participant's Stock Option Agreement. No Participant will have
any rights as a shareholder with respect to any shares of Common Stock subject
to options granted under the Plan before the date of issuance to the
Participant of shares upon the exercise of such options.
9. Compliance with Laws and Regulations.
The Plan, the grant and exercise of options under the Plan, and the
obligation of Perot Systems to sell and deliver shares under such options, are
subject to all applicable federal and state laws, rules, and regulations and to
such approvals by any government or regulatory agency as may be required.
Perot Systems is permitted a reasonable delay in issuing any shares of Common
Stock pursuant to the exercise of options granted under the Plan in order to
accommodate compliance with such laws, rules, regulations, and approvals,
including (i) the listing of such stock on any registered national securities
exchange or approval for quotation in the National Association of Securities
Dealers Automated Quotation ("NASDAQ") system and (ii) the completion of any
registration or qualification of such shares under any federal or state law, or
any ruling or regulation of any governmental body that Perot Systems may, in
its sole discretion, determine to be necessary or advisable.
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<PAGE> 5
10. Severability.
If any provision of the Plan is held invalid or unenforceable for any
reason, the validity and enforceability of all other provisions of the Plan
will not be affected.
11. Effect on Other Plans.
The adoption of this Plan has no effect on awards made or to be made
under other equity incentive plans covering employees of Perot Systems or any
of its subsidiaries or any of their predecessors or subsidiaries.
12. Governing Law.
The Plan shall be governed by and construed in accordance with the law
of the State of Texas, without regard to the choice of law rules in such law.
13. Definitions.
As used in this Plan, the following terms have the meanings indicated:
"Board of Directors" means the Board of Directors of Perot Systems.
"Committee" means the Committee established by the Board of Directors
under Section 2 of the Plan.
"Common Stock" means the Common Stock, $0.01 par value, of Perot
Systems.
"Company" means Perot Systems and its majority-owned subsidiaries, if
any.
"Market Value" of a share of Common Stock on a given date means (i) if
the Common Stock is Publicly Traded, the closing sale price for Common Stock,
as determined in good faith by the Board of Directors, on such date or, if no
closing sale price is available for such date, on the most recent prior date
for which a closing sale price is available or, if no closing sale price is
available, the closing bid price, as so determined, on such date or, if no
closing bid price is available for such date, the closing bid price on the most
recent prior date for which a closing bid price is available, or (ii) if the
Common Stock is not Publicly traded, its fair market value, as determined in
good faith by the Board of Directors, as of the most recent Valuation Date on
or before such date.
"Net Investment Proceeds", with respect to any share of Purchased
Stock sold or otherwise transferred by a Participant or a Participant's
successor in interest, means the
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greater of the value of the gross proceeds received for such share or the
Market Value of such share on the date of sale or transfer less, in either
case, (i) the exercise price of the option for such share plus simple interest
on such amount at the rate of 8% per annum to the date of the sale or transfer,
(ii) reasonable and customary commissions paid for the sale or transfer, and
(iii) the verified amount of any income taxes paid or payable on the sale or
transfer.
"Participant" means a person who has entered into a Stock Option
Agreement and the person's successors and permitted assigns.
"Perot Systems" means Perot Systems Corporation.
"Plan" means this Stock Option Plan, as it may be amended.
"Publicly Traded" means Common Stock has been listed on a registered
national securities exchange or approved for quotation in the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system.
"Purchased Stock" means outstanding Common Stock purchased pursuant to
options granted under the Plan.
"Stock Option Agreement" means an agreement entered into by an
employee and Perot Systems under which the employee accepts options granted
under the Plan.
"Valuation Date" means each June 30 and December 31 of every year,
beginning on December 31, 1991, and any other date as of which the Board of
Directors determines the Market Value of shares of Purchased Stock.
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EXHIBIT 10.2
Perot Systems Corporation
1991 Stock Option Plan
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of , 1997, is by and between Perot Systems
Corporation ("Perot Systems"), a Delaware corporation, and ("Participant").
WITNESSETH:
WHEREAS, Perot Systems has adopted the Perot Systems Corporation 1991 Stock
Option Plan (the "Plan") to enable employees of Perot Systems and its
majority-owned subsidiaries to acquire shares of Class A common stock, $0.01
par value, of Perot Systems ("Common Stock") in accordance with the provisions
of the Plan; and
WHEREAS, the Committee of the Board of Directors of Perot Systems appointed to
administer the Plan (the "Committee") has selected Participant to participate
in the Plan and has determined to grant Participant the right and option to
purchase shares of Common Stock in accordance with the terms and conditions of
this Agreement, provided, that if any change is made in the shares of Common
Stock (including, but not limited to, by stock dividend, stock split, or merger
or consolidation, but not including the issuance of additional shares for
consideration), the Board of Directors or the Committee, will make such
adjustments in the number and kind of shares (which may consist of shares of a
surviving corporation to a merger) that may thereafter be optioned and sold
under the Plan and the number and kind of shares (which may consist of shares
of a surviving corporation to a merger) and purchase price per share of shares
subject to outstanding Stock Option Agreements under the Plan as the Board of
Directors or the Committee determines are equitable to preserve the respective
rights of the Participants under the Plan.
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
have the meanings indicated:
(a) "Company" means Perot Systems and its majority-owned
subsidiaries.
(b) "Confidential Information" means all written,
machine-reproducible, oral and visual data, information and
material, including but not limited to business, financial and
technical information, computer programs, documents and
records (including those that Participant develops in the
scope of his or her employment) that (i) the Company or any of
its customers or suppliers treats as proprietary or
confidential through markings or otherwise, (ii) relates to
the Company or any of its customers or suppliers or any of
their business activities, products or services (including
software programs and techniques) and is competitively
sensitive or not generally known in the relevant trade or
industry, or (iii) derives independent economic value from not
being generally known to, and is not readily ascertainable by
proper means by, other
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<PAGE> 2
persons who can obtain economic value from its disclosure or
use. Confidential Information does not include any
information or material that is approved by Perot Systems for
unrestricted public disclosure.
(c) "Expiration Date" means the date and time as of which the
Option expires, which is the earlier of (i) the close of
business on the date one year after the entire Option has
Vested or (ii) the date and time as of which all rights to
exercise the Option are terminated under Section 2(d).
(d) "Market Value" of a share of Purchased Stock on a given date
means (i) if the Purchased Stock is Publicly Traded, the
closing sale price for Purchased Stock, as determined in good
faith by the Board of Directors, on such date or, if no
closing sale price is available for such date, on the most
recent prior date for which a closing sale price is available
or, if no closing sale price is available, the closing bid
price, as so determined, on such date or, if no closing bid
price is available for such date, the closing bid price on the
most recent prior date for which a closing bid price is
available, or (ii) if the Purchased Stock is not Publicly
Traded, its fair market value, as determined in good faith by
the Board of Directors, as of the most recent Valuation Date
on or before such date.
(e) "Net Investment Proceeds," with respect to any share of
Purchased Stock sold or otherwise transferred by Participant
or Participant's successor in interest, means the greater of
the value of the gross proceeds received for such share or the
Market Value of such share on the date of sale or transfer
less, in either case, (i) the exercise price of the Option for
such share plus simple interest on such amount at the rate of
8% per annum to the date of the sale or transfer, (ii) any
reasonable and customary commission paid for the sale or
transfer, and (iii) the verified amount of any income taxes
paid or payable on the sale or transfer.
(f) "Option" means the right and option evidenced by this
Agreement.
(g) "Publicly Traded" means Purchased Stock has been listed on a
registered national securities exchange or approved for
quotation in the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system.
(h) "Purchased Stock" means any Common Stock purchased upon the
exercise of this Option, together with any successor security,
property or cash issued or distributed by Perot Systems or any
successor entity, whether by way of merger, consolidation,
share exchange, reorganization, liquidation, recapitalization
or otherwise.
(i) "Termination for Substantial Misconduct" means termination of
employment for a felony conviction of the Participant; actions
involving moral turpitude, theft, or dishonesty in a material
matter; breach of any obligation under Section 5 of this Stock
Option Agreement; or failure by Participant to carry out the
directions, instructions, policies, rules, regulations, or
decisions of the Board of Directors of
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Perot Systems including, without limitation, those relating
to business ethics and the ethical conduct of the business of
the Company.
(j) "Transfer" or "transfer" or derivations thereof includes any
sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition.
(k) "Valuation Date" means each June 30 and December 31 of every
year, beginning on January 1, 1991, and any other date as of
which the Board of Directors determines the Market Value of
Purchased Stock.
(l) "Vesting," or "vesting" or derivations thereof with respect to
any Option issued under this Agreement, means receiving the
right to exercise the Option.
(m) "Vesting Period" means the period of time commencing on the
date of this Agreement and ending on the date on which the
entire Option has Vested.
2. Grant of Option; Purchase of Stock.
(a) Subject to the terms, conditions, and restrictions set forth
in the Plan and in this Agreement, Perot Systems hereby grants
to Participant, and Participant hereby accepts from Perot
Systems, the option to purchase from Perot Systems the number
of shares of Common Stock specified on Attachment A hereto, at
the purchase price so specified, which option will Vest in
Participant in accordance with the Vesting Schedule set forth
on Attachment A hereto. The Option shall only continue to Vest
only for as long as Participant is an employee of Company,
unless the Committee, in its sole discretion, agrees in
writing otherwise. Participant will have the right to
exercise the Vested Option and purchase Common Stock after the
Option Vests as provided in Section 2(d) below.
(b) The purchase price of shares as to which the Option is
exercised must be paid to Perot Systems at the time of the
exercise either in cash or in such other consideration as the
Committee may approve having a total fair market value, as
determined by the Committee, equal to the purchase price, or a
combination of cash and such other consideration.
(c) The Committee may elect to assist Participant in satisfying an
obligation to pay or withhold taxes required as a result of
the exercise of this Option by accepting shares of Purchased
Stock at Market Value to satisfy the tax obligation. The
shares of Purchased Stock accepted may be either shares
withheld upon the exercise of this Option or other shares
already owned by Participant. In determining whether to
approve acceptance of Purchased Stock to satisfy such a tax
obligation, the Committee may consider whether the shares
proposed to be delivered are subject to any holding period or
other restrictions on transfer and may waive or arrange for
the waiver of any such restrictions.
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(d) The Option is only exercisable as to Vested Options. Once
Vested, the Option may be exercised until the Expiration Date,
provided, however, (i) if the Participant ceases to be an
employee for any reason other than death, the Option may be
exercised only for sixty days after the date of cessation of
employment, and in any case no later than the Expiration Date,
and (ii) if the Participant ceases to be an Employee because
of death of the Participant, the Option may be exercised by
the Participant's estate only for two years after the
Participant's Death and in any case no later than the
Expiration Date.
3. Restrictions on Transfer. The following restrictions on transfer
apply unless the Committee otherwise agrees in writing or unless the
transfer is by will or the laws of descent and distribution upon
Participant's death:
(a) The Option may not be sold or otherwise transferred and is
exercisable only by Participant during Participant's lifetime.
(b) One-half of the shares of Purchased Stock purchased on any day
may not be sold or otherwise transferred for two years after
purchase.
(c) Shares of Purchased Stock may not be sold or otherwise
transferred unless the holder has given Perot Systems any
notice required under Section 4(a) and Perot Systems has
waived in writing any right it has to buy back the shares
under Section 4(a).
(d) Shares of Purchased Stock may not be sold or otherwise
transferred for six months after the Purchased Stock (or stock
of the same class as the Purchased Stock) is Publicly Traded.
Perot Systems is not obligated to recognize any purported sale or
other transfer of the Option or any Purchased Stock in violation of
this Section 3 and, unless it elects to do otherwise, may treat any
such purported sale or transfer as null, void, and of no effect.
4. Rights to Buy Back Purchased Stock and to Require Payback of Certain
Profits.
(a) At any time before the Purchased Stock is Publicly Traded, if
Participant or any subsequent holder of shares of Purchased
Stock desires or is obligated to sell or otherwise transfer
any such shares (including any distribution to heirs or other
beneficiaries of Participant's estate), the holder is required
to give Perot Systems written notice of the proposed sale or
transfer, including notice of the proposed purchaser or
transferee, and, for a period of 30 days after receipt of such
notice, Perot Systems will have the right to buy back such
shares for cash at a purchase price equal to the price per
share paid by Participant for the shares plus simple interest
on such amount at the rate of 8% per annum from the date of
payment by Participant to the date of tender of payment by
Perot Systems is set forth in Section 4(c) below.
(b) If the Committee discovers that Participant has engaged in any
conduct prohibited by Section 5 or if Participant ceases to be
employed by the Company and the
4
<PAGE> 5
Committee, in its sole discretion, determines that
Participant's cessation of employment resulted from a
Termination for Substantial Misconduct or would have resulted
in a Termination for Substantial Misconduct had the relevant
facts been known at the time of Participant's cessation of
employment, Perot Systems will have the right for 150 days
after the Committee discovers the relevant facts to cancel any
unexercised Option, whether or not Vested, and to buy back
from Participant any shares of Purchased Stock then owned by
Participant, at a purchase price equal to the price per share
paid by Participant for the shares plus simple interest on
such amount at the rate of 8% per annum from the date of
payment by Participant to the date of tender of payment by
Perot Systems as set forth in Section 4(c) below, and the
right to require Participant to pay back to Perot Systems in
cash the Net Investment Proceeds with respect to any shares of
Purchased Stock that have been sold or otherwise transferred
by Participant.
(c) Whenever Perot Systems has a right to buy back shares of
Purchased Stock or to require Participant to pay back to Perot
Systems Participant's Net Investment Proceeds with respect to
any shares of Purchased Stock under this Section 4, Perot
Systems may exercise its right by notifying Participant or the
subsequent holder of Perot Systems' election to exercise its
right within the designated exercise period. In the case of a
buyback under Section 4(a) or Section 4(b), the giving of such
notice will give rise to an obligation on the part of
Participant or the subsequent holder to tender to Perot
Systems, within 10 days, any previously issued certificate
representing shares of Purchased Stock to be bought back, duly
endorsed in blank or having a duly executed stock power
attached in proper form for transfer. If any such certificate
is not tendered within 10 days, Perot Systems may cancel any
outstanding certificate representing shares to be bought back.
Perot Systems is required to tender the purchase price for
shares to be bought back under this Section 4 within 20 days
of giving notice of its election to exercise its right to buy
back shares. If the person from whom the shares are to be
bought back has not complied with an obligation to return a
certificate representing shares to be bought back, however,
Perot Systems is not required to tender the purchase price
until 20 days after the certificate is returned or 20 days
after it cancels the certificate, whichever occurs first.
5. Competition and Non-Disclosure. Participant acknowledges that: (i)
in the course and as a result of employment with the Company,
Participant will obtain special training and knowledge and will come
in contact with the Company's current and potential customers, which
training, knowledge, and contacts would provide invaluable benefits to
competitors of the Company; (ii) the Company is continuously
developing or receiving Confidential Information, and that during
Participant's employment he or she will receive Confidential
Information from the Company, its customers and suppliers and special
training related to the Company's business methodologies; and (iii)
Participant's employment by Company creates a relationship of trust
that extends to all Confidential Information that becomes known to
Participant. Accordingly, and in consideration of Perot Systems'
granting this Option to Participant, Participant agrees that Perot
Systems will be entitled to terminate all rights to exercise the
Option and to exercise the rights specified in Section 4 above if
Participant does any of the following without the prior written
consent of the Company:
5
<PAGE> 6
(a) while employed by the Company or within one year thereafter:
(i) competes with, or engages in any business that is
competitive with, the Company within 250 miles of any
location at which Participant was employed by or
provided services to the Company;
(ii) solicits or performs services, as an employee,
independent contractor, or otherwise, for any person
(including any affiliates or subsidiaries of that
person) that is or was a customer or prospect of the
Company during the two years before Participant's
employment with the Company ended if Participant
solicited business from or performed services for
that customer or prospect while employed by Company
or
(iii) recruits, hires, or helps anyone to recruit or hire
anyone who was an employee of Perot Systems, or of
any of its customers for whom Participant performed
services of from whom Participant solicited business,
within the six months before Participant's employment
with the Company ended; or
(b) discloses or uses any Confidential Information, except in
connection with the good faith performance of Participant's
duties as an employee; or fails to take reasonable precautions
against the unauthorized disclosure or use of Confidential
Information; or fails, upon Perot Systems' request, to execute
and comply with a third party's agreement to protect its
confidential and proprietary information; or solicits or
induces the unauthorized disclosure or use of Confidential
Information.
If any court of competent jurisdiction finds any provision of this
Section 5 to be unreasonable, then that provision shall be considered
to be amended to provide the broadest scope of protection to the
Company that such court would find reasonable and enforceable.
6. Compliance with Securities Laws. Participant hereby agrees that, upon
demand by Perot Systems, any person exercising this Option, at the
time of such exercise, will deliver to Perot Systems a written
representation to the effect that the shares of Purchased Stock being
acquired are being acquired for investment and not with a view to any
resale or distribution thereof. Participant further agrees that
neither Participant nor any successor in interest of Participant will
sell or otherwise transfer the Option or any shares of Purchased Stock
in any way that might result in a violation of any federal or state
securities laws or regulations. Participant further acknowledges and
agrees that Perot Systems may require Participant or any subsequent
holder of the Option or of any shares of Purchased Stock to provide
Perot Systems, prior to any sale or other transfer, with such other
representations, commitments, and opinions regarding compliance with
applicable securities laws and regulations as Perot Systems may deem
necessary or advisable.
7. Stock Certificates; Rights as Shareholder. Perot Systems will retain
for safekeeping all certificates representing shares of Purchased
Stock. Each such certificate will bear such legends as the Committee
determines are necessary or appropriate. Whether or not
6
<PAGE> 7
certificates representing shares of Purchased Stock have been
issued or delivered, Participant will have all the rights of a
shareholder of Purchased Stock, including voting, dividend and
distribution rights, with respect to shares of Purchased Stock owned
by Participant. Participant will not have any rights as a shareholder
with respect to any shares of Purchased Stock subject to the Option
before the date of issuance to Participant of shares upon exercise of
the Option.
8. Income Tax Withholding. Participant shall, upon request by the
Company, reimburse the Company for, or the Company may withhold from
sums or property otherwise due or payable to Participant, any amounts
the Company is required to remit to applicable taxing authorities as
income tax withholding with respect to the Option or any Purchased
Stock. If shares of Purchased Stock are withheld for such purpose,
they will be withheld at Market Value. If Participant fails to
reimburse the Company for any such amount when requested, the Company
has the right to recover that amount by selling or canceling
sufficient shares of any Purchased Stock held by Participant.
9. Compliance with Plan. Participant acknowledges receipt of a copy of
the Plan and further acknowledges that this Agreement is entered into,
and the Option is granted, pursuant to the Plan. If the provisions of
the Plan are inconsistent with the provisions of this Agreement, the
provisions of the Plan supersede the provisions of this Agreement.
10. Notices. Any notice to Perot Systems or the Company that is required
or permitted by this Agreement shall be addressed to the attention of
the Secretary of Perot Systems at its principal office. Any notice to
Participant that is required or permitted by this Agreement shall be
addressed to Participant at the most recent address for Participant
reflected in the appropriate records of the Company. Either party may
at any time change its address for notification purposes by giving the
other written notice of the new address and the date upon which it
will become effective. Whenever this Agreement requires or permits
any notice from one party to another, the notice must be in writing to
be effective and, if mailed, shall be deemed to have been given on the
third business day after the same is enclosed in an envelope,
addressed to the party to be notified at the appropriate address,
property stamped, sealed, and deposited in the United States mail,
and, if mailed to the Company, by certified mail, return receipt
requested.
11. Remedies. Perot Systems is entitled, in addition to any other
remedies it may have at law or in equity, to temporary and permanent
injunctive and otherwise equitable relief to enforce the provisions of
this Agreement. Any action to enforce the provisions of, or other
relating to, this Agreement may be brought in the state or federal
courts having jurisdiction in Dallas, Dallas County, Texas. By
signing this Agreement, Participant consents to the personal
jurisdiction of such courts in any such action.
12. Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, personal
representatives, successors, and assigns. However, Participant does
not have the power or right to assign this Agreement without the prior
written consent of Perot Systems.
7
<PAGE> 8
13. Attorneys' Fees. If any legal proceeding is brought to enforce or
interpret the terms of this Agreement, the prevailing party will be
entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which that party may
be entitled.
14. Severability. If any provision of this Agreement is held invalid or
unenforceable for any reason, the validity and enforceability of all
other provisions of this Agreement will not be affected.
15. Headings. The section headings used herein are for reference and
convenience only and do not affect the interpretation of this
Agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Texas, without regard to the
choice of law rules in such law.
17. Entire Agreement. This Agreement, together with the Plan and any
procedure adopted by the Committee thereunder, constitutes the entire
agreement between the parties with respect to its subject matter and
may be waived or modified only in writing.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
PARTICIPANT PEROT SYSTEMS CORPORATION
By:
- -------------------------------------- --------------------------------------
Signature Title: Chairman of the Board
- --------------------------------------
Printed Name
8
<PAGE> 9
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Stock Option
Agreement and agree that this consent shall be binding on my interest under
this Agreement and on my heirs, legatees, and assigns.
----------------------------------------
Signature
----------------------------------------
Printed Name
9
<PAGE> 10
ATTACHMENT A
TO
STOCK OPTION AGREEMENT
FOR
<TABLE>
<S> <C> <C> <C>
1. Purchase Price: per Share.
-----
2. Expiration Date: , , unless earlier terminated under Section 2(a) or 2(d).
----
3. Vesting Schedule:
<CAPTION>
Vesting Dates
------------- Number of
Dates Certain Options Vesting
------------- ---------------
<S> <C>
</TABLE>
Total
10
<PAGE> 1
EXHIBIT 10.3
PEROT SYSTEMS CORPORATION
RESTRICTED STOCK PLAN
This Restricted Stock Plan, as amended, (the "Plan") of Perot Systems
Corporation ("Perot Systems") is for the purpose of attracting and retaining
outstanding employees of Perot Systems and its subsidiaries, if any,
(collectively, the "Company") and providing them with a strong incentive to
contribute to the success of the Company by giving them the opportunity to
acquire shares of Common Stock, $0.01 par value, of Perot Systems ("Common
Stock") in accordance with the provisions of the Plan, as set forth below.
1. Term.
The Plan shall be effective upon its approval by the Board of
Directors of Perot Systems (the "Board of Directors") and may thereafter be
amended or terminated by the Board of Directors in its discretion. No such
amendment or termination of the Plan shall adversely affect or alter any rights
or restrictions relating to shares of Common Stock issued pursuant to the Plan
("Restricted Stock") prior to such amendment or termination.
2. Restricted Stock Plan Committee.
The Board of Directors shall appoint a Restricted Stock Plan Committee
(the "Committee"), which shall be responsible for administering and
interpreting the Plan. The Committee may from time to time adopt, amend, waive
and rescind such procedures for the administration of the Plan, consistent with
the provisions hereof, as the Committee deems advisable. To the extent
permitted by law, any determination made by the Committee in administering or
interpreting the Plan shall be conclusive.
3. Available Shares.
The number of shares of Common Stock available for issuance pursuant
to the Plan shall be established by the Board of Directors from time to time.
These shares may be either treasury shares or authorized but unissued shares.
The Board of Directors may from time to time increase or reduce the number of
shares of Common Stock available for issuance pursuant to the Plan, but no such
reduction shall affect any shares previously issued pursuant to the Plan. If
any change is made in the number of shares of Common Stock (such as by stock
dividend, stock split, or stock consolidation), the Committee may make such
adjustments in the number of shares and price per share of Restricted Stock
previously issued pursuant to the Plan as the Committee determines is equitable
to preserve the respective rights of the participants in the Plan.
<PAGE> 2
4. Participants.
The Committee shall from time to time select the employees of the
Company who will be offered the opportunity to participate in the Plan and
shall determine the terms of the offer to each selected employee, including (i)
the number of shares of Restricted Stock to be issued to the employee, (ii) the
purchase price per share (consistent with applicable law) to be paid by the
employee, (iii) the vesting schedule upon which such shares will vest to the
employee, and (iv) any other terms deemed appropriate by the Committee. Each
such employee may elect to become a participant in the Plan (a "Participant")
by entering into an agreement therefor (a "Restricted Stock Agreement") with
Perot Systems, acceptable in form and substance to the Committee, and by paying
to Perot Systems in cash or by check the purchase price for the shares of
Restricted Stock being issued to the employee pursuant to the Restricted Stock
Agreement. The Restricted Stock Agreement shall contain provisions to reflect
and enforce the applicable provisions of the Plan and any other provisions
deemed appropriate by the Committee. The committee and the Participant may
thereafter amend, modify, or waive the provisions of the Restricted Stock
Agreement by mutual written agreement.
5. Restrictions and Conditions Applicable to Restricted Stock.
All shares of Restricted Stock sold to a Participant pursuant to a
Restricted Stock Agreement shall, except as otherwise provided in the
Restricted Stock Agreement, be subject to the following restrictions and
conditions:
(a) Shares of the Restricted Stock that have not vested
to the Participant in accordance with the Restricted Stock Agreement
("Unvested Stock") may not be sold or otherwise transferred.
(b) Shares of the Restricted Stock that have vested to
the Participant in accordance with the Restricted Stock Agreement
("Vested Stock") may not be sold or otherwise transferred, unless and
until (i) any restriction on the sale or transfer of such shares
specified in the Restricted Stock Agreement has expired, and (ii)
Perot Systems has waived or failed to exercise any option to purchase
such shares that it may have pursuant to the Restricted Stock
Agreement.
(c) The Restricted Stock Agreement may contain any other
restrictions or conditions on the Restricted Stock issued to the
Participant that the Committee may deem to be advisable.
<PAGE> 3
6. Stock Certificates.
If requested by a Participant, Perot Systems will issue and deliver to
the Participant certificates representing any shares of Vested Stock held by
the Participant. Perot Systems may require that any certificates or other
property representing shares of Unvested Stock remain in the possession of the
Company or an escrow agent designated by the Committee. Each certificate
representing shares of Vested Stock or Unvested Stock shall bear such legends
as the Committee may determine to be necessary or appropriate. Whether or not
certificates representing such shares have been issued or delivered, each
Participant shall have all the rights of a shareholder of Common Stock,
including voting, dividend and distribution rights, with respect to all shares
of Restricted Stock (both Vested Stock and Unvested Stock) held by the
Participant, except as may otherwise be provided in the Participant's
Restricted Stock Agreement.
7. Severability.
If any provision of the Plan is held invalid or unenforceable for any
reason, the validity and enforceability of all other provisions of the Plan
shall not be affected thereby.
8. Governing Law.
The Plan shall be governed by and construed in accordance with the
laws of the State of Texas, without regard to the choice of law rules in such
law.
<PAGE> 1
EXHIBIT 10.4
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, dated as of 199_, is by and between Perot
Systems Corporation ("Perot Systems"), a Delaware corporation and
("Participant").
WITNESSETH:
WHEREAS, Perot Systems has adopted the Perot Systems Corporation Restricted
Stock Plan (the "Plan") to enable employees of Perot Systems and its
subsidiaries, if any (collectively, the "Company") to acquire shares of Common
Stock, $0.01 par value, of Perot Systems ("Common Stock") in accordance with
the provisions of the Plan; and
WHEREAS, the Restricted Stock Committee of Perot Systems (the "Committee") has
selected Participant to participate in the Plan and granted Participant the
right to purchase shares of Common Stock in accordance with the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Purchase and Sale. Subject to the terms, conditions, and restrictions
set forth in this Agreement, Perot Systems hereby sells to Participant, and
Participant hereby purchases from Perot Systems, for a purchase price of $____
per share payable contemporaneously with the execution hereof, the number of
shares of Common Stock specified on Attachment A hereto, which shares shall
vest to Participant in accordance with the vesting schedule set forth on
Attachment A hereto. In connection with this purchase, Participant hereby
represents to Perot Systems that Participant is purchasing these shares for
investment and not with a view to any resale or distribution thereof.
2. Definitions. As used in this Agreement, the following terms shall have
the respective meanings indicated as follows:
(a) "Holding Period" shall mean, (i) for one-half of the shares of
Vested Stock vesting on a particular Vesting Date, the period of
time commencing on the Vesting Date upon which such shares become
Vested Stock and ending two years thereafter, and (ii) for the
other one-half of the shares of Vested Stock vesting on a
particular Vesting Date, a period of time consisting of the day
upon which such shares become Vested Stock.
1
<PAGE> 2
(b) "Market Value" of a share of Restricted Stock on a given date
shall mean (i) if the Restricted Stock is Publicly Traded the
closing sale price for Restricted Stock, as determined in good
faith by the Board of Directors, on such date or, if no closing
sale price is available for such date, on the most recent prior
date for which a closing sale price is available or, if no closing
sale price is available, the closing bid price, as so determined,
on such date or, if no closing bid price is available for such
date, the closing bid price on the most recent prior date for
which a closing bid price is available, or (ii) if the Restricted
Stock is not Publicly Traded, its fair market value, as determined
in good faith by the Board of Directors, as of the most recent
Valuation Date before or after the date.
(c) "Publicly Traded" means Perot Systems Restricted Stock has been
listed on a registered national securities exchange or approved
for quotation in the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system.
(d) "Restricted Stock" shall mean the Common Stock issued to
Participant pursuant to the Plan and this Agreement, together with
any successor security, property or cash issued or distributed by
Perot Systems or any successor entity, whether by way of merger,
consolidation, share exchange, reorganization, liquidation,
recapitalization, dividend or otherwise.
(e) "Termination for Substantial Misconduct" means termination of
employment for a felony conviction of the Participant; actions
involving moral turpitude, theft, or dishonesty in a material
matter; breach of any obligation under Section 7 of this
Agreement; or failure by Participant to carry out the directions,
instructions, policies, rules, regulations, or decisions of the
Board of Directors of Perot Systems including, without limitation,
those relating to business ethics and the ethical conduct of the
business of the Company.
(f) "Transfer" or "transfer" or derivations thereof includes any sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition.
(g) "Unvested Stock" shall mean all shares of Restricted Stock other
than Vested Stock.
(h) "Valuation Date" means each June 30 and December 31 of every year,
beginning on January 1, 1991, and any other date as of which the
Board of Directors determines the Market Value of Restricted
Stock.
2
<PAGE> 3
(i) "Vesting Date" shall mean each date upon which shares of
Restricted Stock vest to Participant or Participant's estate
pursuant to this Agreement.
(j) "Vesting Period" shall mean the period of time commencing on the
date of this Agreement and ending on the last Vesting Date.
(k) "Vested Stock" shall mean those shares of Restricted Stock that
have vested to Participant or Participant's estate pursuant to
this Agreement.
Other terms used in this Agreement are defined in the context in which
they occur and shall have the meanings there indicated.
3. Restrictions on Transfer. All shares of Restricted Stock shall be
subject to the following restrictions on transfer unless the Company
shall otherwise agree in writing:
(a) Shares of Unvested Stock may not be sold or otherwise transferred.
(b) Shares of Vested Stock may not be sold or otherwise transferred
during the Holding Period for those shares.
(c) Shares of Vested Stock may not be sold or otherwise transferred
after the Holding Period for those shares unless and until Perot
Systems has waived or failed to exercise its option to purchase
those shares pursuant to Section 4 hereof.
(d) Shares of Vested Stock may not be sold or otherwise transferred
for six months after stock of the same class as the Vested Stock
is Publicly Traded.
Perot Systems shall not be obligated to recognize any purported sale or
other transfer of Restricted Stock in violation of this Section 3 and,
unless it elects to do otherwise, may treat any such purported sale or
transfer as null, void, and of no effect. Shares of Vested Stock may,
however, be sold within the Holding Period to the extent necessary to
repay the principal of loans secured by Restricted Stock pursuant to a
security agreement to which Perot Systems is a party, provided that stock
of the same class as the Vested Stock has been Publicly Traded for six
months or more.
4. Options to Purchase Vested Stock. Unless and until waived by Perot
Systems and regardless of whether or not Participant is still employed by
the Company, Perot Systems shall have the following option to purchase
Vested Stock:
3
<PAGE> 4
If, after the Holding Period therefor and prior to the date the
Restricted Stock is Publicly Traded, Participant, or any
subsequent holder of Vested Stock, desires or is obligated to sell
or otherwise transfer any shares of Vested Stock (other than a
transfer to Participant's estate upon Participant's death), the
holder of such shares shall give Perot Systems written notice of
the proposed sale or transfer, including the identity of the
proposed purchaser or transferee, and, for 30 days after receipt
of such notice, Perot Systems shall have the option, in addition
to its option under Section 3(d) above to treat any such purported
sale or transfer as null, void, and of no effect, to purchase for
cash any or all of such shares at the Market Value thereof.
5. Manner of Stock Buy Back. Whenever Perot Systems has a right to buy back
shares of Restricted Stock, Perot Systems may exercise its right by
notifying Participant or the subsequent holder of Perot Systems' election
to exercise its right within the designated exercise period. In the case
of a buy back under Section 4 or Section 8, the giving of such notice
will give rise to an obligation on the part of Participant or the
subsequent holder to tender to Perot Systems, within 10 days, any
previously issued certificate representing shares of Restricted Stock to
be bought back, duly endorsed in blank or having a duly executed stock
power attached in proper form for transfer. If any such endorsed
certificate or stock power is not tendered within 10 days, Perot Systems
may cancel any outstanding certificate representing shares to be bought
back. Perot Systems is required to tender the purchase price within 2
business days of the tender of the shares. If the person from whom the
shares are to be bought back has not complied with an obligation to
return a certificate and stock power representing shares to be bought
back, however, Perot Systems is not required to tender the purchase price
until 20 days after the certificate is returned or 20 days after it
cancels the certificate, whichever occurs first.
6. Termination of Employment. If Participant's employment with the Company
is voluntarily or involuntarily terminated during the Vesting Period for
any reason, then Perot Systems shall be entitled, by notice to
Participant within 90 days after such termination, to exercise the rights
specified in Section 8 below, but only as to Unvested Stock.
7. Competition. Participant acknowledges that, in the course and as a
result of employment with the Company, Participant will obtain special
training and knowledge and will come in contact with the Company's
customers and potential customers, which training, knowledge and contacts
would provide invaluable benefits to competitors of the Company.
Accordingly, and in consideration of Perot Systems' agreement to issue
Restricted Stock to Participant hereunder, which Participant acknowledges
is conditioned on the covenants contained herein, Participant agrees that
Perot Systems shall be entitled to exercise the rights
4
<PAGE> 5
specified in Section 8 below if Participant, either directly or
indirectly, whether as an employee, employer, consultant, agent,
principal, partner, owner, shareholder (other than as a holder of less
than 5% of a publicly traded class of securities), officer, director, or
in any other individual or representative capacity, does any of the
following without the prior written consent of the Company:
(a) while Participant is employed by the Company or within one year
thereafter:
(i) competes with, or engages in any business that is
competitive with, the Company within 250 miles of any
location at which Participant was employed by or provided
services to the Company;
(ii) solicits or accepts any business or employment from any
person or entity that is, or at any time within the
preceding two years was or was solicited to become, a
customer of the Company if Participant solicited business
from or performed services for that customer or prospect
while employed by the Company; or
(iii) recruits, hires, or helps anyone to recruit or hire anyone
who is, or at any time within the preceding six months was,
an employee of the Company or of any of its customers for
whom Participant performed services or from whom Participant
solicited business; or
(b) discloses to any unauthorized person or entity, or uses, licenses,
sells, conveys or otherwise exploits in competition with the
Company or otherwise for the benefit of any person or entity other
than the Company, any information proprietary to, used by, or in
the possession of the Company or any of its customers and not
generally known in the industry which is disclosed to or learned
by Participant while employed by the Company or thereafter,
whether or not reduced to writing and whether or not conceived,
originated, discovered or developed in whole or in part by
Participant.
If any provision of this Section 7 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, and/or scope, 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, and/or scope set forth shall be changed to be the
maximum period of time, the largest territory, and/or the broadest scope,
as the case may be, which would be found reasonable and enforceable by
such court.
8. Rights Upon Termination or Competition. If the Committee discovers that
Participant has engaged in any conduct prohibited by Section 7 or if
Participant
5
<PAGE> 6
ceases to be employed by the Company and the Committee, in its sole
discretion, determines that Participant's cessation of employment
resulted from a Termination for Substantial Misconduct or would have
resulted in a Termination for Substantial Misconduct had the relevant
facts been known at the time of Participant's cessation of employment,
Perot Systems will have the right for 150 days after the Committee
discovers the relevant facts to require Participant to (i) sell to Perot
Systems all or any part of the Restricted Stock (both Vested Stock and
Unvested Stock) then held by Participant, at the price per share paid by
Participant plus simple interest on such amount at the rate of 8% per
annum from the date of payment by Participant to the date of tender of
payment by Perot Systems as set forth in Section 5 above, minus the
amount or value, as applicable, of any dividends or distributions paid on
such Restricted Stock and (ii) if any shares of Restricted Stock have
been sold or otherwise transferred by Participant (including any sale to
the Company), then at Perot Systems' option Participant shall pay to
Perot Systems an amount in cash with respect to each share of Restricted
Stock not still so held equal to the greater of the value of the proceeds
received by Participant for such share or the Market Value of such share
on the first date on which such share is no longer held by Participant,
less in either case the price paid by Participant for such share plus
simple interest on such amount at the rate of 8% per annum from the date
of payment by Participant to the date of tender of payment by Perot
Systems as set forth in Section 5 above, minus the amount or value, as
applicable, of any dividends or distributions paid on such Restricted
Stock. If and when Perot Systems is entitled to exercise the rights
specified in this Section 8, as provided in Section 6 above, then, upon
the demand of Perot Systems, Participant shall sell to Perot Systems all
or any part of the Unvested Stock then held by Participant, at the price
per share paid by Participant plus simple interest on such amount at the
rate of 8% per annum from the date of payment by Participant to the date
of tender of payment by Perot Systems as set forth in Section 5 above,
minus the amount or value, as applicable, of any dividends or
distributions paid on such Restricted Stock.
9. Compliance with Securities Laws. Participant hereby represents and
warrants that Participant has acquired the Restricted Stock for
Participant's own account and not with a view to any resale or
distribution thereof. Participant agrees that neither he nor any
subsequent holder of the Restricted Stock will sell or otherwise transfer
any shares of Restricted Stock in any way that may result in a violation
of any federal or state securities laws or regulations. Participant
further acknowledges and agrees that Perot Systems may require any
subsequent purchaser or other transferee of shares of Restricted Stock
that cannot be publicly traded to provide Perot Systems, prior to such
sale or other transfer, with such representations, commitments and
opinions regarding compliance with applicable securities laws and
regulations as Perot Systems may deem necessary or advisable.
6
<PAGE> 7
10. Stock Certificate. If requested by Participant, Perot Systems will issue
and deliver to Participant certificates representing any shares of Vested
Stock held by Participant. Perot Systems may require that any
certificates or other property representing shares of Unvested Stock
remain in the possession of the Company or an escrow agent designated by
the Committee. Each certificate representing Vested Stock or Unvested
Stock shall bear such legends as the Committee may determine to be
necessary or appropriate. Whether or not certificates representing such
shares have been issued or delivered, Participant shall have all the
rights of a shareholder of Restricted Stock, including voting, dividend
and distribution rights, with respect to all shares of Restricted Stock,
both Vested Stock and Unvested Stock, held by Participant, but any and
all stock and/or cash dividends (other than normal periodic cash
dividends), distributions in property, or other distributions made on or
in respect of the Restricted Stock, whether resulting from a subdivision,
combination or reclassification of the Restricted Stock of any issuer
thereof or received in exchange for Restricted Stock or any part thereof
or as a result of any merger, consolidation, acquisition or other
exchange of assets to which any such issuer may be a party or otherwise,
and any and all cash and other property received in exchange for the
Restricted Stock or received in payment of the principal of or in
redemption of the Restricted Stock (either at maturity, upon call for
redemption or otherwise), shall remain in the possession of Perot Systems
for Unvested Stock.
11. Income Tax Withholding. Participant acknowledges and agrees that
Participant shall, upon request by the Company from time to time,
reimburse the Company for, or the Company may withhold from sums
otherwise payable to Participant, any amounts the Company is required to
remit to applicable taxing authorities as income tax withholding with
respect to the Restricted Stock. If Participant fails to reimburse the
Company for any such amount when requested, the Company shall have the
right to recover that amount by selling sufficient shares of
Participant's Restricted Stock.
12. Compliance with Plan. Participant acknowledges that this Agreement is
entered into, and the Restricted Stock is issued, pursuant to the Plan
and agrees to comply with the provisions of the Plan, as it may be
amended from time to time, to the extent that such provisions are not
inconsistent with the provisions of this Agreement.
13. Notices. Any notice to Perot Systems or Company that is required or
permitted by this Agreement shall be addressed to the attention of the
Secretary of Perot Systems at its principal office. Any notice to
Participant that is required or permitted by this Agreement shall be
addressed to Participant at the most recent address for Participant
reflected in the appropriate records of the Company. Either party may at
any time change its address for notification purposes by giving
7
<PAGE> 8
the other prior written notice of the new address and the date upon
which it will become effective. Whenever this Agreement requires or
permits any notice from one party to another, the notice must be in
writing to be effective and, if mailed, shall be deemed to have been
given on the third business day after the same is enclosed in an
envelope, addressed to the party to be notified at the appropriate
address, properly stamped, sealed and deposited in the United States
mail, and, if mailed to the Company, by certified mail, return receipt
requested.
14. Remedies. Perot Systems shall be entitled, in addition to any other
remedies it may have at law or in equity, to temporary and permanent
injunctive and other equitable relief to enforce the provisions of this
Agreement. Any action to enforce the provisions of, or otherwise
relating to, this Agreement may be brought in the appropriate courts in
Dallas, Dallas County, Texas.
15. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal
representatives, successors, and assigns. However, Participant shall
not, and shall not have the power to, assign this Agreement or any rights
relating to this Agreement without the prior written consent of Perot
Systems. By signing this Agreement, Participant consents to the personal
jurisdiction of such courts in any such action.
16. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which that party may be
entitled.
17. Severability. If any provision of this Agreement is held invalid or
unenforceable for any reason, the validity and enforceability of all
other provisions of this Agreement shall not be affected thereby.
18. Headings. The section headings used herein are for reference and
convenience only and shall not enter into the interpretation hereof.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the
choice of law rules in such law.
20. Entire Agreement. This Agreement, together with the Plan and any
procedures adopted by the Committee thereunder, constitutes the entire
agreement between the parties hereto with respect to its subject matter
and may be waived or modified only in writing.
8
<PAGE> 9
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C> <C>
PARTICIPANT PEROT SYSTEMS CORPORATION
By:
- --------------------------------------- ------------------------------------
SIGNATURE TITLE:
- ---------------------------------------
PRINTED NAME
</TABLE>
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Restricted Stock
Agreement and agree that this consent shall be binding on my interest under
this Agreement and on my heirs, legatees and assigns.
--------------------------------------
SIGNATURE
--------------------------------------
PRINTED NAME
9
<PAGE> 10
ATTACHMENT A
TO
RESTRICTED STOCK AGREEMENT
FOR
--------------
1. Number of Shares of Restricted Stock: _________________
2. Vesting Schedule:
<TABLE>
<CAPTION>
Number of
Vesting Date Shares Vesting
------------ --------------
<S> <C>
TOTAL
==============
</TABLE>
10
<PAGE> 1
EXHIBIT 10.5
PEROT SYSTEMS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK
OPTION/RESTRICTED STOCK INCENTIVE PLAN
1. Purpose
The purpose of the Perot Systems Corporation 1996 Non-Employee
Director Stock Option/Stock Incentive Plan, as amended, is to benefit the
Company and its stockholders by helping to secure and retain for them the
services of non-employee directors with increased incentives to exert maximum
efforts to assure the financial success of the Company.
2. Administration
The Board of Directors of Perot Systems will administer the Plan. The
Board of Directors may interpret the Plan, define terms used in the Plan,
answer questions arising under the Plan, and adopt and amend rules and
regulations for the Plan. To the extent permitted by law, any determination
made by the Board of Directors in administering the Plan will be conclusive.
3. Amount of Stock
The Board of Directors will reserve for issuance under the Plan not
more than 400,000 shares of the Common Stock of the Company, par value $0.01
per share. These shares may be authorized and unissued shares or issued shares
acquired by the Company. If options granted under the Plan terminate or expire
without being exercised, new options may be granted covering the shares not
purchased under the lapsed options.
4. Eligibility
Any person who is not an employee of the Company but is a member of
the Board of Directors of the Company (other than Ross Perot, Jr.) is eligible
to receive an award under the Plan, and thereby become a participant in the
Plan, in consideration of service to the Company in a capacity not involving
the offer or sale of securities in a capital-raising transaction.
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<PAGE> 2
5. Stock Option/Restricted Stock Agreements
All awards granted under the Plan are to be evidenced by a Stock
Option Agreement in the form attached as Exhibit A and/or Restricted Stock
Agreement in the form attached as Exhibit B, as applicable, between the Company
and the participant.
6. Awards
Subject to change at the discretion of the Chairman, upon the
commencement of service and upon the completion of the original vesting period
(without regard to any acceleration of such vesting) for all previously issued
restricted shares and/or options for an eligible director, such director will
be entitled to elect, within 30 days of such commencement, either (i) the award
of an option to purchase 30,000 shares of Common Stock on the terms set forth
in Section 7 or (ii) the right to purchase 30,000 shares of Restricted Stock on
the terms set forth in Section 8. In the event that a director does not
specify the type of award within the 30 day period set forth above, that
director shall be awarded an option on the terms set forth in Section 7.
7. Options
If any change is made in the shares of Common Stock of the Company
(including, but not limited to, by stock dividend, stock split, or merger or
consolidation, but not including the issuance of additional shares for
consideration), the Board of Directors will make such adjustments in the number
and kind of shares (which may consist of shares of a surviving corporation to a
merger) that may thereafter be optioned and sold under the Plan and the number
and kind of shares (which may consist of shares of a surviving corporation to a
merger) and purchase price per share of the shares subject to outstanding Stock
Option Agreements under the Plan as the Board of Directors determines are
equitable to preserve the respective rights of the participants in the Plan.
Stock Option Agreements between the Company and participants who have
received options under the Plan must contain substantially the following terms
and conditions:
(a) The option exercise price will be the fair market value of the
shares underlying the option on the date the option is
granted, which,
(i) if the shares are publicly traded, will be the
closing sale price on such date in the market in
which the shares underlying the option are
principally traded (which may be a stock exchange)
or, if no such closing sale price is available for
such date, on the most recent previous date for which
such a closing sale price is available or, if
Page 2
<PAGE> 3
no closing sale price is available, the closing bid
price on such date as quoted in the NASDAQ system, if
the shares are quoted in the NASDAQ system, or by the
National Quotation Bureau, Inc., if not so quoted,
or, if no such closing bid price is available for
such date, the closing bid price on the most recent
previous date for which such a closing bid price is
available, or
(ii) if the shares are not publicly traded, will be their
fair market value, determined by reference to the
most recent appraisal of the Common Stock conducted
by appraisers selected by the Board of Directors.
(b) No option may be exercised:
(i) except to the extent that such option has vested.
Options shall vest on the following schedule:
<TABLE>
<CAPTION>
Anniversary Percentage of
of Grant Date Option Vested
------------- -------------
<S> <C>
First 20%
Second 20%
Third 20%
Fourth 20%
Fifth 20%
</TABLE>
Options shall not cease to vest upon termination of
the participants service as a director of the Company
unless such participant is removed for Cause or
resigns. For purposes of this Agreement, "Cause"
means for the conviction of a felony (other than a
traffic violation) or the commission of material
fraud with regard to the Company.
(ii) after the expiration date, which will be the eleventh
anniversary of the award of the option.
(iii) before the satisfaction of the other conditions set
forth in the Stock Option Agreement.
(iv) unless written notice of the exercise is delivered to
the Company specifying the number of shares to be
purchased and payment in full is made for the shares
being purchased at the time of the exercise, and such
payment is made
Page 3
<PAGE> 4
(A) in cash or by check in United States dollars,
or
(B) by tendering to the Company shares of the
same class as the shares being acquired that
have been owned by the person exercising the
option for any period necessary to avoid a
charge to the Company's earnings and having a
fair market value equal to the cash exercise
price, such fair market value to be
determined in accordance with Paragraph 7(a)
above, or
(C) by a combination of such cash or check and
shares.
(v) upon termination of participant's service as a
director of the Company if such participant is
removed for Cause or resigns.
(vi) if participant's service ceases (other than by
removal for Cause or resignation), more than two
years after the later of (A) vesting of the
participant's options is completed or (B) such
service ceases; provided that in no case shall an
option be exercisable after the expiration date set
forth in clause (ii) above.
(c) Shares of Common Stock issued upon exercise of any option
outstanding under the Plan will be subject to the restrictions
set forth in the Stock Option Agreement.
8. Restricted Stock Awards
Restricted Stock Agreements between the Company and participants who
have received rights to purchase shares of Restricted Stock under the Plan must
contain substantially the following terms and conditions:
(a) The purchase price per share for the shares will be the fair
market value of the shares, but will not be less than the par
value of the shares or otherwise inconsistent with applicable
law. The fair market value,
(i) if the shares are publicly traded, will be the
closing sale price on such date in the market in
which the shares underlying the option are
principally traded (which may be a stock exchange)
or, if no such closing sale price is available for
such date, on the most recent previous date for which
such a closing sale price is available or, if no
closing sale price is available, the closing bid
price on such date as quoted in the NASDAQ system, if
the shares are quoted in the
Page 4
<PAGE> 5
NASDAQ system, or by the National Quotation Bureau,
Inc., if not so quoted, or, if no such closing bid
price is available for such date, the closing bid
price on the most recent previous date for which such
a closing bid price is available, or
(ii) if the shares are not publicly traded, will be their
fair market value, determined by reference to the
most recent appraisal of the Common Stock conducted
by appraisers selected by the Board of Directors.
(b) The period during which a participant may exercise a right to
purchase shares will end 60 days following the award of the
right.
(c) The right to purchase shares may be exercised:
(i) as to all or any part of the shares subject to the
right;
(ii) by delivering written notice of the exercise to the
Company specifying the number of shares to be
purchased and paying the purchase price in cash or
check in United States dollars;
(iii) only while the participant is serving the Company in
a capacity that renders the participant eligible to
participate in the Plan; and
(iv) only by the participant awarded the right and not by
any transferee, assignee, or successor.
(d) Shares purchased pursuant to rights to purchase restricted
shares awarded under the Plan will be subject to the
restrictions set forth in the Restricted Stock Agreement.
(e) The participant will have the rights of a shareholder with
respect to shares purchased under the Plan, including the
right to vote the shares and to receive any dividends paid on
the shares, from the date of purchase but any and all stock
and/or cash dividends (other than normal periodic cash
dividends), distributions in property, or other distributions
made on or in respect of the shares, whether resulting from a
subdivision, combination or reclassification of the shares of
any issuer thereof or received in exchange for shares or any
part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any such
issuer may be a party or otherwise, and any and all cash and
other property received in exchange for the shares or received
in payment of the principal of or in redemption of the shares
(either at maturity, upon call
Page 5
<PAGE> 6
for redemption or otherwise), shall remain in the possession
of the Company for as long as the Company's right to
repurchase such shares shall not have terminated.
(f) If the participant sells, assigns, conveys, donates, pledges,
transfers, or otherwise disposes of or encumbers any
restricted shares before the lapse, expiration, or termination
of the restrictions imposed on the shares under Paragraph
8(d), the Company will have the right, in addition to such
other rights and remedies as may be available to it (including
the right to restrain or set aside the transaction),
exercisable by written notice to the owner thereof at any time
within 180 days after its discovery of such transaction, to
repurchase all or any part of the shares as to which the
restrictions have not lapsed, expired, and terminated, for
cash in an amount equal to the purchase price paid to the
Company for such shares, plus simple interest at 8% per annum
from the date of payment by the participant to the date of
offer of tender of payment by the Company, minus the amount or
value, as applicable, of any dividends or distributions paid
on such shares.
(g) If the participant is removed for Cause or resigns as a
director before the restrictions imposed on the shares under
Paragraph 8(d) lapse, expire, or terminate, the Company will
have the right for 180 days following the cessation of service
to repurchase all or any part of the shares as to which the
restrictions have not lapsed, expired, and terminated, for
cash in an amount equal to the purchase price paid to the
Company for such shares, plus simple interest at 8% per annum
from the date of payment by the participant to the date of
offer of tender of payment by the Company, minus the amount or
value, as applicable, of any dividends or distributions paid
on such shares.
9. Miscellaneous Provisions
(a) Neither the Plan nor any action taken under the Plan is to be
construed as giving any person a right to be retained in the
service of the Company.
(b) A participant's rights under and interest in the Plan, options
and rights to purchase shares issued under the Plan, and
shares purchased under the Plan that remain subject to
restrictions imposed under Paragraph 8(d) are not subject to
execution, levy, garnishment, attachment, pledge, bankruptcy,
or any obligation or liability of the participant.
(c) The Plan, awards under the Plan, the exercise of options and
rights awarded under the Plan, and the obligation of the
Company to issue or
Page 6
<PAGE> 7
deliver shares under such options and rights are subject to
all applicable federal and state laws, rules, and regulations
and to such approvals as may be required by any government or
regulatory agency. The Company is permitted a reasonable
delay in issuing and delivering any shares under the Plan in
order to accommodate compliance with such laws, rules,
regulations, and approvals, including:
(i) the listing of such shares on any registered national
securities exchange or approval for quotation in the
NASDAQ system, and
(ii) the completion of any registration or qualification
of such issuance or delivery under any federal or
state law or any ruling or regulation of any
government body that the Company may, in its sole
discretion, determine to be necessary or advisable.
(d) It shall be a condition to the obligation of the Company to
issue and deliver shares under the Plan that the participant
(or any person entitled to act on the participant's behalf)
pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying any
liability to withhold federal, state, local, or foreign income
or other taxes. If the amount requested is not paid, the
Company may refuse to issue and deliver shares.
(e) The Company will bear the expenses of the Plan.
(f) By accepting any benefit under the Plan, a participant and
each person claiming under or through a participant will be
conclusively deemed to have indicated the person's acceptance
and ratification of, and consent to, any action taken under
the Plan by the Company or its Board of Directors.
10. Adjustments, Amendment and Termination
(a) The Board of Directors will have the right, in its sole
discretion, to accelerate the exercisability of any options
awarded or the lapse, expiration, or termination of any
restrictions imposed on shares under Paragraph 8(d), and to
waive any conditions for such exercisability, lapse,
expiration, or termination, including the condition that an
option may not be exercised after the participant ceases to
serve the Company.
(b) If any change is made in the shares reserved for issuance
under the Plan (such as by stock dividend, stock split, or
merger or consolidation), the Board of Directors will make
such adjustments in the number and kind of shares reserved for
issuance under the Plan and the purchase price per
Page 7
<PAGE> 8
share of shares covered by options outstanding under the Plan
as the Board of Directors determines are equitable to preserve
the rights of participants in the Plan.
(c) The Board of Directors may amend or terminate the Plan at any
time, except that it may not amend or terminate the Plan in a
way that materially and adversely affects any right of a
participant with respect to any award previously granted under
the Plan without the participant's written consent.
11. Duration of Plan
Unless the Board of Directors has taken action under Paragraph 10(c)
terminating the Plan beforehand, the Plan will terminate for purposes of
issuing new options and Restricted Stock awards ten years after its effective
date.
12. Severability
If any provision of the Plan is held invalid or unenforceable for any
reason, the validity and enforceability of all other provisions of the Plan
will not be affected.
13. Effect on Other Plans
The adoption of the Plan has no effect on awards made or to be made
under other equity incentive plans of the Company.
14. Governing Law
The Plan is to be governed and construed under the law of the State of
Texas, without regard to the State's choice of law rules.
Page 8
<PAGE> 1
EXHIBIT 10.6
PEROT SYSTEMS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK
OPTION/RESTRICTED STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, dated as of ________________________, _____, is by and between
Perot Systems Corporation, a Delaware corporation ("Perot Systems" or the
"Company"), and ________________________________________________ ("Participant"
).
WITNESSETH
WHEREAS, Perot Systems has adopted the Perot Systems Corporation 1996
Non-Employee Director Stock Option/Restricted Stock Incentive Plan (the "Plan")
to enable non-employee directors of the Company to acquire shares of Class A
Common Stock, $0.01 par value, of the Company ("Common Stock") in accordance
with the provisions of the Plan; and
WHEREAS, the Participant is entitled, and has elected, to receive this right to
purchase restricted shares of Common Stock pursuant to the Plan and in
accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Award.
(a) Subject to the terms, conditions, and restrictions set forth
in the Plan and in this Agreement, Perot Systems hereby awards and
grants to Participant, and Participant hereby accepts from Perot
Systems, the right to purchase from Perot Systems ______ of restricted
shares of Common Stock, at the purchase price, and in accordance with
the schedule for termination of transfer restrictions specified on
Attachment A hereto.
(b) The right to purchase restricted shares of Common Stock
evidenced by this Agreement may be exercised by delivering written
notice of the exercise, in substantially the form of Attachment B, to
Perot Systems within 30 days of the
1
<PAGE> 2
date of this Agreement and paying in full the purchase price for such
shares in cash or check in United States dollars. Such right is not
transferable and may be exercised only by Participant, and only while
Participant is serving Perot Systems as a member of the Perot Systems
Board of Directors. "Restricted Stock" shall mean the Common Stock
issued to Participant pursuant to the Plan and this Agreement,
together with any successor security, property or cash issued or
distributed by Perot Systems or any successor entity, whether by way
of merger, consolidation, share exchange, reorganization, liquidation,
recapitalization, dividend or otherwise.
2. Restrictions on Shares.
(a) Restricted Stock purchased under this Agreement may not be
sold, assigned, conveyed, donated, pledged, transferred, or otherwise
disposed of or encumbered until the later of (i) the date set forth in
Attachment A as the date for termination of the transfer restrictions
on such Restricted Stock, or (ii) six months after the Common Stock is
publicly tradable.
(b) If Participant sells, assigns, conveys, donates, pledges,
transfers, or otherwise disposes of or encumbers any of the Restricted
Stock purchased under this Agreement before the date set forth in
Attachment A for termination of the transfer restrictions on such
Restricted Stock, Perot Systems will have the right, in addition to
such other rights and remedies as may be available to it (including
the right to restrain or set aside the transaction), exercisable by
written notice to the owner thereof at any time within 180 days after
its discovery of such transaction, to repurchase all or any part of
the Restricted Stock as to which the transfer restrictions have not
terminated, for cash in an amount equal to the purchase price paid to
Perot Systems for such Restricted Stock, plus simple interest on such
amount at the rate of 8% per annum from the date of payment by
Participant to the date of offer of tender of payment by Perot Systems
as set forth in Section 2(d) below, minus the amount or value, as
applicable, of any dividends or distributions paid on such Restricted
Stock.
(c) If Participant is removed as a member of the Perot Systems
Board of Directors for Cause or resigns, before the date set forth in
Attachment A for termination of the transfer restrictions on any
Restricted Stock purchased under this Agreement, Perot Systems will
have the right for 180 days following the cessation of service to
repurchase all or any part of the Restricted Stock as to which the
transfer restrictions have not terminated, for cash in an amount equal
to the purchase price paid to Perot Systems for such Restricted Stock,
plus simple interest on such amount at the rate of 8% per annum from
the date of payment by Participant to the date of offer of tender of
payment by Perot Systems as set
2
<PAGE> 3
forth in Section 2(d) below, minus the amount or value, as applicable,
of any dividends or distributions paid on such Restricted Stock.
(d) Whenever Perot Systems has a right to buy back shares of
Restricted Stock, Perot Systems may exercise its right by notifying
Participant or the subsequent holder of the Company's election to
exercise its right within the designated exercise period. The giving
of such notice will give rise to an obligation on the part of
Participant or the subsequent holder to tender to Perot Systems,
within 10 days, the Restricted Stock and any previously issued
certificate representing shares of Restricted Stock to be bought back,
duly endorsed in blank or having a duly executed stock power attached
in proper form for transfer. If any such endorsed certificate or
stock power is not tendered within 10 days, Perot Systems may cancel
any outstanding certificate representing shares to be bought back.
Perot Systems is required to tender the purchase price within 2
business days of the tender of the Restricted Stock. If the person
from whom the Restricted Stock are to be bought back has not complied
with an obligation to return a certificate and stock power
representing shares to be bought back, however, the Company is not
required to tender the purchase price until 20 days after the
certificate is returned or 20 days after it cancels the certificate,
whichever occurs first.
(e) For purposes of this Agreement, "Cause" means for the
conviction of a felony (other than a traffic violation) or the
commission of a material fraud with respect to the Company.
3. Company's Right of First Refusal.
(a) Unless and until Restricted Stock purchased under this
Agreement are publicly traded, Perot Systems will have a right of
first refusal to purchase such Restricted Stock if the holder of the
Restricted Stock desires or is obligated to sell or otherwise transfer
the shares after the date set forth in Attachment A for termination of
the transfer restrictions on such Restricted Stock, but this right
will not apply to a transfer upon Participant's death by will or by
the laws of descent and distribution.
(b) Any holder of such Restricted Stock who desires or is
obligated to sell or otherwise transfer it before it are publicly
traded after the date set forth in Attachment A for termination of the
transfer restrictions on such Restricted Stock, must give Perot
Systems written notice of the proposed sale or other transfer. The
notice must include the name of the proposed purchaser or transferee
and describe the circumstances of the transfer. Perot Systems may
purchase any or all of the Restricted Stock proposed to be sold or
transferred by notifying the holder within 30 days of its receipt of
the notice of its election to
3
<PAGE> 4
exercise its right of first refusal and tendering the purchase price
of the Restricted Stock as soon as reasonably practicable thereafter.
(c) The purchase price at which Perot Systems will purchase
Restricted Stock under its right of first refusal will be its fair
market value, determined by reference to the most recent appraisal of
the Common Stock conducted by appraisers selected by the Board of
Directors of the Company conducted on or before the date of receipt of
the notice of the proposed sale or transfer.
(d) For purposes of this Section, the term "publicly traded" means
shares of Restricted Stock have been listed on a registered national
securities exchange or approved for quotation in the National
Association of Securities Dealers Automated Quotation ("NASDAQ")
system.
4. Compliance with Securities Laws.
(a) Participant acknowledges that the right to purchase shares of
Common Stock evidenced by this Agreement and any shares purchased
under this Agreement have not been registered under the Securities Act
of 1933, that Perot Systems has no present intention to so register
them, that such shares may be deemed "restricted securities" under
Rule 144 of the Act, that the holder of restricted securities may be
required to hold them for an indefinite period of time unless they are
registered for sale under the Act or an exemption from registration is
available, and that routine sales of restricted securities under Rule
144 can only be made if Perot Systems meets certain requirements,
including a requirement to make certain information publicly
available, and then only in limited amounts and in a specified manner
in accordance with the terms and conditions of Rule 144.
(b) Neither Participant nor any successor in interest of
Participant will sell or otherwise transfer any Restricted Stock
purchased under this Agreement in any way that might result in a
violation of any federal or state securities laws or regulations.
(c) Perot Systems may require Participant or any subsequent holder
of Restricted Stock purchased under this Agreement to provide Perot
Systems, before any sale or other transfer of such shares, with such
representations, commitments, and opinions regarding compliance with
applicable securities laws and regulations as Perot Systems may deem
necessary or advisable.
4
<PAGE> 5
5. Stock Certificates; Rights as Shareholder.
Perot Systems will retain for safekeeping all certificates or other
property representing Restricted Stock. Each such certificate will
bear such legends as the Board determines are necessary or
appropriate. Whether or not certificates representing such shares have
been issued or delivered, Participant will have all the rights of a
shareholder of Common Stock, including voting, dividend and
distribution rights, with respect to such shares, but any and all
stock and/or cash dividends (other than normal periodic cash
dividends), distributions in property, or other distributions made on
or in respect of the Restricted Stock, whether resulting from a
subdivision, combination or reclassification of the Restricted Stock
of any issuer thereof or received in exchange for Restricted Stock or
any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any such issuer may
be a party or otherwise, and any and all cash and other property
received in exchange for the Restricted Stock or received in payment
of the principal of or in redemption of the Restricted Stock (either
at maturity, upon call for redemption or otherwise), shall remain in
the possession of Perot Systems until the date set forth on Attachment
A for termination of the transfer restriction on such Restricted
Stock.
6. Income Tax Withholding.
Participant (or any person entitled to act on Participant's behalf)
shall, upon request by Perot Systems, pay to Perot Systems, or Perot
Systems may withhold from sums or property otherwise due or payable to
Participant (or such person), such amount as Perot Systems may request
for the purpose of satisfying any liability to withhold federal,
state, local, or foreign income or other taxes.
7. Compliance with Plan.
Participant acknowledges receipt of a copy of the Plan and further
acknowledges that this Agreement is entered into pursuant to the Plan.
If the provisions of the Plan are inconsistent with the provisions of
this Agreement, the provisions of the Plan govern and supersede the
provisions of this Agreement.
8. Notices.
Any notice to Perot Systems or the Company that is required or
permitted by this Agreement shall be addressed to the attention of the
Secretary of Perot Systems at: 12377 Merit Drive, Suite 1100, Dallas,
Texas 75251. Any notice to Participant that is required or permitted
by this Agreement shall be addressed to Participant at the most recent
address for Participant reflected in the appropriate records of Perot
Systems. Either party may at any time change its address for
5
<PAGE> 6
notification purposes by giving the other written notice of the new
address and the date upon which it will become effective. Whenever
this Agreement requires or permits any notice from one party to
another, this notice must be in writing to be effective and, if
mailed, shall be deemed to have been given on the third business day
after the same is enclosed in an envelope, addressed to the party to
be notified at the appropriate address, properly stamped, sealed, and
deposited in the United States mail, and, if mailed to Perot Systems,
by certified mail, return receipt requested.
9. Remedies.
Perot Systems is entitled, in addition to any other remedies it may
have at law or in equity, to temporary and permanent injunctive and
other equitable relief to enforce the provisions of this Agreement.
Any action to enforce the provisions of, or otherwise relating to,
this Agreement may be brought in the state or federal courts having
jurisdiction in Dallas, Dallas County, Texas. By signing this
Agreement, Participant consents to the personal jurisdiction of such
courts in any such action.
10. Assignment.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal representatives
and permitted successors and assigns. However, Participant does not
have the power or right to assign this Agreement without the prior
written consent of Perot Systems.
11. Attorneys' Fees.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party will be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in
addition to any other relief to which that party may be entitled.
12. Severability.
If any provision of this Agreement is held invalid or unenforceable
for any reason, the validity and enforceability of all other
provisions of this Agreement will not be affected.
13. Headings.
The section headings used herein are for reference and convenience
only and do not affect the interpretation of this Agreement.
6
<PAGE> 7
14. Governing Law.
This Agreement shall be governed by and construed in accordance with
the law of the State of Texas, without regard to that State's choice
of law rules.
15. Entire Agreement.
This Agreement, together with the Plan and any rules and regulations
adopted by the Board thereunder, constitutes the entire agreement
between the parties with respect to its subject matter.
16. Amendment.
This Agreement may be amended only in a manner that is consistent with
the Plan and only by a written instrument signed by both Perot Systems
and Participant.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
PARTICIPANT PEROT SYSTEMS CORPORATION
By:
- ------------------------------------ -------------------------------------
[name] Chairman Of The Board
7
<PAGE> 8
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Restricted Stock
Agreement and agree that this consent shall be binding on any interest I may
have under this Agreement and on my heirs, legatees, and assigns.
---------------------------------------
Signature
---------------------------------------
Printed Name
---------------------------------------
Date
8
<PAGE> 9
ATTACHMENT A
TO
RESTRICTED STOCK AGREEMENT
FOR
[NAME]
1. Purchase Price: $________________________ per Share
2. Schedule for Termination of Transfer Restrictions:
<TABLE>
<CAPTION>
Date on Which Transfer Shares as to Which Transfer
Restrictions Expire Restrictions Expire on Date
---------------------- ---------------------------
Percentage Number
---------- ------
<S> <C> <C>
Total Shares Offered: 100%
</TABLE> ------
9
<PAGE> 10
ATTACHMENT B
NOTICE OF EXERCISE OF RIGHT TO PURCHASE SHARES
OF RESTRICTED STOCK
_______________________________________________
I hereby notify Perot Systems Corporation that I am exercising my right under
the Restricted Stock Agreement between me and Perot Systems dated
____________________________________, and purchasing ______________ shares of
Class A Common Stock of the Corporation at $___ per share, or $_____________ in
total, which I herewith tender in cash or by check payable to Perot Systems
Corporation.
In connection with this purchase, I hereby represent to Perot Systems
Corporation that I am purchasing these shares for investment and not with a
view to any resale or distribution thereof.
----------------------------------------
[Name]
Date:
------------------------------------
10
<PAGE> 1
EXHIBIT 10.7
PEROT SYSTEMS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK
OPTION/RESTRICTED STOCK INCENTIVE PLAN
S T O C K O P T I O N A G R E E M E N T
THIS AGREEMENT, dated as of, ________, _____, is by and between Perot Systems
Corporation, a Delaware corporation ("Perot Systems" or the "Company"), and
_______ ("Participant").
WITNESSETH
WHEREAS, Perot Systems has adopted the Perot Systems Corporation 1996
Non-Employee Director Stock Option/Restricted Stock Incentive Plan (the "Plan")
to enable non-employee directors of the Company to acquire shares of Class A
Common Stock, $0.01 par value, of the Company ("Common Stock") in accordance
with the provisions of the Plan; and
WHEREAS, the Participant is entitled, and has elected, to receive this option
to purchase shares of Common Stock pursuant to the Plan and in accordance with
the terms and conditions of this Agreement, provided, that if any change is
made in the shares of Common Stock (including, but not limited to, by stock
dividend, stock split, or merger or consolidation, but not including the
issuance of additional shares for consideration), the Board of Directors will
make such adjustments in the number and kind of shares (which may consist of
shares of a surviving corporation to a merger) and purchase price per share of
shares subject to outstanding options issued under the Plan as the Board of
Directors determines are equitable to preserve the respective rights of the
Participants under the Plan;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Award.
(a) Subject to the terms, conditions, and restrictions set forth in the
Plan and in this Agreement, Perot Systems hereby awards and grants to
Participant, and Participant hereby accepts from Perot Systems, the option
to purchase from Perot Systems [30,000][_______] of shares of Common Stock,
at the purchase price, and in accordance with the schedule specified on
Attachment A hereto.
-1-
<PAGE> 2
(b) The option may be exercised only with respect to vested options.
Once vested, the options may be exercised until the expiration date set
forth on Attachment A hereto (unless such right to exercise is earlier
terminated pursuant to Section 3 hereunder), by delivering written notice
of the exercise to Perot Systems specifying the number of shares to be
purchased and paying in full the purchase price for such shares either
(i) in cash or check in United States dollars or
(ii) by tendering to Perot Systems shares of the same class as the
shares being acquired that have been owned by the person exercising
the option for any period necessary to avoid a charge to Perot
Systems' earnings and having a fair market value on the date of
exercise equal to such purchase price, or
(iii) by a combination of such cash and shares.
(c) For purposes of this Agreement, the term "fair market value" means,
with respect to any Purchased Stock means,
(i) if the Purchased Stock is publicly traded, the closing sale
price on the date of determination in the market in which the shares
are principally traded (which may be a stock exchange) or, if no
such closing sale price is available for such date, on the most
recent previous date for which such a closing sale price is
available or, if no closing sale price is available, the closing bid
price on such date as quoted in the NASDAQ system, or by the
National Quotation Bureau, Inc., if not so quoted, or, if no such
closing bid price is available for such date, the closing bid price
on the most recent previous date for which such a closing bid price
is available, or
(ii) if Purchased Stock is not publicly traded, their fair market
value, determined by reference to the most recent appraisal of the
Common Stock conducted by appraisers selected by the Board of
Directors of Perot Systems.
(d) For purposes of this Agreement, the term "publicly traded" means
Purchased Stock has been listed on a registered national securities
exchange or approved for quotation in the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system.
(e) For purposes of this Agreement, the term "Purchased Stock" means any
Common Stock or other security purchased upon the exercise of this option,
together with any successor security, property or cash issued or
distributed by Perot Systems or any successor entity, whether by way of
merger, consolidation, share exchange, reorganization, liquidation,
recapitalization, or otherwise.
- 2 -
<PAGE> 3
2. Restrictions on Transfer of Option and Purchased Stock.
(a) The option evidenced by this Agreement may not be sold or otherwise
transferred, and is exercisable only by Participant.
(b) Shares of Purchased Stock may not be sold or otherwise transferred
for six months after stock of the same class as the Purchased Stock is
publicly traded.
(c) Perot Systems is not obligated to recognize any purported sale or
other transfer of the option or Purchased Stock in violation of this
Section 2 and may treat any such purported sale or transfer as null, void,
and of no effect.
3. Cessation of Service to Perot Systems.
Any unvested options evidenced by this Agreement will terminate and, except
to the extent set forth in this Section 3, will cease being exercisable if
Participant, for any reason whatsoever, is no longer serving Perot Systems
in at least one of the following capacities: a member of the Perot Systems
Board of Directors, a member of the Perot Systems Advisory Board, [a
consultant under contract to Perot Systems,] or full time employee of Perot
Systems (a "Termination Event"), unless the Committee, in its sole
discretion, agrees in writing otherwise. If a Termination Event occurs by
reason other than the death of Participant, Participant will have thirty
days after the Termination Event to exercise all vested options hereunder,
but in no event later than the expiration date set forth on Attachment A
hereto. If a Termination Event occurs by reason of the death of
Participant, Participant's estate will have two years after the Termination
Event to exercise all vested options hereunder, but in no event later than
the expiration date set forth on Attachment A hereto.
4. Company's Right of First Refusal.
(a) Unless and until shares of Purchased Stock are publicly traded,
Perot Systems will have a right of first refusal to purchase such shares
purchased hereunder if the holder of the shares desires or is obligated to
sell or otherwise transfer the shares, but this right will not apply to a
transfer upon Participant's death by will or by the laws of descent and
distribution.
(b) Any holder of such shares who desires or is obligated to sell or
otherwise transfer them before shares of Purchased Stock are publicly
traded must give Perot Systems written notice of the proposed sale or other
transfer. The notice must include the name of the proposed purchaser or
transferee and describe the circumstances of the transfer. Perot Systems
may purchase any or all of the shares
- 3 -
<PAGE> 4
proposed to be sold or transferred by notifying the holder within 30 days
of its receipt of the notice of its election to exercise its right of first
refusal and tendering the purchase price of the shares as soon as
reasonably practicable thereafter.
(c) The purchase price at which Perot Systems will purchase shares under
its right of first refusal will be their fair market value, determined by
reference to the most recent appraisal of the Common Stock conducted by
appraisers selected by the Board of Directors of Perot Systems conducted
on or before the date of receipt of the notice of the proposed sale or
transfer.
5. Compliance with Securities Laws.
(a) Participant acknowledges that the option evidenced by this Agreement
and the shares to be issued upon exercise of the option have not been
registered under the Securities Act of 1933, that Perot Systems has no
present intention to so register them, that such shares may be deemed
"restricted securities" under Rule 144 of the Act, that the holder of
restricted securities may be required to hold them for an indefinite period
of time unless they are registered for sale under the Act or an exemption
from registration is available, and that routine sales of restricted
securities under Rule 144 can only be made if Perot Systems meets certain
requirements, including a requirement to make certain information publicly
available, and then only in limited amounts and in a specified manner in
accordance with the terms and conditions of Rule 144.
(b) Upon demand by Perot Systems, any person exercising the option
evidenced by this Agreement, at the time of such exercise, will deliver to
Perot Systems a written representation to the effect that the shares being
acquired are being acquired for investment and not with a view to any
resale or distribution thereof.
(c) Neither Participant nor any successor in interest of Participant
will sell or otherwise transfer the option evidenced by this Agreement or
any shares acquired upon exercise of the option in any way that might
result in a violation of any federal or state securities laws or
regulations.
(d) Perot Systems may require Participant or any subsequent holder of
the option or of any shares acquired upon exercise of the option to provide
Perot Systems, before any sale or other transfer, with such
representations, commitments, and opinions regarding compliance with
applicable securities laws and regulations as Perot Systems may deem
necessary or advisable.
6. Stock Certificates; Rights as Shareholder. Perot Systems will retain for
safekeeping all certificates representing shares purchased upon exercise of
the option evidenced by this Agreement. Each such certificate will bear
such legends as the Board
- 4 -
<PAGE> 5
determines are necessary or appropriate. Whether or not certificates
representing such shares have been issued or delivered, Participant will
have all the rights of a shareholder of Common Stock, including voting,
dividend and distribution rights, with respect to such shares owned by
Participant. Participant will not have any rights as a shareholder with
respect to any shares subject to the option before the date of issuance to
Participant of shares upon exercise of the option.
7. Income Tax Withholding. Participant (or any person entitled to act on
Participant's behalf) shall, upon request by the Company, pay to Perot
Systems, or Perot Systems may withhold from sums or property otherwise due
or payable to Participant (or such person), such amount as Perot Systems
may request for the purpose of satisfying any liability to withhold
federal, state, local, or foreign income or other taxes. If shares of stock
are withheld for such purpose, they will be withheld at fair market value,
as defined in Section l(c), as of the date of accrual of the liability.
8. Compliance with Plan. Participant acknowledges receipt of a copy of the
Plan and further acknowledges that this Agreement is entered into, and the
option has been awarded, pursuant to the Plan. If the provisions of the
Plan are inconsistent with the provisions of this Agreement, the provisions
of the Plan govern and supersede the provisions of this Agreement.
9. Notices. Any notice to Perot Systems or the Company that is required or
permitted by this Agreement shall be addressed to the attention of the
Secretary of Perot Systems at 12377 Merit Drive, Suite 1100, Dallas, Texas
75251. Any notice to Participant that is required or permitted by this
Agreement shall be addressed to Participant at the most recent address for
Participant reflected in the appropriate records of the Company. Either
party may at any time change its address for notification purposes by
giving the other written notice of the new address and the date upon which
it will become effective. Whenever this Agreement requires or permits any
notice from one party to another, this notice must be in writing to be
effective and, if mailed, shall be deemed to have been given on the third
business day after the same is enclosed in an envelope, addressed to the
party to be notified at the appropriate address, properly stamped, sealed,
and deposited in the United States mail, and, if mailed to the Company, by
certified mail, return receipt requested.
10. Remedies. Perot Systems is entitled, in addition to any other remedies it
may have at law or in equity, to temporary and permanent injunctive and
other equitable relief to enforce the provisions of this Agreement. Any
action to enforce the provisions of, or otherwise relating to, this
Agreement may be brought in the state or federal courts having
jurisdiction in Dallas, Dallas County, Texas. By signing this Agreement,
Participant consents to the personal jurisdiction of such courts in any
such action.
- 5 -
<PAGE> 6
11. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal
representatives and permitted successors and assigns. However,
Participant does not have the power or right to assign this Agreement
without the prior written consent of Perot Systems.
12. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
will be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which that party may be
entitled.
13. Severability. If any provision of this Agreement is held invalid or
unenforceable for any reason, the validity and enforceability of all other
provisions of this Agreement will not be affected.
14. Headings. The section headings used herein are for reference and
convenience only and do not affect the interpretation of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Texas, without regard to that
state's choice of law rules.
16. Entire Agreement. This Agreement, together with the Plan and any rules
and regulations adopted by the Board or Committee thereunder, constitutes
the entire agreement between the parties with respect to its subject
matter.
17. Amendment. This Agreement may be amended only in a manner that is
consistent with the Plan and only by a written instrument signed by both
Perot Systems and Participant.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
PARTICIPANT PEROT SYSTEMS CORPORATION
By:
- -------------------------- ------------------------------
[name] Title: Chairman Of The Board
- 6 -
<PAGE> 7
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Stock Option
Agreement and agree that this consent shall be binding on any interest I may
have under this Agreement and on my heirs, legatees, and assigns.
By:
-------------------------------------
Signature
----------------------------------------
Printed Name
----------------------------------------
Date
- 7 -
<PAGE> 8
A T T A C H M E N T A
T O
S T O C K O P T I O N A G R E E M E N T
F O R
[NAME]
1. Purchase Price: $ per Share
----------
2. Expiration Date: , [_____]
-------------------------------------------
3. Vesting Schedule:
<TABLE>
Date Option Shares as to Which Option
Vests Vests on Date
------------------- ------------------------------------
Percentage Number
---------- ------
<S> <C>
, [ ] 20% [5,000][ ]
------------------------ ----- -----
, [ ] 20% [5,000][ ]
------------------------ ----- -----
, [ ] 20% [5,000][ ]
------------------------ ----- -----
, [ ] 20% [5,000][ ]
------------------------ ----- -----
, [ ] 20% [5,000][ ]
------------------------ ----- -----
Shares Covered by Option: 100% [30,000][ ]
-----
------------- -------------------
</TABLE>
- 8 -
<PAGE> 1
EXHIBIT 10.8
PEROT SYSTEMS CORPORATION
ADVISOR STOCK OPTION/RESTRICTED STOCK INCENTIVE PLAN
1. Purpose
The purpose of the Perot Systems Corporation Advisor Stock
Option/Stock Incentive Plan, as amended, is to benefit the Company and its
stockholders by helping to secure and retain for them the services of
non-employee directors, advisors, and consultants with increased incentives to
exert maximum efforts to assure the financial success of the Company.
2. Administration
A Committee consisting of at least three members of the Board of
Directors of Perot Systems will administer the Plan and award stock options
and/or rights to purchase shares of restricted stock under the Plan. The
Committee will be appointed by the Board, and may interpret the Plan, define
terms used in the Plan, answer questions arising under the Plan, and adopt and
amend rules and regulations for the Plan. To the extent permitted by law, any
determination made by the Committee in administering the Plan will be
conclusive.
3. Amount of Stock
The Board of Directors will reserve for issuance under the Plan not
more than 500,000 shares of the Common Stock of the Company, par value $0.01
per share. These shares may be authorized and unissued shares or issued shares
acquired by the Company. If options granted under the Plan terminate or expire
without being exercised, new options may be granted covering the shares not
purchased under the lapsed options.
4. Eligibility
Any person who is not an employee of the Company but is a member of
the Board of Directors or Advisory Board of the Company or a consultant under
contract to the Company is eligible to receive an award under the Plan, and
thereby become a participant in the Plan, in consideration of past service to
the Company in a capacity not involving the offer or sale of securities in a
capital-raising transaction. The adoption of the Plan, however, does not
confer on any person any right to be granted an award under the Plan, except to
the extent and upon the terms and conditions determined by the Committee.
Page 1
<PAGE> 2
5. Stock Option/Restricted Stock Agreements
All awards granted under the Plan are to be evidenced by a Stock
Option Agreement and/or Restricted Stock Agreement, as applicable, between the
Company and the participant in the form prescribed by the Committee in
accordance with the Plan. Each such Agreement is to contain substantially the
terms and conditions of the award to the participant approved by the Committee,
including the terms and conditions set forth in Paragraph 6 if an option is
awarded and those set forth in Paragraph 7 if a right to purchase shares of
restricted stock is awarded. Each such Agreement may also contain such other
terms and conditions as the Committee deems appropriate that are not
inconsistent with the Plan.
6. Option Awards
If any change is made in the shares of Common Stock of the Company
(including, but not limited to, by stock dividend, stock split, or merger or
consolidation, but not including the issuance of additional shares for
consideration), the Board of Directors or the Committee, as appropriate, will
make such adjustments in the number and kind of shares (which may consist of
shares of a surviving corporation to a merger) that may thereafter be optioned
and sold under the Plan and the number and kind of shares (which may consist of
shares of a surviving corporation to a merger) and purchase price per share of
the shares subject to outstanding Stock Option Agreements under the Plan as the
Board of Directors or the Committee determines are equitable to preserve the
respective rights of the participants in the Plan.
Stock Option Agreements between the Company and participants who have
been granted options under the Plan must contain substantially the following
terms and conditions:
(a) The option exercise price will be the fair market value of the
shares underlying the option on the date the option is
granted, which,
(i) if the shares are publicly traded, will be the
closing sale price on such date in the market in
which the shares underlying the option are
principally traded (which may be a stock exchange)
or, if no such closing sale price is available for
such date, on the most recent previous date for which
such a closing sale price is available or, if no
closing sale price is available, the closing bid
price on such date as quoted in the NASDAQ system, if
the shares are quoted in the NASDAQ system, or by the
National Quotation Bureau, Inc., if not so quoted,
or, if no such closing bid price is available for
such date, the closing bid price on the most recent
previous date for which such a closing bid price is
available, or
Page 2
<PAGE> 3
(ii) if the shares are not publicly traded, will be their
fair market value, as determined in good faith by the
Board of Directors, as of the most recent June 30 or
December 31 on or before such date.
(b) The option will not be transferable except upon the
participant's death by will or by the laws of descent and
distribution. During the participant's lifetime, only the
participant may exercise the option.
(c) No option may be exercised:
(i) before the date or dates it becomes exercisable,
which date or dates will be established by the
Committee and set forth in the Stock Option Agreement
and may not be later than ten years after the award
of the option;
(ii) after the date or dates it expires, which date or
dates will be established by the Committee and may
not be later than 11 years after the award of the
option;
(iii) before the satisfaction of such other conditions as
are established by the Committee and set forth in the
Stock Option Agreement;
(iv) unless written notice of the exercise is delivered to
the Company specifying the number of shares to be
purchased and payment in full is made for the shares
being purchased at the time of the exercise, and such
payment is made
(A) in cash or by check in United States dollars,
or
(B) by tendering to the Company shares of the
same class as the shares being acquired that
have been owned by the person exercising the
option for any period necessary to avoid a
charge to the Company's earnings and having a
fair market value equal to the cash exercise
price, such fair market value to be
determined in accordance with Paragraph 6(a)
above, or
(C) by a combination of such cash or check and
shares; and
(v) after the participant ceases to serve the Company as
a director, member of its Advisory Board, consultant
under contract, or full-time employee, except as
provided in the Stock Option Agreement
Page 3
<PAGE> 4
and as otherwise determined by the Committee, in its
sole discretion.
7. Restricted Stock Awards
Restricted Stock Agreements between the Company and participants who
have been awarded rights to purchase shares of Restricted Stock under the Plan
must contain substantially the following terms and conditions:
(a) The purchase price per share for the shares will be the price
determined by the Committee, but will not be less than the par
value of the shares or otherwise inconsistent with applicable
law.
(b) The period during which a participant may exercise a right to
purchase shares will be determined by the Committee, but must
end within 60 days of the award of the right.
(c) The right to purchase shares may be exercised:
(i) as to all or any part of the shares subject to the
right;
(ii) by delivering written notice of the exercise to the
Company specifying the number of shares to be
purchased and paying the purchase price in cash or
check in United States dollars;
(iii) only while the participant is serving the Company in
a capacity that renders the participant eligible to
participate in the Plan; and
(iv) only by the participant awarded the right and not by
any transferee, assignee, or successor.
(d) Shares purchased pursuant to rights to purchase restricted
shares awarded under the Plan:
(i) may not be sold, assigned, conveyed, donated,
pledged, transferred, or otherwise disposed of or
encumbered for the period during which they are
restricted, which period
(A) will be determined by the Committee and set
forth in the Restricted Stock Agreement,
(B) may lapse as to specified amounts of such
shares on different dates, and
Page 4
<PAGE> 5
(C) may not exceed ten years measured from the
date the shares are purchased; and
(ii) will be subject to such additional restrictions as
may be determined by the Committee and set forth in
the Restricted Stock Agreement.
(e) The participant will have the rights of a shareholder with
respect to shares purchased under the Plan, including the
right to vote the shares and to receive any dividends paid on
the shares, from the date of purchase but any and all stock
and/or cash dividends (other than normal periodic cash
dividends), distributions in property, or other distributions
made on or in respect of the shares, whether resulting from a
subdivision, combination or reclassification of the shares of
any issuer thereof or received in exchange for shares or any
part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any such
issuer may be a party or otherwise, and any and all cash and
other property received in exchange for the shares or received
in payment of the principal of or in redemption of the shares
(either at maturity, upon call for redemption or otherwise),
shall remain in the possession of the Company for as long as
the Company's right to repurchase such shares shall not have
terminated.
(f) If the participant sells, assigns, conveys, donates, pledges,
transfers, or otherwise disposes of or encumbers any
restricted shares before the lapse, expiration, or termination
of the restrictions imposed on the shares under Paragraph
7(d), the Company will have the right, in addition to such
other rights and remedies as may be available to it (including
the right to restrain or set aside the transaction),
exercisable by written notice to the owner thereof at any time
within 180 days after its discovery of such transaction, to
repurchase all or any part of the shares as to which the
restrictions have not lapsed, expired, and terminated, for
cash in an amount equal to the purchase price paid to the
Company for such shares, plus simple interest at 8% per annum
from the date of payment by the participant to the date of
offer of tender of payment by the Company, minus the amount or
value, as applicable, of any dividends or distributions paid
on such shares.
(g) If the participant ceases to serve the Company as a director,
member of its Advisory Board, consultant under contract, or
full-time employee before the restrictions imposed on the
shares under Paragraph 7(d) lapse, expire, or terminate, the
Company will have the right for 180 days following the
cessation of service to repurchase all or any part of the
shares as to which
Page 5
<PAGE> 6
the restrictions have not lapsed, expired, and terminated, for
cash in an amount equal to the purchase price paid to the
Company for such shares, plus simple interest at 8% per annum
from the date of payment by the participant to the date of
offer of tender of payment by the Company, minus the amount or
value, as applicable, of any dividends or distributions paid
on such shares.
8. Miscellaneous Provisions
(a) Neither the Plan nor any action taken under the Plan is to be
construed as giving any person a right to be retained in the
service of the Company.
(b) A participant's rights under and interest in the Plan, options
and rights to purchase shares issued under the Plan, and
shares purchased under the Plan that remain subject to
restrictions imposed under Paragraph 7(d) are not subject to
execution, levy, garnishment, attachment, pledge, bankruptcy,
or any obligation or liability of the participant.
(c) The Plan, awards under the Plan, the exercise of options and
rights awarded under the Plan, and the obligation of the
Company to issue or deliver shares under such options and
rights are subject to all applicable federal and state laws,
rules, and regulations and to such approvals as may be
required by any government or regulatory agency. The Company
is permitted a reasonable delay in issuing and delivering any
shares under the Plan in order to accommodate compliance with
such laws, rules, regulations, and approvals, including:
(i) the listing of such shares on any registered national
securities exchange or approval for quotation in the
NASDAQ system, and
(ii) the completion of any registration or qualification
of such issuance or delivery under any federal or
state law or any ruling or regulation of any
government body that the Company may, in its sole
discretion, determine to be necessary or advisable.
(d) It shall be a condition to the obligation of the Company to
issue and deliver shares under the Plan that the participant
(or any person entitled to act on the participant's behalf)
pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying any
liability to withhold federal, state, local, or foreign income
or other taxes. If the amount requested is not paid, the
Company may refuse to issue and deliver shares.
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<PAGE> 7
(f) The Company will bear the expenses of the Plan.
(g) By accepting any benefit under the Plan, a participant and
each person claiming under or through a participant will be
conclusively deemed to have indicated the person's acceptance
and ratification of, and consent to, any action taken under
the Plan by the Company or its Board of Directors.
9. Adjustments, Amendment and Termination
(a) The Committee will have the right, in its sole discretion, to
accelerate the exercisability of any options awarded or the
lapse, expiration, or termination of any restrictions imposed
on shares under Paragraph 7(d), and to waive any conditions
for such exercisability, lapse, expiration, or termination,
including the condition that an option may not be exercised
after the participant ceases to serve the Company.
(b) If any change is made in the shares reserved for issuance
under the Plan (such as by stock dividend, stock split, or
merger or consolidation), the Board of Directors will make
such adjustments in the number and kind of shares reserved for
issuance under the Plan and the purchase price per share of
shares covered by options outstanding under the Plan as the
Board determines are equitable to preserve the rights of
participants in the Plan.
(c) The Board may amend or terminate the Plan at any time, except
that it may not amend or terminate the Plan in a way that
materially and adversely affects any right of a participant
with respect to any award previously granted under the Plan
without the participant's written consent.
10. Duration of Plan
Unless the Board has taken action under Paragraph 9(c) terminating the
Plan beforehand, the Plan will terminate for purposes of issuing new options
and Restricted Stock awards ten years after its effective date.
11. Severability
If any provision of the Plan is held invalid or unenforceable for any
reason, the validity and enforceability of all other provisions of the Plan
will not be affected.
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<PAGE> 8
12. Effect on Other Plans
The adoption of the Plan has no effect on awards made or to be made
under other equity incentive plans of the Company.
13. Governing Law
The Plan is to be governed and construed under the law of the State of
Texas, without regard to the State's choice of law rules.
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<PAGE> 1
EXHIBIT 10.9
PEROT SYSTEMS CORPORATION
ADVISOR STOCK OPTION/RESTRICTED STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, dated as of ________________________, 1996, is by and between
Perot Systems Corporation, a Delaware corporation ( "Perot Systems" or the
"Company" ), and ________________________________________________
("Participant" ).
WITNESSETH
WHEREAS, Perot Systems has adopted the Perot Systems Corporation Advisor Stock
Option/Restricted Stock Incentive Plan ( the "Plan" ) to enable non-employee
directors and advisors of the Company, and consultants under contract with the
Company, to acquire shares of Class A Common Stock, $0.01 par value, of the
Company ("Common Stock") in accordance with the provisions of the Plan; and
WHEREAS, the Committee of the Board of Directors of Perot Systems with
responsibility for administering the Plan has selected Participant to
participate in the Plan and has determined to grant Participant the right to
purchase restricted shares of Common Stock in accordance with the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Award.
(a) Subject to the terms, conditions, and restrictions set forth
in the Plan and in this Agreement, Perot Systems hereby awards and
grants to Participant, and Participant hereby accepts from Perot
Systems, the right to purchase from Perot Systems the number of
restricted shares of Common Stock, at the purchase price, and in
accordance with the schedule for termination of transfer restrictions
specified on Attachment A hereto, unless, prior to the date set forth
for vesting, the Chief Executive Officer of Perot Systems modifies
such attachment by delaying or canceling vesting prior to the
respective vesting date. If the Chief Executive Officer so determines
to delay or cancel the vesting, Participant will be
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<PAGE> 2
notified of the determination in advance of the date provided for
vesting. Perot Systems will thereupon modify Attachment A in
accordance with the determination.
(b) The right to purchase restricted shares of Common Stock
evidenced by this Agreement may be exercised by delivering written
notice of the exercise, in substantially the form of Attachment B, to
Perot Systems within 30 days of the date of this Agreement and paying
in full the purchase price for such shares in cash or check in United
States dollars. Such right is not transferable and may be exercised
only by Participant, and only while Participant is serving as a member
of the Advisory Board or Board of Directors of Perot Systems, or as a
consultant under contract with Perot Systems. "Restricted Stock"
shall mean the Common Stock issued to Participant pursuant to the Plan
and this Agreement, together with any successor security, property or
cash issued or distributed by Perot Systems or any successor entity,
whether by way of merger, consolidation, share exchange,
reorganization, liquidation, recapitalization, dividend or otherwise.
2. Restrictions on Shares.
(a) Restricted Stock purchased under this Agreement may not be
sold, assigned, conveyed, donated, pledged, transferred, or otherwise
disposed of or encumbered until the date set forth in Attachment A as
the date for termination of the transfer restrictions on such
Restricted Stock.
(b) If Participant sells, assigns, conveys, donates, pledges,
transfers, or otherwise disposes of or encumbers any of the Restricted
Stock purchased under this Agreement before the date set forth in
Attachment A for termination of the transfer restrictions on such
Restricted Stock, Perot Systems will have the right, in addition to
such other rights and remedies as may be available to it (including
the right to restrain or set aside the transaction), exercisable by
written notice to the owner thereof at any time within 180 days after
its discovery of such transaction, to repurchase all or any part of
the Restricted Stock as to which the transfer restrictions have not
terminated, for cash in an amount equal to the purchase price paid to
Perot Systems for such Restricted Stock, plus simple interest on such
amount at the rate of 8% per annum from the date of payment by
Participant to the date of offer of tender of payment by Perot Systems
as set forth in Section 2(d) below, minus the amount or value, as
applicable, of any dividends or distributions paid on such Restricted
Stock.
(c) If Participant ceases to serve Perot Systems in at least one
of the following capacities: a member of its Advisory Board, a member
of its Board of Directors, a consultant under contract, or full time
Employee for any reason whatsoever, before the date set forth in
Attachment A for termination of the transfer
- 2 -
<PAGE> 3
restrictions on any Restricted Stock purchased under this Agreement,
Perot Systems will have the right for 180 days following the cessation
of service to repurchase all or any part of the Restricted Stock as to
which the transfer restrictions have not terminated, for cash in an
amount equal to the purchase price paid to Perot Systems for such
Restricted Stock, plus simple interest on such amount at the rate of
8% per annum from the date of payment by Participant to the date of
offer of tender of payment by Perot Systems as set forth in Section
2(d) below, minus the amount or value, as applicable, of any dividends
or distributions paid on such Restricted Stock.
(d) Whenever Perot Systems has a right to buy back shares of
Restricted Stock, Perot Systems may exercise its right by notifying
Participant or the subsequent holder of the Company's election to
exercise its right within the designated exercise period. The giving
of such notice will give rise to an obligation on the part of
Participant or the subsequent holder to tender to Perot Systems,
within 10 days, the Restricted Stock and any previously issued
certificate representing shares of Restricted Stock to be bought back,
duly endorsed in blank or having a duly executed stock power attached
in proper form for transfer. If any such endorsed certificate or
stock power is not tendered within 10 days, Perot Systems may cancel
any outstanding certificate representing shares to be bought back.
Perot Systems is required to tender the purchase price within 2
business days of the tender of the Restricted Stock. If the person
from whom the Restricted Stock are to be bought back has not complied
with an obligation to return a certificate and stock power
representing shares to be bought back, however, the Company is not
required to tender the purchase price until 20 days after the
certificate is returned or 20 days after it cancels the certificate,
whichever occurs first.
3. Company's Right of First Refusal.
(a) Unless and until Restricted Stock purchased under this
Agreement are publicly tradable, Perot Systems will have a right of
first refusal to purchase such Restricted Stock if the holder of the
Restricted Stock desires or is obligated to sell or otherwise transfer
the shares after the date set forth in Attachment A for termination of
the transfer restrictions on such Restricted Stock, but this right
will not apply to a transfer upon Participant's death by will or by
the laws of descent and distribution.
(b) Any holder of such Restricted Stock who desires or is
obligated to sell or otherwise transfer them before they are publicly
tradable after the date set forth in Attachment A for termination of
the transfer restrictions on such Restricted Stock, must give Perot
Systems written notice of the proposed sale or other transfer. The
notice must include the name of the proposed purchaser or
- 3 -
<PAGE> 4
transferee and describe the circumstances of the transfer. Perot
Systems may purchase any or all of the Restricted Stock proposed to be
sold or transferred by notifying the holder within 30 days of its
receipt of the notice of its election to exercise its right of first
refusal and tendering the purchase price of the Restricted Stock as
soon as reasonably practicable thereafter.
(c) The purchase price at which Perot Systems will purchase
Restricted Stock under its right of first refusal will be their fair
market value, as determined in good faith by the Board of Directors of
the Company, as of the most recent June 30 or December 31 on or before
the date of receipt of the notice of the proposed sale or transfer.
(d) For purposes of this Section, the term "publicly tradable"
means shares of Restricted Stock have been listed on a registered
national securities exchange or approved for quotation in the National
Association of Securities Dealers Automated Quotation ("NASDAQ")
system.
4. Compliance with Securities Laws.
(a) Participant acknowledges that the right to purchase shares of
Common Stock evidenced by this Agreement and any shares purchased
under this Agreement have not been registered under the Securities Act
of 1933, that Perot Systems has no present intention to so register
them, that such shares may be deemed "restricted securities" under
Rule 144 of the Act, that the holder of restricted securities may be
required to hold them for an indefinite period of time unless they are
registered for sale under the Act or an exemption from registration is
available, and that routine sales of restricted securities under Rule
144 can only be made if Perot Systems meets certain requirements,
including a requirement to make certain information publicly
available, and then only in limited amounts and in a specified manner
in accordance with the terms and conditions of Rule 144.
(b) Neither Participant nor any successor in interest of
Participant will sell or otherwise transfer any Restricted Stock
purchased under this Agreement in any way that might result in a
violation of any federal or state securities laws or regulations.
(c) Perot Systems may require Participant or any subsequent holder
of Restricted Stock purchased under this Agreement to provide Perot
Systems, before any sale or other transfer of such shares, with such
representations, commitments, and opinions regarding compliance with
applicable securities laws and regulations as Perot Systems may deem
necessary or advisable.
- 4 -
<PAGE> 5
5. Stock Certificates; Rights as Shareholder.
Perot Systems will retain for safekeeping all certificates or other
property representing Restricted Stock. Each such certificate will
bear such legends as the Board determines are necessary or
appropriate. Whether or not certificates representing such shares have
been issued or delivered, Participant will have all the rights of a
shareholder of Common Stock, including voting, dividend and
distribution rights, with respect to such shares, but any and all
stock and/or cash dividends (other than normal periodic cash
dividends), distributions in property, or other distributions made on
or in respect of the Restricted Stock, whether resulting from a
subdivision, combination or reclassification of the Restricted Stock
of any issuer thereof or received in exchange for Restricted Stock or
any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any such issuer may
be a party or otherwise, and any and all cash and other property
received in exchange for the Restricted Stock or received in payment
of the principal of or in redemption of the Restricted Stock (either
at maturity, upon call for redemption or otherwise), shall remain in
the possession of Perot Systems until the date set forth on Attachment
A for termination of the transfer restriction on such Restricted
Stock.
6. Income Tax Withholding.
Participant (or any person entitled to act on Participant's behalf)
shall, upon request by Perot Systems, pay to Perot Systems, or Perot
Systems may withhold from sums or property otherwise due or payable to
Participant (or such person), such amount as Perot Systems may request
for the purpose of satisfying any liability to withhold federal,
state, local, or foreign income or other taxes.
7. Compliance with Plan.
Participant acknowledges receipt of a copy of the Plan and further
acknowledges that this Agreement is entered into pursuant to the Plan.
If the provisions of the Plan are inconsistent with the provisions of
this Agreement, the provisions of the Plan govern and supersede the
provisions of this Agreement.
8. Notices.
Any notice to Perot Systems or the Company that is required or
permitted by this Agreement shall be addressed to the attention of the
Secretary of Perot Systems at: 12377 Merit Drive, Suite 1100 Dallas,
Texas 75251. Any notice to Participant that is required or permitted
by this Agreement shall be addressed to Participant at the most recent
address for Participant reflected in the appropriate records of Perot
Systems. Either party may at any time change its address for
- 5 -
<PAGE> 6
notification purposes by giving the other written notice of the new
address and the date upon which it will become effective. Whenever
this Agreement requires or permits any notice from one party to
another, this notice must be in writing to be effective and, if
mailed, shall be deemed to have been given on the third business day
after the same is enclosed in an envelope, addressed to the party to
be notified at the appropriate address, properly stamped, sealed, and
deposited in the United States mail, and, if mailed to Perot Systems,
by certified mail, return receipt requested.
9. Remedies.
Perot Systems is entitled, in addition to any other remedies it may
have at law or in equity, to temporary and permanent injunctive and
other equitable relief to enforce the provisions of this Agreement.
Any action to enforce the provisions of, or otherwise relating to,
this Agreement may be brought in the state or federal courts having
jurisdiction in Dallas, Dallas County, Texas. By signing this
Agreement, Participant consents to the personal jurisdiction of such
courts in any such action.
10. Assignment.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal representatives
and permitted successors and assigns. However, Participant does not
have the power or right to assign this Agreement without the prior
written consent of Perot Systems.
11. Attorneys' Fees.
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party will be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in
addition to any other relief to which that party may be entitled.
12. Severability.
If any provision of this Agreement is held invalid or unenforceable
for any reason, the validity and enforceability of all other
provisions of this Agreement will not be affected.
13. Headings.
The section headings used herein are for reference and convenience
only and do not affect the interpretation of this Agreement.
- 6 -
<PAGE> 7
14. Governing Law.
This Agreement shall be governed by and construed in accordance with
the law of the State of Texas, without regard to that State's choice
of law rules.
15. Entire Agreement.
This Agreement, together with the Plan and any rules and regulations
adopted by the Board or Committee thereunder, constitutes the entire
agreement between the parties with respect to its subject matter.
16. Amendment.
This Agreement may be amended only in a manner that is consistent with
the Plan and only by a written instrument signed by both Perot Systems
and Participant.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
PARTICIPANT PEROT SYSTEMS
CORPORATION
By:
- -------------------------------------- ------------------------------------
[name] Chairman Of The Board
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Restricted Stock
Agreement and agree that this consent shall be binding on any interest I may
have under this Agreement and on my heirs, legatees, and assigns.
----------------------------------------
Signature
- 7 -
<PAGE> 8
----------------------------------------
Printed Name
----------------------------------------
Date
- 8 -
<PAGE> 9
ATTACHMENT A
TO
RESTRICTED STOCK AGREEMENT
FOR
[NAME]
1. Purchase Price: $________________________ per Share
2. Schedule for Termination of Transfer Restrictions:
<TABLE>
<CAPTION>
Date on Which Transfer Shares as to Which Transfer
Restrictions Expire Restrictions Expire on Date
---------------------- ---------------------------
Percentage Number
---------- ------
<S> <C> <C>
---------------------- ---- ------
---------------------- ---- ------
---------------------- ---- ------
---------------------- ---- ------
---------------------- ---- ------
Total Shares Offered: 100% ------
</TABLE>
- 9 -
<PAGE> 10
ATTACHMENT B
NOTICE OF EXERCISE OF RIGHT TO PURCHASE SHARES
OF RESTRICTED STOCK
_______________________________________________
I hereby notify Perot Systems Corporation that I am exercising my right under
the Restricted Stock Agreement between me and Perot Systems dated
____________________________________, and purchasing ______________ shares of
Class A Common Stock of the Corporation at $_____ per share, or $_____________
in total, which I herewith tender in cash or by check payable to Perot Systems
Corporation.
In connection with this purchase, I hereby represent to Perot Systems
Corporation that I am purchasing these shares for investment and not with a
view to any resale or distribution thereof.
---------------------------------------
[Name]
Date:
----------------------------------
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<PAGE> 1
EXHIBIT 10.10
PEROT SYSTEMS CORPORATION
ADVISOR STOCK OPTION/RESTRICTED STOCK INCENTIVE PLAN
S T O C K O P T I O N A G R E E M E N T
THIS AGREEMENT, dated as of, ________, 1996, is by and between Perot Systems
Corporation, a Delaware corporation ("Perot Systems" or the "Company"), and
_______ ("Participant").
WITNESSETH
WHEREAS, Perot Systems has adopted the Perot Systems Corporation Advisor Stock
Option/Restricted Stock Incentive Plan (the "Plan") to enable non-employee
directors and advisors of the Company, and consultants under contract with the
Company, to acquire shares of Class A Common Stock, $0.01 par value, of the
Company ("Common Stock") in accordance with the provisions of the Plan; and
WHEREAS, the Committee of the Board of Directors of Perot Systems with
responsibility for administering this Plan (the "Committee") has selected
Participant to participate in the Plan and has determined to grant Participant
the option to purchase shares of Common Stock in accordance with the terms and
conditions of this Agreement, provided, that if any change is made in the
shares of Common Stock (including, but not limited to, by stock dividend, stock
split, or merger or consolidation, but not including the issuance of additional
shares for consideration), the Board of Directors or the Committee will make
such adjustments in the number and kind of shares (which may consist of shares
of a surviving corporation to a merger) and purchase price per share of shares
subject to outstanding options issued under the Plan as the Board of Directors
or the Committee determines are equitable to preserve the respective rights of
the Participants under the Plan;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Award.
(a) Subject to the terms, conditions, and restrictions set forth in the
Plan and in this Agreement, Perot Systems hereby awards and grants to
Participant, and Participant hereby accepts from Perot Systems, the option
to purchase from Perot Systems the number of shares of Common Stock, at the
purchase price, and in accordance with the schedule specified on Attachment
A hereto.
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<PAGE> 2
(b) The option may be exercised only with respect to vested options.
Once vested, the options may be exercised until the expiration date set
forth on Exhibit A hereto (unless such right to exercise is earlier
terminated pursuant to Section 3 hereunder), by delivering written notice
of the exercise to Perot Systems specifying the number of shares to be
purchased and paying in full the purchase price for such shares either
(i) in cash or check in United States dollars or
(ii) by tendering to Perot Systems shares of the same class as the
shares being acquired that have been owned by the person exercising
the option for any period necessary to avoid a charge to Perot
Systems' earnings and having a fair market value on the date of
exercise equal to such purchase price, or
(iii) by a combination of such cash and shares.
(c) For purposes of this Agreement, the term "fair market value" means,
with respect to any Purchased Stock means,
(i) if the Purchased Stock is publicly traded, the closing sale
price on the date of determination in the market in which the shares
are principally traded (which may be a stock exchange) or, if no
such closing sale price is available for such date, on the most
recent previous date for which such a closing sale price is
available or, if no closing sale price is available, the closing bid
price on such date as quoted in the NASDAQ system, or by the
National Quotation Bureau, Inc., if not so quoted, or, if no such
closing bid price is available for such date, the closing bid price
on the most recent previous date for which such a closing bid price
is available, or
(ii) if Purchased Stock is not publicly traded, their fair market
value, as determined in good faith by the Board of Directors of
Perot Systems, as of the most recent June 30 or December 31 on or
before the date of determination.
(d) For purposes of this Agreement, the term "publicly traded" means
Purchased Stock has been listed on a registered national securities
exchange or approved for quotation in the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system.
(e) For purposes of this Agreement, the term "Purchased Stock" means any
Common Stock or other security purchased upon the exercise of this option,
together with any successor security, property or cash issued or
distributed by Perot Systems or any successor entity, whether by way of
merger, consolidation, share exchange, reorganization, liquidation,
recapitalization, or otherwise.
-2-
<PAGE> 3
2. Restrictions on Transfer of Option.
(a) The option evidenced by this Agreement may not be sold or otherwise
transferred, and is exercisable only by Participant.
(b) Perot Systems is not obligated to recognize any purported sale or
other transfer of the option in violation of this Section 2 and may treat
any such purported sale or transfer as null, void, and of no effect.
3. Cessation of Service to Perot Systems.
Any unvested options evidenced by this Agreement will terminate and, except
to the extent in this Section 3, will cease being exercisable if
Participant, for any reason whatsoever, is no longer serving Perot Systems
in at least one of the following capacities: a member of the Perot Systems
Board of Directors, a member of the Perot Systems Advisory Board, a
consultant under contract to Perot Systems, or full time employee of Perot
Systems (a "Termination Event"), unless the Committee, in its sole
discretion, agrees in writing otherwise. If a Termination Event occurs by
reason other than the death of Participant, Participant will have thirty
days after the Termination Event to exercise all vested options hereunder,
but in no event later than the expiration date set forth on Attachment A
hereto. If a Termination Event occurs by reason of the death of
Participant, Participant's estate will have two years after the Termination
Event to exercise all vested options hereunder, but in no event later than
the expiration date set forth on Attachment A hereto.
4. Company's Right of First Refusal.
(a) Unless and until shares of Purchased Stock are publicly tradable,
Perot Systems will have a right of first refusal to purchase such shares
purchased hereunder if the holder of the shares desires or is obligated to
sell or otherwise transfer the shares, but this right will not apply to a
transfer upon Participant's death by will or by the laws of descent and
distribution.
(b) Any holder of such shares who desires or is obligated to sell or
otherwise transfer them before shares of Purchased Stock are publicly
tradable must give Perot Systems written notice of the proposed sale or
other transfer. The notice must include the name of the proposed purchaser
or transferee and describe the circumstances of the transfer. Perot Systems
may purchase any or all of the shares proposed to be sold or transferred by
notifying the holder within 30 days of its receipt of the notice of its
election to exercise its right of first refusal and tendering the purchase
price of the shares as soon as reasonably practicable thereafter.
-3-
<PAGE> 4
(c) The purchase price at which Perot Systems will purchase shares under
its right of first refusal will be their fair market value, as determined
in good faith by the Board of Directors of Perot Systems, as of the most
recent June 30 or December 31 on or before the date of receipt of the
notice of the proposed sale or transfer.
5. Compliance with Securities Laws.
(a) Participant acknowledges that the option evidenced by this Agreement
and the shares to be issued upon exercise of the option have not been
registered under the Securities Act of 1933, that Perot Systems has no
present intention to so register them, that such shares may be deemed
"restricted securities" under Rule 144 of the Act, that the holder of
restricted securities may be required to hold them for an indefinite period
of time unless they are registered for sale under the Act or an exemption
from registration is available, and that routine sales of restricted
securities under Rule 144 can only be made if Perot Systems meets certain
requirements, including a requirement to make certain information publicly
available, and then only in limited amounts and in a specified manner in
accordance with the terms and conditions of Rule 144.
(b) Upon demand by Perot Systems, any person exercising the option
evidenced by this Agreement, at the time of such exercise, will deliver to
Perot Systems a written representation to the effect that the shares being
acquired are being acquired for investment and not with a view to any
resale or distribution thereof.
(c) Neither Participant nor any successor in interest of Participant
will sell or otherwise transfer the option evidenced by this Agreement or
any shares acquired upon exercise of the option in any way that might
result in a violation of any federal or state securities laws or
regulations.
(d) Perot Systems may require Participant or any subsequent holder of
the option or of any shares acquired upon exercise of the option to provide
Perot Systems, before any sale or other transfer, with such
representations, commitments, and opinions regarding compliance with
applicable securities laws and regulations as Perot Systems may deem
necessary or advisable.
6. Stock Certificates; Rights as Shareholder. Perot Systems will retain for
safekeeping all certificates representing shares purchased upon exercise of
the option evidenced by this Agreement. Each such certificate will bear
such legends as the Board determines are necessary or appropriate. Whether
or not certificates representing such shares have been issued or delivered,
Participant will have all the rights of a shareholder of Common Stock,
including voting, dividend and distribution rights, with respect to such
shares owned by Participant. Participant will not have any
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<PAGE> 5
rights as a shareholder with respect to any shares subject to the option
before the date of issuance to Participant of shares upon exercise of the
option.
7. Income Tax Withholding. Participant (or any person entitled to act on
Participant's behalf) shall, upon request by the Company, pay to Perot
Systems, or Perot Systems may withhold from sums or property otherwise due
or payable to Participant (or such person), such amount as Perot Systems
may request for the purpose of satisfying any liability to withhold
federal, state, local, or foreign income or other taxes. If shares of stock
are withheld for such purpose, they will be withheld at fair market value,
as defined in Section l(c), as of the date of accrual of the liability.
8. Compliance with Plan. Participant acknowledges receipt of a copy of the
Plan and further acknowledges that this Agreement is entered into, and the
option has been awarded, pursuant to the Plan. If the provisions of the
Plan are inconsistent with the provisions of this Agreement, the provisions
of the Plan govern and supersede the provisions of this Agreement.
9. Notices. Any notice to Perot Systems or the Company that is required or
permitted by this Agreement shall be addressed to the attention of the
Secretary of Perot Systems at 12377 Merit Drive, Suite 1100, Dallas, Texas
75251. Any notice to Participant that is required or permitted by this
Agreement shall be addressed to Participant at the most recent address for
Participant reflected in the appropriate records of the Company. Either
party may at any time change its address for notification purposes by
giving the other written notice of the new address and the date upon which
it will become effective. Whenever this Agreement requires or permits any
notice from one party to another, this notice must be in writing to be
effective and, if mailed, shall be deemed to have been given on the third
business day after the same is enclosed in an envelope, addressed to the
party to be notified at the appropriate address, properly stamped, sealed,
and deposited in the United States mail, and, if mailed to the Company, by
certified mail, return receipt requested.
10. Remedies. Perot Systems is entitled, in addition to any other remedies it
may have at law or in equity, to temporary and permanent injunctive and
other equitable relief to enforce the provisions of this Agreement. Any
action to enforce the provisions of, or otherwise relating to, this
Agreement may be brought in the state or federal courts having
jurisdiction in Dallas, Dallas County, Texas. By signing this Agreement,
Participant consents to the personal jurisdiction of such courts in any
such action.
11. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal
representatives and permitted
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<PAGE> 6
successors and assigns. However, Participant does not have the power or
right to assign this Agreement without the prior written consent of Perot
Systems.
12. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
will be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which that party may be
entitled.
13. Severability. If any provision of this Agreement is held invalid or
unenforceable for any reason, the validity and enforceability of all other
provisions of this Agreement will not be affected.
14. Headings. The section headings used herein are for reference and
convenience only and do not affect the interpretation of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Texas, without regard to that
state's choice of law rules.
16. Entire Agreement. This Agreement, together with the Plan and any rules
and regulations adopted by the Board or Committee thereunder, constitutes
the entire agreement between the parties with respect to its subject
matter.
17. Amendment. This Agreement may be amended only in a manner that is
consistent with the Plan and only by a written instrument signed by both
Perot Systems and Participant.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
PARTICIPANT PEROT SYSTEMS CORPORATION
By:
- -------------------------- -----------------------------
[name] Title: Chairman Of The Board
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<PAGE> 7
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Stock Option
Agreement and agree that this consent shall be binding on any interest I may
have under this Agreement and on my heirs, legatees, and assigns.
By:
------------------------------
Signature
---------------------------------
Printed Name
---------------------------------
Date
-7-
<PAGE> 8
ATTACHMENT A
TO
STOCK OPTION AGREEMENT
FOR
[NAME]
1. Purchase Price: $ per Share
----------
2. Expiration Date: ,
-------------------------------------------
3. Vesting Schedule:
<TABLE>
<CAPTION>
Date Option Shares as to Which Option
Vests Vests on Date
------------------- ----------------------------------
Percentage Number
---------- ------
<S> <C> <C>
------------------------ ----------------- ----------
------------------------ ----------------- ----------
------------------------ ----------------- ----------
------------------------ ----------------- ----------
------------------------ ----------------- ----------
Shares Covered by Option: 100%
----
----------
</TABLE>
-8-
<PAGE> 1
EXHIBIT 10.11
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated as of August
20, 1992, between Perot Systems Corporation, a Texas corporation (the
"Company"), and Meyerson Family Limited Partnership, a Texas limited
partnership (the "Buyer").
WHEREAS, the Company desires that the Company issue and sell to the
Buyer, and the Buyer desires to purchase from the Company, 2,000,000 shares of
the Company's Common Stock, $.O1 par value per share (the "Shares"), on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Buyer hereby agree as follows:
1. Purchase and Sale of the Shares.
(a) Subject to the terms and conditions of this
Agreement and based upon the representations contained herein, the
Company hereby issues and sells the Shares to the Buyer and the Buyer
hereby purchases the Shares from the Company.
(b) The Company hereby delivers to the Buyer a duly
executed stock certificate representing all of the Shares.
(c) In full consideration for the purchase of the Shares,
the Buyer agrees, concurrently with the issuance and transfer of the
Shares, to pay or cause to be paid $3,000,000, payable by a wire
transfer in federal or other same-day funds to the Company.
2. Representations of the Company. The Company hereby represents to
the Buyer (which representations shall survive the purchase and sale hereunder)
as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Texas.
(b) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company. This
Agreement has been duly executed
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<PAGE> 2
and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company, enforceable against it in accordance
with its terms.
(c) The authorized capital stock of the Company consists
solely of 20,000,000 shares of Common Stock, $.O1 par value per
share, of which 3,930,380 shares were issued and outstanding as of
July 31, 1992 and 8,000,000 shares of Liquidation Preference Common
Stock, par value $.O1 per share, of which 8,000,000 shares were issued
and outstanding as of July 31, 1992, and 2,000,000 shares of Series A
Preferred Stock, par value $4.25 per share, none of which shares are
issued and outstanding. Each of the issued and outstanding shares of
Common Stock and Liquidation Preference Common Stock of the Company
is, and upon issuance hereunder the Shares will be, validly issued,
fully paid, and non-assessable and not issued in violation of the
preemptive rights of any person. Except for options granted pursuant
to the Company's 1989 Pioneer Stock Option Plan and the Company's 1991
Stock Option Plan, there are no outstanding options, warrants, or
other rights or agreements obligating the Company to issue or sell any
shares of its capital stock or securities convertible into its capital
stock. To the best of the Company's knowledge, there are no voting
trusts, voting agreements or other agreements or understandings with
respect to the capital stock of the Company.
3. Representations of the Buyer. The Buyer hereby represents to the
Company (which representations shall survive the purchase and sale hereunder)
as follows:
(a) The Buyer is a partnership duly formed and validly
existing under the laws of the State of Texas.
(b) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Buyer. This
Agreement has been duly executed and delivered by the Buyer and
constitutes a legal, valid and binding agreement of the Buyer,
enforceable against it in accordance with its terms.
(c) The Buyer is acquiring the Shares for its own
account for investment purposes and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), or applicable state securities
laws.
(d) The Buyer represents that it has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its
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<PAGE> 3
investment in the Company, and has the ability to bear the economic
risks of such investment. The Buyer further represents it has had
access to information about the Company and it has had the opportunity
to ask questions of, and to receive answers from, employees of the
Company concerning the Company and that no information it has
requested has been denied or withheld.
4. Compliance with Securities Laws. The Buyer understands that the
offer and sale of the Shares acquired by it hereunder have not been registered
under the Securities Act or applicable state securities laws. The Buyer
understands that the Shares being acquired by it hereunder may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act and applicable state securities laws, or the availability of an exemption
therefrom, and that in the absence of an effective registration statement or
the availability of such an exemption covering the offer and sale of the
Shares, that the Shares must be held indefinitely, and that the Buyer holding
same must bear the economic risks of such investment indefinitely. The Buyer
agrees that it will not sell or otherwise transfer any of the Shares in any way
that may result in a violation of any federal or state securities laws or
regulations. The certificates representing the Shares may bear appropriate
legends to such effect.
5. Covenants of the Company. The Company agrees to make cash
payments to the Buyer or any person or entity affiliated or related to the
Buyer, including Morton H. Meyerson (the Buyer and each such person or entity
the "Taxpayer"), in the event that the Taxpayer owes federal income tax as a
result of the purchase of Shares contemplated by this Agreement, in an amount
equal to the lesser of (i) the amount of any tax (plus penalties and interest)
actually paid by Taxpayer in all years as a result thereof and as a result of
receiving the payment contemplated by this paragraph, and (ii) the amount of
tax savings (including interest) actually realized by the Company in all years
as a result thereof. Each Taxpayer shall be an intended third-party
beneficiary of this Section 5.
6. Stock Repurchase.
(a) Subject to Section 6(e) below, if Morton H. Meyerson
("Meyerson") voluntarily resigns from his position as Chairman of the
Board and Chief Executive Officer of the Company and if Meyerson and
the Company do not reach a mutually agreeable arrangement for Meyerson
to remain with the Company (collectively, the "Buyback Event"), the
Company shall have the right to repurchase from the Buyer all or a
portion of the Shares for the
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<PAGE> 4
Buyback Amount (as defined below) or to receive from the Buyer cash in
lieu thereof in the circumstances provided below (collectively, the
"Buyback").
(b) Upon the occurrence of a Buyback Event, the Company shall
have 30 days to give written notice (the "Buyback Notice") to the
Buyer of the Company's decision to cause the Buyback. The Buyback
Notice shall state the number of shares of the Company's common stock
that the Company desires to repurchase, but in no event shall such
number exceed the Maximum Amount (as defined below). Subject to
Section 6(c) below, the Buyer shall then have 30 days to deliver to
the Company stock certificates representing the number of shares of
the Company's Common Stock equal to the number of shares set forth in
the Buyback Notice in exchange for the payment by the Company to the
Buyer of the Buyback Amount, with payment to be made by wire transfer
of same-day funds.
(c) To the extent that the Buyer owns an insufficient
number of shares to tender to the Company pursuant to a Buyback Notice
required by Section 6(b) above or refuses to so tender such shares
(such difference is referred to herein as the "Shortfall Amount"),
then the Buyer shall tender to the Company so many of the number of
shares actually owned by the Buyer in accordance with Section 6(b)
above in exchange for payment by the Company in accordance with
Section 6(b) above that it so wishes to tender, and the Buyer shall be
obligated to pay to the Company, within one year after the date of the
Buyback Event, cash in an amount equal to the Fair Market Value (as
defined below) of the number of shares represented by the Shortfall
Amount less the Buyback Amount for such number of shares represented
by the Shortfall Amount, provided that interest required to be paid
pursuant to the Buyback Amount shall be computed not to the date of
the Buyback Event but instead to the date of the cash payment
required to be made by the Buyer pursuant to this Section 6(c).
(d) For purposes of this Section 6, the following terms shall
be defined as set forth below:
(i) "Buyback Amount" means the product of (i) the
number of shares of the Company's Common Stock actually tendered
by the Buyer to the Company pursuant to the Buyback and (ii) the
sum of $1.50 and interest on such $1.50 at an interest rate of
6.5% per annum, compounded annually, and computed from the date
of this Agreement to the date of the Buyback.
-4-
<PAGE> 5
(ii) "Maximum Amount" means a number of shares of
the Company's common stock equal to the product of 2,000,000
and
<TABLE>
<S> <C>
| x | Where x equals the number of full months that Meyerson remains
| 1 - ---- | as Chairman of the Board and Chief Executive Officer of the Company,
| 60 | commencing June 1, 1992,
</TABLE>
but in the event the Maximum Amount shall be less than 0, then
the Maximum Amount shall be deemed to be 0.
(iii) "Fair Market Value" means an amount
representing the value of a number of shares of the Company's
Common Stock as mutually agreed upon by the Company and the
Buyer; but if they cannot agree within 60 days prior to the
date requiring payment of such amount, then each of the
Company and the Buyer shall select an independent,
third-party, reputable appraiser, and the two appraisers shall
select a third independent, third-party, reputable appraiser
who shall make a determination as to such value, and the
determination of such third appraiser shall be binding on the
Company and the Buyer. In making a determination, the third
appraiser shall not take into account any control premium or
minority discount with respect to the shares being valued.
(e) Notwithstanding anything in this Section 6 to the
contrary, Meyerson shall not have voluntarily resigned from the
Company if his decision to resign from the Company (or his inability
to continue to serve the Company in such capacity) is caused by one or
more of the following events:
(i) the death or disability of Meyerson or the
termination of Meyerson by the Company from his position as
Chairman of the Board and Chief Executive Officer (and
disability shall occur upon the mental or physical disability
of Meyerson that will permanently prevent Meyerson from
performing his duties for the Company);
(ii) a request to provide full-time services to
the U.S. government or an agency thereof or one working for
such government or agency and after consulting with Meyerson,
the Company's Board of
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<PAGE> 6
Directors agrees to permit Meyerson to leave his position as
Chairman of the Board and Chief Executive Officer of the
Company;
(iii) Meyerson is constructively terminated from
his position, such as being assigned tasks to perform work not
suitable for a chief executive officer;
(iv) the Company requests Meyerson to relocate
from the City of Dallas;
(v) the Company demands excessive travel from
Meyerson;
(vi) the Company, its Board of Directors, or one
of the Company's officers requests Meyerson to engage in any
conduct that is not moral or ethical or in violation of law;
or
(vii) the Board of Directors of the Company makes
a major change in corporate policy or has decided that the
Company should engage in a significant corporate development
or transaction and Meyerson has voted against such decision or
Meyerson is not present at the meeting where the decision is
made; provided that (a) Meyerson has delivered written notice
to each of the members of the Board of Directors within 5 days
of the date of the Board decision (or if Meyerson is not
present at the meeting when the decision is made, within 5
days of notice from the Board to him of its decision),
requesting the Board to reverse its decision and informing the
Board that he intends to resign because of such decision and
(b) the Board has not reversed its decision and so informed
Meyerson within 30 days of the receipt of the notice given by
Meyerson. This provision will not apply to the refusal by the
Board of Directors to approve a policy, development or
transaction recommended by Meyerson.
(f) Morton H. Meyerson hereby agrees that, to the extent
the Buyer fails to meet any of its obligations to the Company pursuant
to Section 6(c) hereof, Morton H. Meyerson will be liable for, and
agrees to pay to the Company, any deficiency in the amount to be paid
to the Company pursuant to such section (the "Guaranteed
Obligations"). Morton H. Meyerson also waives all demands and notices
of every kind in connection with the Guaranteed Obligations and this
guarantee, including without limitation notice of acceptance of this
guarantee and notice of the occurrence of any breach or default by
Buyer with respect to the Guaranteed Obligations, and
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<PAGE> 7
Morton H. Meyerson further waives diligence, presentment, protest and
suit on the part of Company. This guarantee is a primary,
unconditional guarantee of payment and performance and not a guarantee
of collection. The guarantee is not subject to any counterclaim,
setoff, deduction, reduction or other defense for any reason
whatsoever.
(g) Except as provided in subsection 6(f) with respect
to Morton H. Meyerson, the obligations of the Buyer under this Section
6 shall be non-recourse to the partners of the Buyer.
7. Registration Rights.
(a) Subject to Section 7(i) below, if the Company
proposes to register for sale for cash in an offering to the public
any shares of its stock ("Stock") under the Securities Act on Form
S-1, S-2, or S-3, or any successor registration form at the time in
effect, it will at such time give written notice to the Holders (as
defined below) of its intention to do so. Upon written request of the
Holder, given within fifteen days after the giving of any such notice
by the Company, the Company will use its best efforts to cause the
shares of Stock acquired hereby held by the respective Holders for
which registration is requested (the "Piggy-Back Registrable Shares")
(the "Requesting Holders") to be registered under the Securities Act
as part of the offering being made by the Company and under the same
registration statement proposed to be filed by the Company; provided,
however, if the offering to which the proposed registration statement
relates is to be distributed by or through an underwriter approved by
the Company, the Requesting Holders shall agree to sell the Piggy-Back
Registrable Shares through such underwriter on the same terms and
conditions as the under-writer agrees to sell the other securities;
and provided further, that the Company shall not be required to
include part or all of the Piggy-Back Registrable Shares if the
Company is advised in writing by the managing underwriter for the
proposed offering that the inclusion of such Piggy-Back Registrable
Shares together with the Stock requested to be registered by other
owners (the "Other Owners") of shares of Stock (the "Other Registrable
Shares") pursuant to agreements between such Other Owners and the
Company which contain registration rights comparable to those
contained herein (the Piggy-Back Registrable Shares and the Other
Registrable Shares are sometimes hereinafter referred to as the
"Aggregate Registrable Shares") would in its opinion have a material
adverse effect on such proposed offering. In such event, the Company
shall include in the proposed offering that number of Piggy-Back
Registrable Shares equal to the Requesting
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<PAGE> 8
Holders, pro rata portion of the total number of Aggregate Registrable
Shares which may be registered in the opinion of the managing
underwriter referred to in the preceding sentence. The term "Holder"
means the Buyer or any Related Party of the Buyer, but only during the
period or periods of time any of such persons or entities own stock
which may qualify as "Piggy-Back Registrable Shares". The term
"Related Party" means any limited partner of the Buyer, Morton H.
Meyerson and Marlene Meyerson, the parents of Morton H. Meyerson and
the mother of Marlene Meyerson (cumulatively, the "Parents"), any
descendants of the Parents, any trust which includes as a beneficiary
any of the persons or entities above and any corporation, partnership
or other entity of which a majority of the voting shares or equity
interest is controlled directly or indirectly by any of the
above-mentioned persons or entities, to the extent such persons or
entities continue to so control such corporation, partnership or other
entity.
(b) Notwithstanding anything to the contrary contained
in Section 7(a) hereof, the Company shall have no obligation to
register the Piggy-Back Registrable Shares if, within twenty days from
the receipt of a request to register the Piggy-Back Registrable Shares
pursuant to Section 7(a) hereof, the Company shall have delivered to
the Buyer an opinion of experienced securities counsel for the Company
to the effect that no registration of the Piggy-Back Registrable
Shares is required for their sale on the terms on which the Requesting
Holder desires to sell those shares.
(c) The Requesting Holders and the Company shall in
connection with any registration of any Piggy-Back Registrable
Shares contemplated by this Section 7 enter into an appropriate
underwriting agreement containing terms and provisions (including
reasonable provisions as to opinions of counsel, comfort letters and
indemnification) customary in such agreements.
(d) The Company shall prepare and file with the
Securities and Exchange Commission all amendments, post-effective
amendments and supplements to a registration statement containing any
Piggy-Back Registrable Shares pursuant to Section 7(a) hereof as may
be necessary under the Securities Act and the regulations of the
Securities and Exchange Commission to permit the sale of such
Piggy-Back Registrable Shares to the public.
(e) The Company shall use its best efforts to register
or qualify the Piggy-Back Registrable Shares covered by a registration
statement filed pursuant to
-8-
<PAGE> 9
Section 7(a) hereof under blue sky or other state securities laws, in
such states or jurisdictions as shall reasonably be requested by the
Requesting Holders, and do any and all other reasonable acts or things
which may be necessary to enable the Requesting Holders to consummate
the public sale or other disposition of Registrable Shares in such
jurisdictions; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the
laws of any jurisdiction in which it is not then qualified or to file
any general consent to service of process.
(f) The Company will bear all expenses related to a
registration pursuant to this Section 7, except for amounts reflecting
the increase in expenses directly attributable to the inclusion of the
portion of the Piggy-Back Registrable Shares so registered, which
increase in expenses shall be borne by the appropriate Requesting
Holder. In connection with any registration undertaken by the Company
hereunder, the Company and the Requesting Holders shall indemnify each
other against violations of law in customary form and shall execute
such other agreements in connection with the underwriting as shall
reasonably be requested by the Company.
(g) The Requesting Holders shall promptly furnish the
Company, upon request, with all information required in the opinion of
the Company's securities counsel to be included in the registration
statement, or any amendment or supplement thereto.
(h) The Holder's rights and obligations pursuant to this
Section 7 may be exercised only by the Holders.
(i) Notwithstanding anything to, the contrary in this
Section 7, for a registration of the Company's Stock in an initial
public offering, the, Holders shall not have any right to request the
Company to register any Piggy-Back Registrable Shares unless the
Company is registering Stock held by owners other than the Company as
a part of such offering.
8. Miscellaneous.
(a) This Agreement and the attachments hereto contain
the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements, written or oral, and
all contemporaneous oral agreements, with respect thereto.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, assigns and
legal representatives.
-9-
<PAGE> 10
(c) Except as expressly provided in Section 5 and Section
7 of this Agreement, nothing in this Agreement is intended or shall be
construed to give any person, other then the parties hereto, any legal
or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
(d) The Company and the Buyer shall execute such
documents and take such further actions as may be reasonably required
or desirable to carry out the provisions hereof and the transactions
contemplated hereby.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
(f) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
(g) Any notice to be given hereunder shall be given by
personal delivery or by first-class U.S. mail, postage prepaid, to
the parties hereto at the following address:
If to the Company, to:
Perot Systems Corporation
5001 Spring Valley Road, Suite 1075 West
Dallas, Texas 75244
Attn: General Counsel
If to the Buyer, to:
Meyerson Family Limited Partnership
4514 Cole Avenue, Suite 400
Dallas, Texas 75205
Attn: Morton H. Meyerson
A party hereto may change the address for receipt of notices by giving notice
to the other party in the manner provided for in this Section 8(g).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PEROT SYSTEMS CORPORATION
Name: /s/ J. PATRICK HORNER
-------------------------------
Title: President
------------------------------
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<PAGE> 11
MEYERSON FAMILY LIMITED PARTNERSHIP
By: /s/ MORTON H. MEYERSON
--------------------------------
Morton H. Meyerson, General
Partner
Consent and Agreement:
The undersigned hereby executes this Agreement for the purpose of
consenting to, and agreeing to be bound by, the provisions of Section 6(f) of
this Agreement.
/s/ MORTON H. MEYERSON
-------------------------------------
Morton H Meyerson
-11-
<PAGE> 1
EXHIBIT 10.12
STOCK OPTION GRANT
This Stock Option Grant (the "Grant") is made as of July 27, 1995, by
Perot Systems Corporation, a Texas corporation ("PSC"), in favor of James A.
Cannavino ("Cannavino").
WITNESSETH:
WHEREAS, PSC desires to grant Cannavino the right and option to
purchase shares of Common Stock, $0.01 par value per share, of PSC ("Common
Stock") in accordance with and subject to the terms and conditions of this
Grant;
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, PSC hereby agrees
for the benefit of Cannavino as follows:
1. Certain Definitions. As used in this Grant, the following
terms have the meanings indicated:
(a) "After-Tax Cost" of a share of Restricted Stock means
the Cost of such share, plus the amount of any taxes incurred by
Cannavino in respect of such share, including without limitation any
taxes paid under Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code"), or in respect of any dividends on such
Restricted Stock or in connection with a gain on the sale of such
Restricted Stock.
(b) "Board" means the Board of Directors of PSC.
(c) "Cost" of a share of Restricted Stock means the price
per share paid by Cannavino to acquire such Restricted Stock plus
interest on such amount at the rate of interest applicable to the
Purchase Price Note (as defined below) from the date of payment by
Cannavino to the date of tender of payment by PSC (or, if earlier, the
date that Cannavino sells such Restricted Stock), minus the amount or
fair market value, as applicable, of any dividends or distributions
paid in respect of such Restricted Stock prior to the date of
disposition.
(d) "Effective Date" means the date on which Cannavino
commences his employment with PSC pursuant to the Employment
Agreement.
(e) "Employment Agreement" means an employment agreement
between PSC and Cannavino substantially in the form of Exhibit A
hereto.
(f) "Expiration Date" means the earlier of (i) the
fifteenth anniversary of the Effective Date, unless the Restricted
Stock is Publicly Traded on that date, and Cannavino is terminated for
Cause (as defined in the Employment Agreement) or resigns for other
than Good Reason (as defined in the Employment Agreement) in which
case it will mean the twelfth anniversary of the Effective Date or
(ii) if Cannavino ceases to be an employee of PSC for any reason and
on such date the Restricted Stock is Publicly Traded, the date five
years after the last Vesting Date, but if on the date of termination
the Restricted Stock is Publicly Traded, and Cannavino is terminated
for Cause or other than for Good Reasons, the date two years after the
Page 1
<PAGE> 2
last Vesting Date. Notwithstanding anything else in this paragraph
(f), the Expiration Date shall never occur less than one year after
the Restricted Stock is first Publicly Traded.
(g) "Market Value" of a share of Restricted Stock on a
given date (prior to the time the Restricted Stock is Publicly Traded)
means the fair market value of such Restricted Stock, as determined in
good faith by the Board as of the most recent Valuation Date on or
before such date.
(h) "Option" means the right and option to purchase
Restricted Stock evidenced by this Grant.
(i) "Publicly Traded" means the Restricted Stock has been
listed on a registered national securities exchange or approved for
quotation in the National Association of Securities Dealers Automated
Quotation ("Nasdaq") system.
(j) "Put Value" of a share of Restricted Stock on a given
date (prior to the time the Restricted Stock is Publicly Traded) means
the fair market value of such Restricted Stock, without discount for
minority interest or illiquidity, as agreed between PSC and Cannavino
or, if no such agreement can be reached within 20 days, as determined
by an independent appraiser (the costs of which will be paid by PSC)
selected jointly by PSC and Cannavino. If an independent appraisal is
necessary, PSC and Cannavino will negotiate in good faith to agree on
the appraiser within 30 days. If they cannot agree, the appraiser
will be selected by an independent arbitrator selected pursuant to the
rules of the American Arbitration Association. The appraiser will
make its determination within 60 days after selection.
(k) "Restricted Stock" means any Common Stock purchased
upon the exercise of this Option, together with any successor
security, property or cash issued or distributed by PSC or any
successor entity, whether by way of merger, consolidation, share
exchange, reorganization, liquidation, recapitalization or otherwise.
(l) "Transfer" or "transfer" or derivations thereof
include any sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition.
(m) "Unvested Stock" means all shares of Restricted Stock
other than Vested Stock.
(n) "Valuation Date" means each June 30 and December 31
of every year, and any other date as of which the Board determines the
Market Value of Restricted Stock.
(o) "Vested Stock" means those shares of Restricted Stock
that have vested to Cannavino or Cannavino's estate pursuant to
Section 3.
(p) "Vesting Date" means each date upon which shares of
Restricted Stock vest to Cannavino or Cannavino's estate pursuant to
this Grant, as set forth in Exhibit B hereto.
(q) "Vesting Period" means the period of time commencing
on the date of this Grant and ending on the last date on which
Restricted Stock vests hereunder.
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2. Grant of Option; Exercise.
(a) Subject to the terms, conditions and restrictions set
forth in this Grant, PSC hereby grants to Cannavino the option to
purchase from PSC 1,000,000 shares of Common Stock, at an exercise
price of $2.00 per share. PSC is granting the Option hereunder in
consideration for Cannavino's agreement not to commence permanent,
full-time employment with any other company before January 1, 1996.
(b) Subject to the terms, conditions and restrictions set
forth in this Grant, Cannavino may exercise the Option at any time
after the Effective Date and prior to the Expiration Date. If
Cannavino does not accept employment with PSC pursuant to the
Employment Agreement by December 31, 1995, then the Option will be
canceled and have no further effect.
(c) To the extent that Cannavino exercises the Option, in
whole or in part, on or prior to December 31, 1995, the exercise price
may be paid 30% in cash and 70% by delivery from Cannavino to PSC of a
secured promissory note substantially in the form of Exhibit C hereto
(the "Purchase Price Note"), which will be secured by a pledge of this
Option and any Restricted Stock acquired hereunder pursuant to a
pledge agreement substantially in the form of Exhibit F hereto (the
"Pledge Agreement"). To the extent that Cannavino exercises the
Option, in whole or in part, after December 31, 1995, the full
exercise price payable upon each exercise must be paid by Cannavino to
PSC at the time of exercise.
3. Vesting of Restricted Stock. The Restricted Stock issuable
upon exercise of the Option will vest in Cannavino in accordance with the
Vesting Schedule set forth on Exhibit B hereto, but only for so long as
Cannavino is an employee of PSC, except as follows:
(a) If Cannavino's employment with PSC is terminated (i)
by PSC without Cause, including termination due to Cannavino's
physical or mental illness or death, or (ii) by Cannavino with Good
Reason, then (A) the Restricted Stock scheduled to vest on each
Vesting Date to and including the Vesting Date in 1998 will vest on
such Vesting Dates (to the extent not previously vested)
notwithstanding such termination and (B) if such termination occurs
after the Vesting Date in 1998, the Restricted Stock scheduled to vest
on the next Vesting Date after such termination (if any) will vest on
such Vesting Date notwithstanding such termination. Notwithstanding
the foregoing, if vesting is accelerated under Section 3(b), then
Section 3(b) (and not this paragraph) will apply through the last
Vesting Date for which vesting is accelerated under Section 3(b) and,
thereafter, this paragraph will again apply.
(b) If a Change in Control (as defined in the Employment
Agreement) occurs while Cannavino is employed by PSC, or if
Cannavino's employment with PSC is terminated prior to but in
connection with a Change in Control, then (A) the Restricted Stock
scheduled to vest on each Vesting Date to and including the Vesting
Date in 2000 will vest immediately upon such Change in Control (to the
extent not previously vested) and (B) if the Change in Control occurs
after the Vesting Date in 1999, the Restricted Stock scheduled to vest
on the next two Vesting Dates after such termination (if any) will
vest immediately upon such Change in Control. If the vesting
scheduled to occur on one or more Vesting Dates is accelerated
pursuant to this paragraph, then the remaining Vesting Dates, which
are not accelerated, will remain unchanged, with the result that no
vesting will occur during the years for which vesting was accelerated.
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(c) If Cannavino is employed by PSC pursuant to the
Employment Agreement by December 31, 1995, but his employment with PSC
is terminated prior to the Vesting Date in 1996 (i) by PSC with Cause
or (ii) by Cannavino without Good Reason, then the Restricted Stock
scheduled to vest on the Vesting Date in 1996 will vest on such
Vesting Date notwithstanding such termination.
4. Restrictions on Transfer. The following restrictions on
transfer apply unless PSC otherwise agrees in writing:
(a) The Option may not be sold or otherwise transferred,
except by will or the laws of descent and distribution. If the Option
is transferred by will or the laws of descent and distribution, the
transferee will hold the Option and any Restricted Stock acquired upon
exercise of the Option subject to all of the vesting provisions,
transfer restrictions, repurchase options and other provisions of this
Grant and the Pledge Agreement, in each case as if such Option or
Restricted Stock continued to be held by Cannavino. Without limiting
the generality of the foregoing, a transferee under this paragraph
will hold the Option and any Restricted Stock subject to PSC's
repurchase options and other rights under Section 5, Section 6 and
paragraphs (b), (c) and (d) of Section 7 and PSC's rights of offset
under Section 13.
(b) Shares of Unvested Stock may not be sold or otherwise
transferred.
(c) One-half of the total number of shares of Vested
Stock that vest on a particular Vesting Date may not be sold or
otherwise transferred for two years after such Vesting Date; provided
that such restriction on transfer will not apply (i) if Cannavino
sells Vested Stock and applies the proceeds of such sale, less any
federal income taxes incurred by Cannavino as a result of such sale,
to prepayment of the Notes (as defined in Section 12), or (ii) if
Cannavino's employment with PSC terminates for any reason.
(d) Shares of Vested Stock may not be sold or otherwise
transferred prior to the Restricted Stock being Publicly Traded unless
the holder has given PSC any notice required under Section 5 and PSC
has waived in writing any right it has to buy back the shares under
Section 5.
(e) Notwithstanding the foregoing restrictions on
transfer, Cannavino may transfer, while he is alive or as a
distribution upon his death, all or a portion of the Restricted Stock
to a maximum of two transferees, but only if each transferee is
Cannavino's spouse, descendant or a trust for their benefit. Any such
transfer must be effected pursuant to documentation reasonably
acceptable in form and substance to PSC, and such documentation must
provide that the Restricted Stock transferred remains subject to all
of the vesting provisions, transfer restrictions, repurchase options
and other provisions of this Grant and the Pledge Agreement, in each
case as if such Restricted Stock continued to be held by Cannavino.
Without limiting the generality of the foregoing, a transferee under
this paragraph will hold the Restricted Stock subject to PSC's
repurchase options and other rights under Section 5, Section 6 and
Section 7 and PSC's rights of offset under Section 13.
PSC is not obligated to recognize any purported sale or other transfer
of the Option or any Restricted Stock in violation of this Section 4 and,
unless it elects to do otherwise, may treat any such purported sale or transfer
as null, void and of no effect.
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5. First Option to Buy Restricted Stock. At any time before the
Restricted Stock is Publicly Traded, if Cannavino desires or is obligated to
sell or otherwise transfer any Vested Stock (including any distribution to
heirs or other beneficiaries of Cannavino's estate, but excluding any transfer
pursuant to Section 4(e) or Section 9), Cannavino is required to give PSC
written notice of the proposed sale or transfer, including notice of the
proposed purchaser or transferee, and, for a period of 30 days after receipt of
such notice, PSC will have the right to buy back such Restricted Stock for cash
at a purchase price equal to its Market Value.
6. Option to Buy Unvested Stock. If Cannavino's employment with
PSC is terminated for any reason during the Vesting Period, then (a) the Option
will be immediately canceled with respect to any shares of Unvested Stock,
except for Unvested Stock that will vest at or following such termination
pursuant to Section 3, and (b) PSC will be entitled, by notice to Cannavino
within 150 days after such termination, to require Cannavino to sell to PSC all
or any part of the Unvested Stock then held by Cannavino, except for any
Unvested Stock that will vest at or following such termination pursuant to
Section 3. The purchase price applicable to PSC's purchase option under clause
(b) above will be (i) the After-Tax Cost of such Unvested Stock, if Cannavino's
employment with PSC is terminated by PSC without Cause or by Cannavino with
Good Reason, or (ii) the Cost of such Unvested Stock, if Cannavino's employment
with PSC is terminated by PSC with Cause or by Cannavino without Good Reason.
7. Competition. If, following Cannavino's employment by PSC
pursuant to the Employment Agreement, Cannavino breaches Section 4 of the
Employment Agreement and such breach is not cured in accordance with the notice
and cure provisions of Section 5 of the Employment Agreement (either because
Cannavino fails to give notice of the action constituting a breach within the
time period specified therein or because he fails to effect the cure required
thereunder within the specified time period), then PSC will have the right, for
150 days after PSC discovers such breach, to
(a) cancel any unexercised portion of the Option;
(b) cancel any remaining vesting that has not yet
occurred, but is scheduled to occur in the future under Section 3;
(c) require Cannavino to sell to PSC all or any part of
the Restricted Stock then owned by Cannavino at a purchase price equal
to its After-Tax Cost; and
(d) if any shares of Restricted Stock have been sold or
otherwise transferred by Cannavino (including any shares sold to PSC
but excluding any shares transferred under Section 4(e) or acquired by
a transferee under Section 4(a), which shares will be held subject to
this paragraph) prior to such time, require Cannavino to pay to PSC,
with respect to each share of Restricted Stock not then held by
Cannavino, an amount in cash equal to the value of the consideration
received by Cannavino for such share or, if such share was not
transferred in a bona fide arm's length sale, the greater of the value
of such consideration or the Market Value of such share on the date of
such transfer, less (in either case) the After-Tax Cost of such share;
provided that (i) the total number of shares of Restricted Stock as to which
the Option is canceled pursuant to clause (a) that are vested on the date of
cancellation or would vest subsequent to such date pursuant to Section 3, plus
(ii) the total number of shares of Restricted Stock as to which future vesting
is canceled pursuant to clause (b), plus (iii) the total number of shares of
Restricted Stock that are repurchased by PSC pursuant to clause (c), plus (iv)
the total number of shares of Restricted Stock with
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respect to which Cannavino is required to make the payment described in clause
(d), may not exceed 200,000 shares (as adjusted to reflect any stock split,
stock dividend or similar event affecting the total number of shares of Common
Stock outstanding). PSC will exercise its remedies under this Section 7 in the
order of paragraphs (a) through (d), above, until the 200,000 share limit is
reached.
8. Procedure for Repurchase of Stock. Whenever PSC has a right
to buy back shares of Restricted Stock under Section 5, 6 or 7, PSC may
exercise its right by notifying Cannavino of PSC's election to exercise its
right within the designated exercise period. The giving of such notice will
give rise to an obligation on the part of Cannavino to tender to PSC, within 10
days, any previously issued certificate representing shares of Restricted Stock
to be bought back, duly endorsed in blank or having a duly executed stock power
attached in proper form for transfer. If any such certificate is not tendered
within 10 days, PSC may cancel any outstanding certificate representing shares
to be bought back. PSC is required to tender the purchase price for shares to
be bought back under this Section 8 within 20 days of giving notice of its
election to exercise its right to buy back shares. If Cannavino has not
complied with an obligation to return a certificate representing shares to be
bought back, however, PSC is not required to tender the purchase price until 20
days after the certificate is returned or 20 days after it cancels the
certificate, whichever occurs first.
9. Put Option. If the Restricted Stock is not Publicly Traded by
the fifteenth anniversary of the Effective Date (the "Put Date"), then,
beginning on the Put Date and ending on the date that the Restricted Stock is
Publicly Traded, Cannavino will have the option (the "Put Option") to require
PSC to repurchase and exchange Vested Stock at its Put Value, on the terms set
forth in this Section 9. but such exercise will be limited to a number of
shares of Vested Stock equal to the shares resulting in profits to Cannavino
(calculated as the Put Value, less any federal income taxes incurred by
Cannavino as a result of such sale or exchange) equal to no more than all the
then outstanding principal and interest under the Notes, provided that
Cannavino will transfer and exchange such Vested Stock to PSC, at the Put
Value, equal to such outstanding principal and interest under the Notes in
exchange for cancellation of such principal and interest, and will only receive
from PSC cash equal to the amount necessary to pay any federal income taxes
incurred by Cannavino as a result of such sale or exchange.
The Put Option may be exercised no more than once. The Put Option may be
exercised only by Cannavino with respect to shares of Vested Stock that he owns
(or shares that are held by a transferee under Section 4(e) before or after
Cannavino's death by the holders of such shares, proportionate to their
holdings). Cannavino may exercise the Put Option by notifying PSC of his
election to exercise and the number of shares to be sold (up to the maximum as
permitted under the Put above), and upon delivery of such notice the parties
will determine the Put Value (in accordance with Section 1(j)). The purchase
and sale of shares pursuant to the Put Option will occur at a closing to be
held 30 days after the determination of the Put Value (or such earlier date as
may be mutually agreed). At the closing, Cannavino will deliver to PSC all
certificates representing shares of Vested Stock to be sold to PSC, duly
endorsed in blank or having a duly executed stock power attached in proper form
for transfer, and PSC will cancel the indebtedness exchanged for such shares
and deliver the purchase price so much of the Vested Stock as is put to PSC to
permit Cannavino to pay any income taxes associated with the Put.
Alternatively, if Cannavino so elects in his notice of exercise, he may
exercise the Option (subject to the vesting and other provisions of this Grant)
at the closing and simultaneously sell Restricted Stock acquired upon exercise
to PSC pursuant to the Put Option, in which case PSC may deduct the applicable
exercise price from the amount to be paid to Cannavino for such taxes (after
deduction for the canceled Notes); provided however in such case the number of
shares of Vested Stock which may be exercised by the Put Option shall include
shares to also cover the expense of the exercise price.
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Notwithstanding the foregoing, if, prior to the Put Date and prior to the time
that the Restricted Stock is Publicly Traded, Cannavino incurs liability for an
excise tax under Section 4999 of the Code, without regard to the effect of this
Section 9, then Cannavino may additionally exercise the Put Option (which
shares will not be considered with regard to the above Put) beginning on the
date that Cannavino incurs such excise tax liability, but such exercise will be
limited to a number of shares of Vested Stock equal to the lesser of (a) shares
resulting in aggregate net profits to Cannavino (calculated as the Put Value,
less Cannavino's tax basis in such shares, less any federal income taxes
incurred by Cannavino as a result of such sale, less any portion of the sale
proceeds that is required to be applied to the Purchase Price Note) equal to
Cannavino's excise tax liability and (b) during any 12 month period, one
quarter of the total number of shares that have previously vested.
10. Defense of Certain Claims. If (a) Cannavino accepts
employment pursuant to the Employment Agreement by December 31, 1995, and (b)
International Business Machines Corporation ("IBM") asserts a claim against
Cannavino, based on his association with PSC prior to the Effective Date,
seeking a refund of any profits realized by Cannavino from the exercise during
March, April or May of 1995 of stock options granted by IBM, which profits
would not be subject to any claim by IBM if Cannavino had no contact with PSC
prior to the Effective Date, regardless of any conduct of Cannavino after the
Effective Date (a "Covered Claim"), then (i) PSC will pay all reasonable costs
associated with contesting the Covered Claim, but only if and for so long as
Cannavino's defense against the Covered Claim has merit, as determined in good
faith by PSC, and only if PSC consents in advance to the selection of
Cannavino's attorneys (which consent will not be unreasonably withheld), and
(ii) PSC will loan to Cannavino any amount that Cannavino is required to pay to
his former employer in respect of a Covered Claim (whether pursuant to a
judgment or in settlement), up to an aggregate of $2,700,000, pursuant to a
promissory note in the form of Exhibit D hereto (the "Covered Claims Note"),
which will be secured by the Pledge Agreement. The Covered Claims specifically
exclude any claim relating to activities by Cannavino subsequent to his
employment by PSC. In the course of defending himself against a Covered Claim,
Cannavino may also defend himself against other claims that are based on the
same facts as the Covered Claim, in which case Cannavino will be responsible
only for those non-incidental costs that would not have been incurred if his
defense was limited solely to the Covered Claim (subject to the limitations in
clause (i) above). PSC will not be required to advance any funds under the
Covered Claims Note after Cannavino's death or after the date on which the
Covered Claims Note would be due in accordance with its terms. PSC hereby
consents to the selection of Proskauer Rose Goetz & Mendelsohn LLP as
Cannavino's attorney (for purposes of clause (i) above) if the fees charged by
such firm are reasonable.
11. General Advance. At the request of Cannavino at any time
prior to August 15, 1996, PSC will loan Cannavino up to $1,500,000 pursuant to
a promissory note substantially in the form of Exhibit E hereto (the "General
Note"), which will be secured by the Pledge Agreement. Such loan will be made
in a single advance, and any portion of such loan that is repaid by Cannavino
may not be reborrowed. Cannavino may use the proceeds of such loan for any
purpose, including without limitation purchasing a house or furnishings for a
house or for other personal expenditures. PSC will not be required to advance
any funds under the General Note after Cannavino's death or after the date on
which the General Note would be due in accordance with its terms.
12. Tax Matters. PSC agrees to indemnify Cannavino from any
liability for federal income taxes that Cannavino may incur as a result of any
finding that the interest rate on the Purchase Price Note, the General Note or
the Covered Claims Note (collectively, the "Notes"), if any such Notes are
issued, is below the minimum interest rate respected for tax purposes under
applicable federal law. Such indemnification payments will be "grossed up" as
necessary to compensate Cannavino for any additional
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federal income tax liability incurred as a result of such indemnification
payments and any "gross up" payment.
13. Rights of Offset. PSC may, in its discretion, satisfy any
payment obligations to Cannavino under this Grant by offset against amounts
owing from Cannavino to PSC under any of the Notes, whether or not such amounts
are then due and payable under the Notes; provided that PSC must pay in cash
(a) defense costs for Covered Claims to the extent required under Section
10(i), (b) indemnity payments to the extent required under Section 12 and (c)
the initial advances required in respect of the Notes. Cannavino may, in his
discretion, satisfy any payment obligation to PSC under the Notes by offset
against amounts then owing from PSC to Cannavino under this Grant.
14. Compliance with Securities Laws. Exercise of the Option may,
in PSC's discretion, be conditioned upon a representation by the Option holder
that he is an "accredited investor" within the meaning of Regulation D under
the Securities Act of 1933, as amended (the "Securities Act"), and that he is
acquiring the Restricted Stock for his own account and not with a view to any
resale or distribution thereof. Neither Cannavino nor any subsequent holder of
the Restricted Stock may sell or otherwise transfer any Restricted Stock in any
way that may result in a violation of any federal or state securities laws or
regulations. PSC may require any subsequent purchaser or other transferee of
Restricted Stock that cannot be publicly traded to provide PSC, prior to such
sale or other transfer, with such representations, commitments and opinions
regarding compliance with applicable securities laws and regulations as PSC may
deem necessary or advisable. PSC is granting the Option and will offer and
sell the Restricted Stock hereunder pursuant to an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof, and under similar provisions of state securities laws (and not under
Rule 701 under the Securities Act).
15. Stock Certificates; Rights as Shareholder. PSC will retain
for safekeeping all certificates representing Unvested Stock and, until all
obligations under the Notes have been repaid in full, all other Restricted
Stock. Each certificate evidencing Restricted Stock will bear such legends as
PSC determines are necessary or appropriate. Whether or not certificates
representing shares of Restricted Stock have been issued or delivered,
Cannavino will have all the rights of a shareholder of Restricted Stock,
including voting, dividend and distribution rights, with respect to shares of
Restricted Stock owned by Cannavino, subject to PSC's repurchase rights
hereunder. Cannavino will not have any rights as a shareholder with respect to
any shares subject to the Option before the date of exercise of the Option with
respect to such shares.
16. Income Tax Withholding. Cannavino shall, upon request by PSC,
reimburse PSC for, or PSC may withhold from sums or property otherwise due or
payable to Cannavino, any amounts PSC is required to remit to applicable taxing
authorities as withholding pursuant to any law or government regulation or
ruling. If shares of Restricted Stock are withheld for such purpose, they will
be withheld at Market Value. If Cannavino fails to reimburse PSC for any such
amount within 30 days after PSC requests reimbursement in writing, PSC has the
right to recover that amount by selling or canceling sufficient shares of any
Restricted Stock held by Cannavino.
17. Adjustments. If any change is made in the shares of Common
Stock (including without limitation by stock dividend, stock split, merger or
consolidation, but not including the issuance of additional shares for
consideration or the issuance of restricted stock to employees, consultants or
other agents of PSC), the Board will make such adjustments in the number and
kind of shares (which may consist of shares of a surviving corporation to a
merger) that may thereafter be acquired by Cannavino
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upon exercise of the Option and the exercise price applicable thereto as are
equitable to preserve the intent and economic effect of this Grant.
18. Action by PSC. Any election, consent, waiver or other action
that may be taken by PSC hereunder will be taken by the Chairman of the Board,
unless Cannavino is then serving in such capacity, in which case such action
will be taken by the Board.
19. Notices. Any notice to PSC that is required or permitted by
this Grant must be addressed to PSC at its principal office to the attention of
the Chairman (unless Cannavino is then the Chairman, in which case to the
attention of the Board of Directors), with a copy to the General Counsel. Any
notice to Cannavino that is required or permitted by this Grant must be
addressed to Cannavino at the most recent address for Cannavino reflected in
the appropriate records of PSC, with copies to Proskauer Rose Goetz &
Mendelsohn LLP, 1585 Broadway, New York, New York 10036, Attention: Michael S.
Sirkin (telecopy: 212-969-2900). Either party may at any 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. Whenever
this Grant requires or permits any notice from one party to another, the notice
must be in writing and must be sent by courier, overnight delivery service,
facsimile or certified mail, return receipt requested, and such notice will be
deemed to be given (a) if sent by courier, on the date actually delivered, (b)
if sent by overnight delivery service, one day after being sent, (c) if sent by
telecopy, on the date that confirmation of transmission is received by the
sender, or (d) if sent by certified mail, on the third business day after being
mailed.
20. Enforcement. This Grant will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the choice of
law rules thereof. PSC will be entitled, in addition to any other remedies it
may have at law or in equity, to temporary and permanent injunctive and other
equitable relief to enforce the provisions of this Grant. Any action to
enforce the provisions of, or otherwise relating to, this Grant may be brought
in the appropriate courts in Dallas, Dallas County, Texas, and by accepting the
Option Cannavino hereby consents to the personal jurisdiction of such courts in
any such action; provided that, at the request of PSC or Cannavino, any claim
or dispute arising out of or relating to this Grant or the transactions
contemplated hereby, will be resolved without resort to the courts solely
through mediation and, if mediation is not successful, through binding
arbitration pursuant to the rules of the American Arbitration Association. A
judgment upon the award rendered by the arbitrators may be entered by any court
having jurisdiction. Neither party will be liable to the other for punitive
damages for any such claim or dispute.
21. Entire Agreement. This Grant, the Employment Agreement and
the other documents and instruments specifically referenced therein constitute
the entire agreement between the parties hereto with respect to the subject
matter thereof, and except as expressly set forth therein, there are no
agreements or representations, written or oral, express or implied, with
respect to such subject matter. No provision of this Grant may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Cannavino and PSC. No waiver by either party hereto of
any condition or provision of this Grant to be performed by the other party
will be deemed a waiver of any other provisions or conditions at the same or at
any prior or subsequent time.
22. Severability. If any provision of this Grant is held to be
invalid or unenforceable for any reason, the validity and enforceability of all
other provisions of this Grant will not be affected thereby.
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IN WITNESS WHEREOF, PSC has executed this Grant as of the date first above
written.
PEROT SYSTEMS CORPORATION
By: /s/ MORTON H. MEYERSON
-------------------------------
Name: MORTON H. MEYERSON
-------------------------------
Title: President and Chief Executive
-------------------------------
Officer
Exhibits
A. Employment Agreement
B. Vesting Schedule
C. Form of Purchase Price Note
D. Form of Covered Claims Note
E. Form of General Note
F. Form of Pledge Agreement
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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of September
16, 1995 (the "Effective Date") by and between Perot Systems Corporation, a
Texas corporation ("PSC"), and James A. Cannavino ("Cannavino").
1. Employment. Subject to the terms and conditions specified in
this Agreement, PSC hereby agrees to employ Cannavino as President and Chief
Operating Officer and Cannavino agrees to perform those duties normally
associated with such positions, subject to such legal and ethical policies and
guidelines as may be reasonably established from time to time by the Board of
Directors of PSC (the "Board"), the Chairman of the Board (the "Chairman") or
the Chief Executive Officer of PSC. The term of Cannavino's employment by PSC
hereunder will commence on the Effective Date and will continue thereafter
until terminated in accordance with Section 8.
2. Extent of Services. Cannavino will not participate in any way
in any other job or business while employed by PSC, without prior written
consent of the Board; provided that Cannavino may (subject to Section 4) engage
in charitable activities, passive investments and part time business projects
or ventures unrelated to the business of PSC if such activities (taken
together) do not occupy a significant portion of Cannavino's business time and
do not materially interfere with the performance of his duties to PSC. At the
request of the Board, Cannavino will serve as a director and/or officer of one
or more of PSC's subsidiaries for no additional compensation.
3. Confidential Information. Cannavino agrees never to use or
disclose any Confidential Information of PSC, except for (a) use and disclosure
made in good faith by Cannavino in the course of his services for PSC and (b)
disclosure required by applicable law. "Confidential Information" of PSC
includes all PSC trade secrets, intellectual property or other business,
financial or technical information relating to PSC's business, technology,
vendors or customers, whether or not reduced to writing and whether or not
conceived, originated, discovered or developed in whole or in part by
Cannavino; provided that Confidential Information does not include (i)
information that is available to the general public or known generally within
the industry; (ii) information that has been intentionally disclosed by PSC to
a third party without any confidentiality obligation on the part of the third
party; and (iii) information that was known to Cannavino prior to his
association with PSC. Cannavino will also comply with any agreements by PSC to
protect third party confidential information, to the same extent as if it were
Confidential Information of PSC hereunder.
4. Competition. Cannavino acknowledges that, in the course and
as a result of his employment with PSC, Cannavino will obtain special training
and knowledge and will come in contact with PSC's customers and potential
customers, which training, knowledge and contacts would provide invaluable
benefits to competitors of PSC. Accordingly, and in consideration of PSC's
agreement to hire Cannavino hereunder, which Cannavino acknowledges is
conditioned on the covenants contained herein, Cannavino agrees that, during
the time Cannavino is employed by PSC and within two years thereafter, except
with the prior written consent of PSC, Cannavino will comply with the following
covenants:
<PAGE> 2
(a) Cannavino will not, directly or indirectly, whether
as an employee, employer, consultant, agent, principal, partner,
owner, shareholder (other than as a holder of less than 5% of a
publicly traded class of securities), officer, director or in any
other individual or representative capacity, provide services to, or
be otherwise associated with, any of the companies or divisions listed
on Schedule I attached hereto (the "Named Competitors"); provided that
Cannavino may serve as a senior management level employee or
consultant for, or be a shareholder or director of, the parent company
or an affiliate of a Named Competitor, if he is not involved in the
day-to-day activities of the Named Competitor and the revenues of the
Named Competitor during its most recent fiscal year at the time
Cannavino begins such employment are less than 20% of the consolidated
revenues of the parent company and its subsidiaries. Within 30 days
after Cannavino's employment with the Company is terminated, PSC may
add up to six additional Named Competitors to the list set forth on
Schedule I, if each new Named Competitor's principal business is
directly competitive with a Core Business of PSC. "Core Business"
means a business segment (based on the type of products or services
provided and not the industry to which such products or services are
provided) that generated 20% or more of PSC's total revenues during
the latest completed fiscal year of PSC prior to Cannavino's
termination.
(b) Cannavino will not head up, run, consult for or
become an employee of any entity whose principal business is directly
competitive with a Core Business of PSC, or any subsidiary or division
of a company where the principal business of such subsidiary or
division is directly competitive with a Core Business of PSC.
(c) Cannavino will not directly solicit to work for him
or any entity by which is he employed or intends to become employed
(and actually is employed within six months), or specifically identify
for employment by any such entity, any individuals who, at the time of
such solicitation or identification, are employees of PSC; provided
that (i) no violation of this paragraph will be deemed to have
occurred unless the employee involved actually commences employment
with such entity and (ii) Cannavino may solicit or identify for
employment up to three such individuals, if such individuals were
first employed by PSC after the Effective Date.
(d) Cannavino will not directly solicit from a Major
Customer any business that is directly competitive with a Core
Business of PSC or directly competitive with a business that
accounts for more than 25% of PSC's revenues from such Major Customer
in the year prior to Cannavino's termination. For such purposes, a
"Major Customer" means any customer (which is limited to the
operating unit that benefits from the goods or services provided
by PSC and, if such operating unit has a parent company, the
other operating units of such parent company that do not receive
any substantial benefits from such goods or services will not be Major
Customers) that accounted for more than $5 million in revenues to PSC
during PSC's latest completed fiscal year prior to Cannavino's
termination, adjusted to an annualized basis for any contracts
entered into during such fiscal year, or which would account for more
than $5 million in revenues to PSC during the fiscal year in which
Cannavino is terminated after giving
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effect to any new contracts entered into during such fiscal year;
provided that (i) no more than 50 customers may be classified as Major
Customers and (ii) within 30 days after Cannavino's termination, PSC
will provide to Cannavino a list of its Major Customers at such time,
indicating any Major Customers to whom PSC provides goods or services
in excess of such 25% of revenue for such Major Customer that do not
constitute Core Business and indicating such goods or services. It is
understood that Cannavino may attend meetings and social events with
executives of a Major Customer (or the parent of a Major Customer)
without violating this paragraph, so long as he does not directly
solicit any business of the type described in the first sentence of
this paragraph from such Major Customer.
The foregoing restrictions will not apply to the ownership by
Cannavino of less than 5% of a publicly traded class of securities or to the
performance by Cannavino of investment banking services for any entity. If any
provision of this Section 4 is found by any court of competent jurisdiction to
be unreasonable by reason of its being too broad as to the period of time,
territory or scope, then, and in that event, such provision will nevertheless
remain valid and fully effective, but will be considered to be amended so that
the period of time, territory or scope set forth will be changed to be the
maximum period of time, the largest territory or the broadest scope, as the
case may be, that would be found reasonable and enforceable by such court.
5. Notice and Cure. If, before the end of the month following
any month in which (a) Cannavino performs services for a particular company
(other than a company listed on Schedule I) that might constitute a breach of
Section 4(b), (b) knows (or would have known if he had not intentionally
avoided such knowledge) that a former employee of PSC has accepted employment
under circumstances that might constitute a breach of Section 4(c), or (c)
engages in any conduct that might be prohibited under Section 4(d)
(collectively, a "Questionable Activity"), Cannavino delivers notice to PSC
fully describing the Questionable Activity, then (i) if PSC does not deliver
written notice to Cannavino stating that such Questionable Activity constitutes
a breach of Section 4 (a "Notice of Breach") within 30 days after receiving
Cannavino's notice, then such Questionable Activity will be deemed not to
constitute a breach of Section 4, and (ii) if PSC does deliver a Notice of
Breach with respect to such Questionable Activity within such 30 day period,
then Cannavino will be deemed to have fully cured any breach of Section 4
resulting from such Questionable Activity, and PSC will have no right to
exercise remedies with respect to such breach, if within 15 days after the
Notice of Breach, (A) Cannavino ceases to engage in such Questionable Activity,
(B) in the case of clause (b) above, the services of the former employee of PSC
terminate with the entity involved, and (C) in the case of clause (c) above,
any contract with the Major Customer that was obtained in connection with such
Questionable Activity is canceled. Except as expressly provided in this
Section 5, Cannavino will have no right to notice or cure with respect to a
breach of Section 4.
6. Inventions. All inventions, improvements, technical
developments, patentable or copyrightable work products and other intellectual
property that Cannavino helps to create wholly or partly in the course of
Cannavino's work for PSC or as a result of that work or use of PSC property,
and that relates to PSC's business or any natural extension of PSC's business,
will be the property of PSC. Cannavino will promptly disclose all of such
intellectual property to PSC. Cannavino will have no rights to such
intellectual property and hereby assigns any such
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rights to PSC, and will execute any documents reasonably requested and provided
by PSC in order to establish, protect or enforce such rights.
7. Property. At the end of Cannavino's employment, Cannavino
will promptly return all PSC property and Confidential Information to PSC, and
PSC may deduct any amounts owed by Cannavino to PSC from any amounts otherwise
due to Cannavino from PSC.
8. Termination.
(a) PSC may terminate Cannavino's employment under this
Agreement at any time for Cause. "Cause" means the occurrence of any
of the following circumstances: (i) Cannavino's refusal to follow
proper written directions of the Board, the Chairman or the Chief
Executive Officer as to specific actions within a reasonable specified
period unless the action is illegal, unethical or immoral and
Cannavino so notifies the Board and the Chief Executive Officer of
such illegality, unethical position or immorality in writing within
five business days of the request to Cannavino; (ii) Cannavino's
conviction of a felony (other than a traffic violation) or (iii)
Cannavino's commission of material fraud with regard to PSC. "Cause"
specifically excludes Cannavino's death or any physical or mental
illness affecting Cannavino.
(b) PSC may terminate Cannavino's employment under this
Agreement at any time for any reason other than Cause, upon which
termination PSC will pay Cannavino severance pay equal to two year's
Base Salary (as defined below, using the highest Base Salary
previously paid to Cannavino), to be paid on a semi-monthly basis;
provided that, unless such discharge occurs within six months
following a Change in Control, if Cannavino receives any salary,
consulting fees or other cash compensation for services during the
second year following discharge, then any such severance payments made
during the second year following discharge and after Cannavino first
earns such other cash compensation will be reduced by the amount of
such other cash compensation.
(c) Cannavino may terminate his employment under this
Agreement for Good Reason, upon which termination PSC will pay
Cannavino severance pay equal to two year's Base Salary (using the
highest Base Salary previously paid to Cannavino), to be paid on a
semi-monthly basis; provided that, unless Cannavino's Good Reason is
as a result of an action covered by subparagraph (i)-(iv) below that
occurs within six months following a Change in Control, if Cannavino
receives any salary, consulting fees or other cash compensation for
services during the second year following discharge, then any such
severance payments made during the second year following discharge and
after Cannavino first earns such other cash compensation will be
reduced by the amount of such other cash compensation. "Good Reason"
means the occurrence of any of the reasons set forth below, if within
60 days after such occurrence, Cannavino delivers written notice to
the Board stating that he will terminate his employment with PSC if
such reason is not substantially cured within 30 days, and such reason
is not substantially cured within such 30 day period. The reasons for
Good Reason are the following:
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(i) failure to elect Cannavino as Chief Executive
Officer of PSC within 12 months after the Effective Date;
(ii) failure to elect Cannavino as Chairman within
24 months after the Effective Date (or such earlier time as
Morton H. Meyerson ceases to serve as Chairman), unless Morton
H. Meyerson is then the Chairman, in which case the failure to
elect Cannavino as Chairman after Morton H. Meyerson ceases to
be Chairman;
(iii) removal of Cannavino from the position of
President or Chief Operating Officer (unless such removal is
in conjunction with his promotion to Chief Executive Officer)
or a material diminution in the duties associated with such
position;
(iv) removal of Cannavino from the position of
Chairman or Chief Executive Officer or a material diminution
in the duties associated with such position;
(v) a reduction in Cannavino's Base Salary;
(vi) a "Change in Control" of PSC, which is
defined to mean any of the following events:
(A) PSC is merged, consolidated or
reorganized into or with another corporation or other
legal entity and as a result of such merger,
consolidation or reorganization less than 50% of the
combined equity interests or voting power of the then
outstanding securities of the remaining corporation
or legal entity or its ultimate parent immediately
after such transaction are received in respect of or
in exchange for voting securities of PSC pursuant to
such transaction;
(B) PSC sells all or substantially all
of its assets to any other corporation or other legal
entity and, immediately following such sale, the
equity owners of PSC prior to such sale own less than
50% of the combined equity interests or voting power
of the then outstanding securities of such other
corporation or legal entity or its ultimate parent;
(C) any person (including any "person"
as such term is used in Section 13(d)(3) or Section
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) has become the
beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities which, when added to any securities
already owned by such person, would represent in the
aggregate (i) 50%, if PSC's common stock is not
Publicly Traded at such time, or (ii) 40%, if PSC's
common stock is
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Publicly Traded at such time, of the outstanding
securities of PSC which are entitled to vote to elect
directors;
(D) the shares of PSC common stock owned
by Ross Perot and his family members or affiliates of
his family members are voted, separately or together
with shares owned by other shareholders, at the
request of Ross Perot or his family members, as
necessary to constitute a majority of the outstanding
voting stock, to replace, within a six month period,
a majority of the Board with new directors and,
within six months after the new majority of directors
is in office, Cannavino is removed as Chairman,
President, Chief Executive Officer or Chief Operating
Officer of PSC;
(E) shares of PSC common stock owned by
Swiss Bank Corporation ("SBC") or its affiliates are
voted, separately or together with shares owned by
other shareholders, at the request of SBC or its
affiliates, as necessary to constitute a majority of
the outstanding voting stock, to replace, within a
six month period, a majority of the Board with new
directors and, within six months after the new
majority of directors is in office, Cannavino is
replaced as Chairman, President, Chief Executive
Officer or Chief Operating Officer of PSC;
(F) shares of PSC common stock owned by
the Siemens group of companies ("Siemens") or its
affiliates are voted, separately or together with
shares owned by other shareholders, at the request of
Siemens or its affiliates, as necessary to constitute
a majority of the outstanding voting stock, to
replace, within a six month period, a majority of the
Board with new directors and, within six months after
the new majority of directors is in office, Cannavino
is replaced as Chairman, President, Chief Executive
Officer or Chief Operating Officer of PSC; or
(G) if, before the common stock of PSC
or any successor security, issued or distributed by
PSC or any successor entity, whether by way of
merger, consolidation, share exchange,
reorganization, recapitalization or otherwise, has
been listed on a registered national securities
exchange or approved for quotation in the National
Association of Securities Dealers Automated Quotation
("Nasdaq") system, more than 95% of the shares of PSC
common stock currently owned by HWGA, Ltd. and
Meyerson Family Limited Partnership area transferred
in a single or series of related transfers, other
than in one or more distributions to the partners of
such partnerships;
provided, however, that notwithstanding paragraphs (A), (B) or
(C) above, the ownership or acquisition of securities by SBC
or its affiliates (subject to the limitations of any agreement
between SBC or its affiliates and PSC) or Ross Perot
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or his affiliates or family members or affiliates of his
family members or Siemens or its affiliates (subject to the
limitations of any agreement between Siemens or its affiliates
and PSC) will not constitute, or be deemed to cause, a Change
in Control, except that (x) a Change in Control will be deemed
to have occurred if either Siemens and its affiliates or SBC
and its affiliates own more than 45% of the outstanding
securities of PSC that are entitled to elect directors and
such ownership continues for one year and (y) if PSC
terminates Cannavino's employment during such year without
Cause or Cannavino terminates with Good Reason, then such
termination will be deemed to have occurred immediately
following a Change in Control and Cannavino's rights under
this Agreement and the Option Grant will be adjusted
accordingly (and retroactively, to the extent necessary); or
(vii) any other material breach by PSC of its
obligations under this Agreement.
(d) Cannavino may terminate his employment under this
Agreement without Good Reason, but in such event PSC will have no
further obligations to Cannavino hereunder, except for the payment of
accrued Base Salary through the date of termination.
(e) The parties agree that actual damages in the event of
a breach of this Agreement by PSC are speculative and that the
severance payments set forth in paragraphs (b) and (c) above
constitute liquidated damages and are a reasonable estimate of the
actual damages that would result from a breach of this Agreement by
PSC. Cannavino is not entitled to any additional damages whatsoever.
If PSC tenders such severance pay, Cannavino hereby waives and
relinquishes any cause of action relating to his employment or
termination under this Agreement (excluding any claim for Base Salary
and any claim for nondiscretionary benefits, bonus payments,
indemnification or insurance to which Cannavino is entitled under
PSC's articles of incorporation, bylaws or other agreements binding on
PSC, in each case through the date of termination, other than with
respect to indemnification or director and officer insurance, and any
claim under the Option Grant, dated as of July 27, 1995 from PSC to
Cannavino (the "Option Grant")), and if he institutes any such cause
of action against PSC or its directors, officers or employees under or
in connection with this Agreement, Cannavino forfeits any entitlement
to the severance payments provided in paragraphs (b) and (c) above and
will be entitled to no damages whatsoever. Notwithstanding the
foregoing, Cannavino may bring a claim against PSC or its directors,
officers or employees for defamation if he first returns any severance
payments previously made hereunder, and upon bringing such claim he
will forfeit his right to any additional severance payments hereunder
unless and until he is successful in winning a final judgment on such
claim (in which case PSC will be liable for the full amount of
severance pay required hereunder).
9. Compensation. During the term of this Agreement, PSC will pay
Cannavino a salary of $41,666.67 per month, which salary may be revised by the
Board from time to time (the "Base Salary"), plus a bonus, if any, to be
determined in the sole discretion of the Board and payable as of the end of
each calendar year other than 1995. Cannavino will also receive
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a signing bonus, payable as of the Effective Date, in an amount to be
determined by the current Chairman.
10. Benefits. Cannavino will be entitled to receive employee
benefits as established or revised by PSC from time to time for its senior
executive officers. Cannavino will receive medical coverage, dependent medical
coverage and disability coverage on the same terms as the other executive
officers of PSC. Cannavino will be entitled to indemnification and will
receive directors' and officers' liability insurance to the maximum extent
provided to other directors and executive officers of PSC and its subsidiaries
from time to time. Cannavino will receive life insurance coverage on the same
terms as provided to the current Chairman, if Cannavino submits to a physical
examination and receives an insurability rating that provides for no higher
premium than that paid by PSC for the current Chairman; provided that, if
Cannavino's premium would be higher than that paid by PSC for the current
Chairman, Cannavino may obtain a lower amount of coverage, so as to reduce the
premium to that paid for the current Chairman, or may obtain equivalent
coverage by paying the difference between his actual rate and the rate paid for
the current Chairman. Cannavino will be provided the benefits of the standard
PSC relocation policy provided to employees relocating when already employed by
PSC and given the most favorable reasonable alternatives within that policy in
connection with Cannavino's permanent relocation to the Dallas, Texas area,
which relocation Cannavino agrees he will make within two years of the
Effective Date. Cannavino will be provided with a PSC paid apartment, car,
temporary living expenses and commuting expenses during the period of up to one
year prior to such permanent relocation.
11. Legal Fees. PSC will pay all reasonable legal fees incurred
by Cannavino through the date hereof in connection with the negotiation and
documentation of this Agreement, the Stock Option Grant and the other documents
specifically referenced herein or therein.
12. Withholding. PSC may withhold from any amounts payable under
this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or government regulation or ruling.
13. Survival. The provisions of Sections 3, 4, 5, 6 and 7 will
survive any termination of this Agreement and will continue to be enforceable
against Cannavino after his employment with PSC ends.
14. Action by PSC. Any election, consent, waiver or other action
that may be taken by PSC hereunder will be taken by the Chairman, unless
Cannavino is then serving in such capacity, in which case such action will be
taken by the Board.
15. Notices. Any notice to PSC that is required or permitted by
this Agreement must be addressed to PSC at its principal office to the
attention of the Chairman (unless Cannavino is then the Chairman, in which case
to the attention of the Board of Directors), with a copy to the General
Counsel. Any notice to Cannavino that is required or permitted by this
Agreement must be addressed to Cannavino at the most recent address for
Cannavino reflected in the appropriate records of PSC, with copies to Proskauer
Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New York 10036,
Attention: Michael S. Sirkin (telecopy: 212-969-2900). Either party
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may at any 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. Whenever this Agreement requires or permits any notice from
one party to another, the notice must be in writing and must be sent by
courier, overnight delivery service, facsimile or certified mail, return
receipt requested, and such notice will be deemed to be given (a) if sent by
courier, on the date actually delivered, (b) if sent by overnight delivery
service, one day after being sent, (c) if sent by telecopy, on the date that
confirmation of transmission is received by the sender, or (d) if sent by
certified mail, on the third business day after being mailed.
16. Enforcement. This Agreement will be governed by and construed
in accordance with the laws of the State of Texas, without regard to the choice
of law rules thereof. PSC will be entitled, in addition to any other remedies
it may have at law or in equity, to temporary and permanent injunctive and
other equitable relief to enforce the provisions of this Agreement. Any action
to enforce the provisions of, or otherwise relating to, this Agreement may be
brought in the appropriate courts in Dallas, Dallas County, Texas, and
Cannavino hereby consents to the personal jurisdiction of such courts in any
such action; provided that, at the request of PSC or Cannavino, any claim or
dispute arising out of or relating to this Agreement or Cannavino's employment
by PSC or the termination of such employment, including any federal or state
statutory claims, will be resolved without resort to the courts solely through
mediation and, if mediation is not successful, through binding arbitration
pursuant to the rules of the American Arbitration Association. A judgment upon
the award rendered by the arbitrators may be entered by any court having
jurisdiction. Neither party will be liable to the other for punitive damages
for any such claim or dispute.
17. Entire Agreement. This Agreement and the other documents and
instruments specifically referenced herein constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof, and except as expressly set forth herein or therein, there are no
agreements or representations, written or oral, express or implied, with
respect to such subject matter. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by Cannavino and PSC. No waiver by either party
hereto of any condition or provision of this Agreement to be performed by the
other party will be deemed a waiver of any other provisions or conditions at
the same or at any prior or subsequent time.
18. Severability. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, the validity and enforceability of
all other provisions of this Agreement will not be affected thereby.
19. Counterparts. This Agreement may be executed in any number of
multiple counterparts and by different parties on separate counterparts, all of
which when taken together will constitute one and the same agreement.
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IN WITNESS WHEREOF, and intending to be legally bound, Cannavino and a
duly-authorized representative of PSC have executed this Agreement as of the
date first above written.
/s/ JAMES A CANNAVINO
------------------------------------------
JAMES A. CANNAVINO
PEROT SYSTEMS CORPORATION
By: /s/ PETER ALTABEF
---------------------------------------
Name: Peter Altabef
-------------------------------------
Title: Vice President and General Counsel
------------------------------------
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SCHEDULE I TO
EMPLOYMENT AGREEMENT
List of Competitors
Electronic Data Systems Corporation
Computer Sciences Corporation and CSC Index
SHL System House Inc.
Integrated Systems Solutions Corporation
American Management Systems
The Solutions company of AT&T
SEMA
Anderson Consulting
Deloitte & Touche [any business competitive with PSC]
Ernst & Young [any business competitive with PSC]
Cap Gemini Sogeti
KPGM Peat Marwick [any business competitive with PSC]
Price Waterhouse [any business competitive with PSC]
A.D. Little
Cambridge Technology
Booze Allen
Siemens [any business competitive with PSC]
Daimler-Benz [any business competitive with PSC]
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EXHIBIT 10.14
PROMISSORY NOTE
$1,400,000 December 18, 1995
Dallas, Texas
FOR VALUE RECEIVED, James A. Cannavino ("Cannavino"), promises to pay to
Perot Systems Corporation, a Texas corporation ("PSC"), or order, at the
principal offices of PSC or at such other place as the holder of this Note may
designate, the principal sum of One Million Four Hundred Thousand Dollars
($1,400,000), together with interest on all unpaid portions of such amount from
the date of advance until repayment at the greater of (a) eight percent (8%)
per annum or (b) the "Applicable Federal Rate," which is necessary to prevent
such interest from being treated as "below market," as such terms are defined
in the Internal Revenue Code of 1986, as amended, for the month in which this
Note is executed and delivered, compounded annually.
1. Payment. Reference is made to the Stock Option Grant, dated as of
July 27, 1995, by PSC in favor of Cannavino (the "Option Grant"). Capitalized
terms used in this Note that are not otherwise defined have the meanings given
to such terms in the Option Grant. The principal and all accrued interest on
this Note will be payable in full on the earliest to occur of the following
dates (or earlier if otherwise required by this Note):
(a) the fifteenth anniversary of the Effective Date;
(b) three years after the Restricted Stock is Publicly Traded; or
(c) six months after the first date on which the Restricted Stock is
Publicly Traded and on which, for the preceding ten consecutive trading
days, the product of (i) the closing price of the Restricted Stock
multiplied by (ii) the number of shares of Vested Stock then owned by
Cannavino is equal to or greater than two times the aggregate outstanding
balance of principal and interest on this Note, the Covered Claims Note
and the General Note at such time.
2. Security. Payment of this Note is secured pursuant to a Pledge
Agreement of even date herewith between PSC and Cannavino (the "Pledge
Agreement").
3. Prepayment. Cannavino may prepay this Note in whole or in part at
any time or from time to time, without premium or penalty. If Cannavino sells
any of the Restricted Stock, then Cannavino will promptly (and in any event
within five days after the completion of each such sale) make a prepayment in
an amount equal to the proceeds of such sale, less any federal income taxes
incurred by Cannavino as a result of such sale, which will be applied to this
Note, the Covered Claims Note and the General Note as follows (but, in each
case, not to exceed the unpaid balance of principal and interest then
outstanding under such Notes, if any): (a) to this Note, in an amount equal to
$1.40 for each share of Restricted Stock sold, plus the accrued interest on the
Purchase Price Note applicable to such $1.40 per share; (b) to the Covered
Claims
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Note; (c) to the General Note; and (d) to any remaining balance on this Note;
provided that, if Restricted Stock is sold upon exercise of the Put Option
under the circumstances described in the last sentence of Section 9 of the
Option Grant, Cannavino may apply the proceeds of such sale to his excise tax
liability before making the payments required by clauses (b), (c) and (d)
above. Any prepayment under this paragraph will be applied first to accrued
but unpaid interest and then to principal.
4. Offset Rights. Pursuant to the Option Grant, (a) PSC has the right
to satisfy certain payment obligations to Cannavino under the Option Grant by
offset against amounts, whether or not then otherwise due, under this Note, and
any amount so offset will automatically be deemed due and payable hereunder
without notice or demand, and (b) Cannavino has the right to satisfy his
obligations to PSC under this Note by offset against amounts owing from PSC to
Cannavino under the Option Grant. This Note may not be assigned by PSC.
5. Events of Default. This Note will become immediately due and
payable without notice or demand upon the occurrence at any time of any of the
following events of default (individually, an "Event of Default" and
collectively, "Events of Default"):
(a) the failure by Cannavino to make any required payment of
principal or interest on this Note within five days after PSC gives
written notice of such failure to Cannavino;
(b) the institution against Cannavino of any proceedings under the
United States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law affecting
the rights of creditors generally, which proceeding is not dismissed
within 60 days of filing; or
(c) the institution by Cannavino of any proceedings under the United
States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law affecting
the rights of creditors generally or the making by Cannavino or any
endorser or guarantor of this Note of a composition or an assignment or
trust mortgage for the benefit of creditors.
6. Default Interest. Every amount overdue under this Note shall bear
interest from and after the date on which such amount first became overdue at
an annual rate (compounded annually) which is the lesser of (a) two percentage
points above the rate otherwise applicable under this Note or (b) the maximum
amount permitted by law. Such interest on overdue amounts under this Note
shall be payable on demand and shall accrue until the obligation of Cannavino
with respect to the payment of such interest has been discharged (whether
before or after judgment).
7. Maximum Rate. In no event shall any interest charged, collected or
reserved under this Note exceed the maximum rate then permitted by applicable
law and if any such payment is paid by Cannavino, then such excess sum shall be
credited by the holder as a payment of principal.
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8. Collection Costs. The Cannavino agrees to pay on demand all costs of
collection, including reasonable attorneys' fees, incurred by the holder in
enforcing the obligations of Cannavino under this Note.
9. Waivers. No delay or omission on the part of the holder in
exercising any right under this Note or the Pledge Agreement shall operate as a
waiver of such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion. Cannavino hereby waives
presentment, demand, protest and notices of every kind and assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable.
10. Amendments. None of the terms or provisions of this Note may be
excluded, modified or amended except by a written instrument duly executed on
behalf of the holder expressly referring to this Note and setting forth the
provision so excluded, modified or amended.
11. Enforcement. This Note will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the choice of
law rules thereof. Any action to enforce the provisions of, or otherwise
relating to, this Note may be brought in the appropriate courts in Dallas,
Dallas County, Texas, and Cannavino hereby consents to the personal
jurisdiction of such courts in any such action; provided that, at the request
of PSC or Cannavino, any claim or dispute arising out of or relating to this
Note or the indebtedness evidenced hereby will be resolved without resort to
the courts solely through mediation and, if mediation is not successful,
through binding arbitration pursuant to the rules of the American Arbitration
Association. A judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction. Neither party will be liable to the
other for punitive damages for any such claim or dispute.
/s/ JAMES A. CANNAVINO
-------------------------------
James A. Cannavino
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EXHIBIT 10.15
PROMISSORY NOTE
$1,500,000 January 1, 1996
Dallas, Texas
FOR VALUE RECEIVED, James A. Cannavino ("Cannavino"), promises to pay to
Perot Systems Corporation, a Delaware corporation ("PSC"), or order, at the
principal offices of PSC or at such other place as the holder of this Note may
designate, the principal sum of One Million Five Hundred Thousand Dollars
($1,500,000), or such lesser amount as may be advanced by PSC to Cannavino
hereunder, together with interest on all unpaid portions of such amount from
the date of advance until repayment at the "Applicable Federal Rate," which is
necessary to prevent such interest from being treated as "below market," as
such terms are defined in the Internal Revenue Code of 1986, as amended, for
the month in which this Note is executed and delivered, compounded annually.
1. Payment. Reference is made to the Stock Option Grant, dated as of
July 27, 1995, by PSC in favor of Cannavino (the "Option Grant"). Capitalized
terms used in this Note that are not otherwise defined have the meanings given
to such terms in the Option Grant. The principal and all accrued interest on
this Note will be payable in full on the earliest to occur of the following
dates (or earlier if otherwise required by this Note):
(a) the fifteenth anniversary of the Effective Date;
(b) three years after the Restricted Stock is Publicly Traded; or
(c) six months after the first date on which the Restricted Stock is
Publicly Traded and on which, for the preceding ten consecutive trading
days, the product of (i) the closing price of the Restricted Stock
multiplied by (ii) the number of shares of Vested Stock then owned by
Cannavino is equal to or greater than two times the aggregate outstanding
balance of principal and interest on this Note, the Purchase Price Note
and the Covered Claims Note at such time.
2. Security. Payment of this Note is secured pursuant to a Pledge
Agreement dated as of December 18, 1995, between PSC and Cannavino (the "Pledge
Agreement").
3. Prepayment. Cannavino may prepay this Note in whole or in part at
any time or from time to time, without premium or penalty. If Cannavino sells
any of the Restricted Stock, then Cannavino will promptly (and in any event
within five days after the completion of each such sale) make a prepayment in
an amount equal to the proceeds of such sale, less any federal income taxes
incurred by Cannavino as a result of such sale, which will be applied to this
Note, the Purchase Price Note and the Covered Claims Note as follows (but, in
each case, not to exceed the unpaid balance of principal and interest then
outstanding under such Notes, if any): (a) to the Purchase Price Note, in an
amount equal to $.70 for each share of Restricted Stock (such Restricted Stock
being the shares existing after PSC's two for one stock split effective
December 1995) sold, plus the accrued interest on the Purchase Price Note
applicable to such $.70 per
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share; (b) to the Covered Claims Note; (c) to this Note; and (d) to any
remaining balance on the Purchase Price Note; provided that, if Restricted
Stock is sold upon exercise of the Put Option under the circumstances described
in the last sentence of Section 9 of the Option Grant, Cannavino may apply the
proceeds of such sale to his excise tax liability before making the payments
required by clauses (b), (c) and (d) above. Any prepayment under this
paragraph will be applied first to accrued but unpaid interest and then to
principal.
4. Recourse. Recourse of the holder of this Note is limited to the
Collateral (as defined in the Pledge Agreement), and Cannavino has no personal
or other liability for such amounts except as to such Collateral on the terms
set forth in the Pledge Agreement; provided that (a) if, prior to the maturity
date of this Note, (i) Cannavino's employment with PSC is terminated for Cause
(as defined in the Employment Agreement) or (ii) Cannavino terminates his
employment with PSC without Good Reason (as defined in the Employment
Agreement), then, beginning on the date of such transfer or termination, the
holder of this Note will have full recourse against Cannavino and Cannavino
will be personally liable for all of the obligations evidenced hereby, and (b)
if Cannavino sells or otherwise transfers all or any portion of the Restricted
Stock (other than a transfer pursuant to Section 4(e) of the Option Grant, but
including any sale or other transfer by a transferee under such Section 4(e)),
then the holder of this Note will have full recourse against Cannavino with
respect to, and Cannavino will be personally liable for, any advances made
under this Note after the date of such sale or transfer, plus accrued interest
on any such advances.
5. Offset Rights. Pursuant to the Option Grant, (a) PSC has the right
to satisfy certain payment obligations to Cannavino under the Option Grant by
offset against amounts, whether or not then otherwise due, under this Note, and
any amount so offset will automatically be deemed due and payable hereunder
without notice or demand, and (b) Cannavino has the right to satisfy his
obligations to PSC under this Note by offset against amounts owing from PSC to
Cannavino under the Option Grant. This Note may not be assigned by PSC.
6. Events of Default. This Note shall become immediately due and
payable without notice or demand upon the occurrence at any time of any of the
following events of default (individually, an "Event of Default" and
collectively, "Events of Default"):
(a) the failure by Cannavino to make any required payment of
principal or interest on this Note within five days after PSC gives
notice of such failure to Cannavino;
(b) the institution against Cannavino of any proceedings under the
United States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law affecting
the rights of creditors generally, which proceeding is not dismissed
within 60 days of filing; or
(c) the institution by Cannavino of any proceedings under the United
States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law affecting
the rights of creditors generally or the making
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by Cannavino or any endorser or guarantor of this Note of a composition
or an assignment or trust mortgage for the benefit of creditors.
7. Default Interest. Every amount overdue under this Note shall bear
interest from and after the date on which such amount first became overdue at
an annual rate (compounded annually) which is the lesser of (a) two percentage
points above the rate otherwise applicable under this Note or (b) the maximum
amount permitted by law. Such interest on overdue amounts under this Note
shall be payable on demand and shall accrue until the obligation of Cannavino
with respect to the payment of such interest has been discharged (whether
before or after judgment).
8. Maximum Rate. In no event shall any interest charged, collected or
reserved under this Note exceed the maximum rate then permitted by applicable
law and if any such payment is paid by Cannavino, then such excess sum shall be
credited by the holder as a payment of principal.
9. Waivers. No delay or omission on the part of the holder in
exercising any right under this Note or the Pledge Agreement shall operate as a
waiver of such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion. Cannavino hereby waives
presentment, demand, protest and notices of every kind and assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable.
10. Amendments. None of the terms or provisions of this Note may be
excluded, modified or amended except by a written instrument duly executed on
behalf of the holder expressly referring to this Note and setting forth the
provision so excluded, modified or amended.
11. Enforcement. This Note will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the choice of
law rules thereof. Any action to enforce the provisions of, or otherwise
relating to, this Note may be brought in the appropriate courts in Dallas,
Dallas County, Texas, and Cannavino hereby consents to the personal
jurisdiction of such courts in any such action; provided that, at the request
of PSC or Cannavino, any claim or dispute arising out of or relating to this
Note or the indebtedness evidenced hereby will be resolved without resort to
the courts solely through mediation and, if mediation is not successful,
through binding arbitration pursuant to the rules of the American Arbitration
Association. A judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction. Neither party will be liable to the
other for punitive damages for any such claim or dispute.
/s/ JAMES A. CANNAVINO
--------------------------------
James A. Cannavino
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EXHIBIT 10.16
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement") is made as of December 18, 1995,
by and between Perot Systems Corporation, a Texas corporation ("PSC"), and
James A. Cannavino ("Cannavino").
WHEREAS, PSC has granted Cannavino the option to purchase 1,000,000 shares
of PSC's common stock pursuant to a Stock Option Grant dated as of July 27,
1995 (the "Option Grant");
WHEREAS, in accordance with the Option Grant, PSC has extended credit to
Cannavino and may extend additional credit pursuant to the terms of a Purchase
Price Note, a Covered Claims Note and a General Note (as such terms are defined
in the Option Grant, the "Notes");
NOW, THEREFORE, to secure the Obligations (as defined below), Cannavino
and PSC hereby agree as follows:
1. Definitions. Capitalized terms that are not otherwise defined in
this Agreement have the meanings assigned to such terms in the Option Grant.
2. Pledge of Securities. Cannavino hereby pledges and grants to PSC a
security interest in the following:
(a) the Option and any Restricted Stock purchased by Cannavino
pursuant to the Option, together with any other shares of capital stock
of PSC that may be distributed with respect to such Restricted Stock
(collectively, the "Securities"), and all rights and privileges
pertaining thereto;
(b) all proceeds, products, cash, securities, dividends, increases,
distributions and profits received from or on the Securities (the
"Proceeds"), including without limitation distributions or payments in
partial or complete liquidation or redemption, or as a result of
reclassifications, readjustments, reorganizations or changes in the
capital structure of the issuer of the Securities; and
(c) all subscriptions, warrants, options, preemptive rights and
other rights issued or otherwise granted by the issuer of the Securities
or any other person on or in connection with the Securities or any other
item of the Collateral (as defined below);
(all of such property and rights described in items (a), (b) and (c) above are
herein collectively called the "Collateral"); TO HAVE AND TO HOLD the
Collateral, together with all rights, titles, interests, privileges and
preferences appertaining to or incidental thereto, unto PSC, and its respective
successors and assigns, forever, subject, however, to the terms, covenants and
conditions hereinafter set forth. The security interest granted and the
assignments made hereunder are made as security only and shall not subject PSC
to, or transfer or in any way affect
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or modify, any obligation of Cannavino with respect to any of the Collateral or
any transaction involving or giving rise thereto.
3. Obligations Secured. The pledge and security interest in the
Collateral granted hereby secures payment and performance of the following
obligations of Cannavino to PSC, whether now outstanding or incurred after the
date hereof (the "Obligations"): (a) all principal, interest, fees, expenses,
obligations and liabilities of Cannavino arising pursuant to or represented by
the Notes; (b) all taxes, assessments, insurance premiums, brokerage fees,
reasonable attorneys' fees and other expenses of sale of the Collateral; (c)
Cannavino's performance of his obligations under the Notes, this Agreement and
the Option Grant; and (d) all renewals, extensions and modifications of the
indebtedness and obligations referred to in the foregoing clauses, or any part
thereof.
4. Cannavino's Warranties and Indemnity. Cannavino represents, warrants
and covenants to PSC (a) that he is and (except as provided in Section 6) will
be the lawful owner of the Securities, (b) that the Securities are and (except
as provided in Section 6) will remain free and clear of all liens, encumbrances
and security interests other than the security interest granted by Cannavino
hereunder, and (c) that Cannavino has the right and authority to pledge the
Securities and otherwise to comply with the provisions hereof. In the event
that any adverse claim is asserted in respect of the Securities or any portion
thereof, except such as may result from an act of PSC not authorized hereunder,
Cannavino shall indemnify PSC and hold PSC harmless from and against any
losses, liabilities and expenses (including reasonable counsel fees) incurred
by PSC in exercising any right, power or remedy of PSC hereunder or defending,
protecting or enforcing the security interests created hereunder. Any such
loss, liability or expense so incurred shall be paid by Cannavino upon demand,
and shall become part of the Obligations of Cannavino secured pursuant to this
Agreement. PSC hereby consents to the pledge of the Securities to PSC
hereunder, notwithstanding any restrictions on transfer of the Securities set
forth in the Option Grant.
5. Negative Covenants. Cannavino covenants and agrees that, unless PSC
otherwise consents in writing and except as provided in Section 6, Cannavino
will not: (a) sell, assign or transfer any rights of Cannavino in the
Collateral; or (b) create any lien in, or security interest in, or otherwise
encumber, the Collateral, or any part thereof, or permit the same to be or
become subject to any lien, attachment, execution, sequestration, other legal
or equitable process, or any encumbrance of any kind or character, except the
security interest herein created in favor of PSC.
6. Sale of Collateral. So long as no Event of Default (as defined in
the Note) or event that with notice or passage of time or both would constitute
an Event of Default (a "Potential Default") has occurred and is continuing,
Cannavino may (subject to the provisions of the Option Grant):
(a) transfer Restricted Stock to a maximum of two transferees
pursuant to Section 4(e) of the Option Grant; provided that any such
transfer must be effected pursuant to documentation reasonably acceptable
in form and substance to PSC, and such documentation must provide that
the Restricted Stock transferred remains subject to all of
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the vesting provisions, transfer restrictions, repurchase options and
other provisions of the Option Grant and this Agreement, in each case as
if such Restricted Stock continued to be held by Cannavino; or
(b) sell all or any portion of his Vested Stock to PSC pursuant to
the Put Option or for cash to an unaffiliated buyer; provided that (i) in
a sale to an unaffiliated buyer, if the Vested Stock is Publicly Traded
at such time, the Vested Stock must be sold at the market price in a
"brokers' transaction" as defined in Rule 144(g) under the Securities
Act, and (ii) upon any sale of Vested Stock, Cannavino must promptly (and
in any event within five days after the completion of each such sale) pay
to PSC in respect of the Obligations an amount equal to the proceeds of
such sale less any federal income taxes incurred by Cannavino as a result
of such sale. Pending such payment, such net proceeds will continue to
constitute Collateral hereunder.
PSC will deliver certificates representing the Vested Stock to Cannavino and
take such other action as may be necessary to allow a sale of Vested Stock in
accordance with this Section 6.
7. Dividends and Other Distributions.
(a) Cannavino shall cause all non-cash dividends and distributions
with respect to the Securities (including without limitation any stock
dividends and any distributions made on or in respect of the Securities,
whether resulting from a subdivision, combination or reclassification of
the Securities or received in exchange for or in respect of the
Securities or any part thereof or as a result of any merger,
consolidation, acquisition or other transaction) to be distributed
directly to PSC, to be held by PSC as additional Collateral; and if any
such distribution is made to Cannavino, he shall receive such
distribution in trust for PSC and shall immediately transfer it to PSC.
(b) So long as no Event of Default or Potential Default has occurred
and is continuing, Cannavino shall be entitled to receive any cash
dividends payable in respect of the Securities; provided that, upon
receipt of any such cash dividend, Cannavino will promptly (and in any
event within 30 days) pay to PSC in respect of the Obligations (to the
extent of the Obligations then outstanding) the full amount of such cash
dividend less any income taxes payable by Cannavino as a result of such
cash dividend, and, pending such payment, such cash dividend will
continue to constitute Collateral hereunder.
8. Voting Rights. So long as no Event of Default or Potential Default
has occurred and is continuing, Cannavino shall be entitled to exercise any and
all voting rights pertaining to the Securities for any purpose not inconsistent
with the terms of the Note or this Agreement.
9. Termination of Rights. During any period when an Event of Default
has occurred and is continuing, all rights of Cannavino to sell Vested Stock
pursuant to Section 6, to receive dividends pursuant to Section 7(b) or to
exercise voting rights pursuant to Section 8 shall cease and all such rights
shall thereupon become vested in PSC, which shall have the sole and
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exclusive right and authority to dispose of the Securities and to receive
dividends and exercise voting rights in respect of the Securities. Further,
PSC shall have the right, during the continuance of any Event of Default, to
notify and direct the issuer of the Securities to make all payments,
distributions, dividends and any other distributions payable in respect thereof
directly to PSC. The issuer of the Securities making any payment or
distribution to PSC hereunder shall be fully protected in relying on the
written statement of PSC that it then holds a security interest that entitles
PSC to receive such payments and distributions. Any and all money and other
property paid over to or received by PSC pursuant to the provisions of this
Section 9 shall be retained by PSC as additional collateral hereunder and may
be applied in accordance with the provisions hereof.
10. Rights and Remedies of PSC Upon and After Default.
(a) Remedies. Upon the occurrence of an Event of Default, and in
addition to any and all other rights and remedies which PSC may then have
under this Agreement, the Option Grant, the laws of the United States or
the Uniform Commercial Code, as then in effect in Texas (the "Code"), or
otherwise, PSC may: (i) declare the entire unpaid balance of principal of
and all accrued interest on the Obligations immediately due and payable,
without notice except as required under the Notes (including notice of
intention to accelerate and notice of acceleration), demand or
presentment, which are hereby waived; (ii) reduce its claim to judgment,
foreclose or otherwise enforce its security interest in all or any part
of the Obligations by any available judicial procedure; (iii) after
notification, if any, expressly provided for herein, sell or otherwise
dispose of, at the office of PSC, or elsewhere as chosen by PSC, all or
any part of the Collateral, and any such sale or other disposition may be
as a unit or in parcels, by public or private proceedings, and by way of
one or more contracts, (it being agreed that the sale of any part of the
Collateral shall not exhaust the power of sale granted hereunder, but
sales may be made from time to time until all of the Collateral has been
sold or until the Obligations have been paid in full), and at any such
sale it shall not be necessary to exhibit the Collateral; (iv) at PSC's
discretion, retain the Collateral in satisfaction of the Obligations
whenever the circumstances are such that PSC is entitled to do so under
the Code; (v) apply by appropriate judicial proceedings for appointment
of a receiver for the Collateral, or any part thereof, and Cannavino
hereby consents to any such appointment; (vi) purchase the Collateral at
any public sale; (vii) purchase the Collateral at any private sale if
permitted by the Code; and/or (viii) exercise the rights set forth in
Section 11 hereof.
(b) Sale of Securities. Cannavino recognizes that PSC may be unable
to effect a public sale of any or all of the Securities by reason of
certain prohibitions contained in the federal securities laws and
applicable state or foreign securities laws, and thus may resort to one
or more private sales thereof to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the
distribution or resale thereof. Cannavino acknowledges and agrees that
any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale and, notwithstanding
such circumstances, agrees that any such private sale shall be deemed to
have been made in a
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commercially reasonable manner. PSC shall be under no obligation to delay
a sale of any of the Securities for the period of time necessary to
permit the issuer of such securities to register such securities for
public sale under the federal securities laws, or under applicable state
securities laws, even if such issuer would agree to do so. Upon the
consummation of any private or public sale, PSC shall have the right to
deliver, assign, and transfer to the purchaser thereof the Securities so
sold. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right of whatsoever kind, and Cannavino
hereby waives (to the extent permitted by law) all rights of redemption,
stay and/or appraisal which it has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted. PSC
shall give Cannavino notice of PSC's intention to make any such public or
private sale at broker's board or on a securities exchange to the extent
required hereunder or by the Code. Such notice, in case of sale at
broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the
Securities, or that portion thereof so being sold, will first be offered
for sale at such board or exchange. At any such sale the Securities may
be sold in one lot as an entirety or in separate parcels, as PSC may
determine. PSC shall not he obligated to make any such sale pursuant to
any such notice if PSC shall determine not to do so, regardless of the
fact that notice of sale of the Securities may have been given. PSC may
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of
all or any part of the Securities on credit or for future delivery, the
Securities so sold may be retained by PSC until the selling price is paid
by the purchaser thereof, but PSC shall not incur any liability in case
of the failure of such purchaser to take up and pay for the Securities so
sold and, in case of any such failure, such Securities may again be sold
upon like notice. PSC may also, at its discretion, proceed by a suit or
suits at law, or in equity to foreclose its security interest and sell
the Securities, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction. If any consent, approval or
authorization of any state, municipal or other governmental department,
agency or authority should be necessary to effectuate any sale or other
disposition of the Securities or any part thereof, Cannavino shall
execute all such applications and other instruments as may be required in
connection with securing any such consent, approval or authorization, and
will otherwise use Cannavino's best efforts to secure the same.
(c) Limitations on Right to Sell Securities. Notwithstanding any
other provisions of this Agreement (i) Restricted Stock may not be sold
by PSC unless it has vested in accordance with the Option Grant and (ii)
the Option may not be sold or otherwise transferred by PSC, in whole or
in part, at any time, and PSC's remedies with respect to the Option will
be limited to retaining or canceling the Option.
(d) Notification. Reasonable notification of the time and place of
any public sale of the Collateral, or reasonable notification of the time
after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Cannavino and to any other
person entitled under the Code to notice; provided, that if the
Collateral
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threatens to decline quickly in value, or if otherwise permitted by the
Code, PSC may (but shall not be obligated to) sell or otherwise dispose
of the Collateral without notification, advertisement or other notice of
any kind. It is agreed that notice sent or given not less than ten
calendar days prior to the taking of the action to which the notice
relates is reasonable notification and notice for the purposes of this
section.
(e) Application of Proceeds. Upon the maturity of the Obligations or
any part thereof, whether such maturity be by such terms of such
instruments or through the exercise of any power of acceleration, PSC is
authorized and empowered to apply any and all funds realized from the
sale of the Collateral not previously credited against the Obligations
first toward the payment of the costs, charges and expenses, if any,
incurred in connection with the collection of such funds hereunder, and
then toward the payment of the Obligations in such order as PSC, in its
sole discretion, shall deem appropriate, and shall pay the balance
remaining (if any) to Cannavino as prescribed by the Code or as a court
of competent jurisdiction may direct.
11. Attorney-in-Fact. Cannavino hereby appoints PSC as the
attorney-in-fact for Cannavino for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instrument which PSC
may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, PSC shall have the right and power to receive,
endorse and collect all checks and other orders for the payment of money made
payable to Cannavino and included within the Collateral and to give full
discharge for the same. Neither PSC nor any director or officer of the issuer
of the Securities shall have any liability for the distribution to and
collection of the Proceeds by PSC, but shall be fully protected in relying on
the written statement of PSC as to its authorization pursuant to this
paragraph. Any and all amounts collected by PSC pursuant hereto shall be
applied against the Obligations in the manner that PSC shall determine, in
PSC's sole and absolute discretion.
12. Certain Other Rights of PSC.
(a) Duty of Care. PSC's only duty with respect to the Collateral
shall be to exercise reasonable care to secure the safe custody thereof.
PSC shall not have a duty to fix or preserve rights against prior parties
to the Collateral, and shall never be liable for its failure to use
diligence to collect any amount payable with respect to the Collateral,
but shall be liable only to the account of Cannavino for what PSC may
actually collect or receive thereon.
(b) Financing Statement. PSC shall have the right at any time to
execute and file this Agreement or a copy of this Agreement as a
financing statement, but the failure of PSC to do so shall not impair the
validity or enforceability of this Agreement.
(c) Payment of Expenses. At PSC's option, PSC may discharge taxes,
liens and interest, perform or cause to be performed, for and on behalf
of Cannavino, any actions and conditions, obligations or covenants which
Cannavino has failed or refused to
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perform and may pay for the repair, maintenance or preservation of any of
the Collateral, and all sums so expended, including, but not limited to,
attorneys' fees, court costs, agents' fee or commissions, or any other
costs or expenses, shall bear interest from the date of payment at the
highest legal rate and shall be deemed to constitute part of the
Obligations secured by this Agreement.
13. Cumulative Rights and Remedies. All rights and remedies of PSC
hereunder are cumulative of each other and of every other right or remedy which
PSC may otherwise have at law or in equity or under any other contract or other
writing for the enforcement of the security interest herein or the collection
of the Obligations, and the exercise by PSC of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of other
rights or remedies. Should Cannavino have heretofore executed or hereafter
executed any other security agreement in favor of PSC in which a security
interest is created as security for the debts of another or others, in respect
of which Cannavino may not be personally liable, the security interest therein
created and all other rights, powers and privileges vested in PSC by the terms
thereof shall exist concurrently with the security interest created herein,
and, in addition, all property in which PSC holds a security interest under any
such other security agreement shall also be part of the Collateral hereunder,
and all or any part of the proceeds of the sale or other disposition of such
property may, in the discretion of PSC, be applied by PSC in accordance with
the terms hereof, and of such other security agreement, or agreements, or any
of them.
14. Termination. Upon payment in full by Cannavino of all Obligations in
accordance with their terms, this Agreement shall terminate and PSC shall
return to Cannavino all certificates evidencing the Securities (and any related
stock powers) then held under this Agreement.
15. Repurchase Option. In the event that PSC exercises its right to
cancel or repurchase any of the Securities under the Option Grant, PSC shall be
entitled to release such Securities from the pledge under this Agreement and
cancel or repurchase such Securities in accordance with the terms of the Option
Grant.
16. Further Assurances. Cannavino agrees to execute and deliver such
further instruments and take such further actions as PSC may reasonably request
from time to time to preserve or give effect to its rights under this
Agreement.
17. Action by PSC. Any election, consent, waiver or other action that
may be taken by PSC hereunder will be taken by the Chairman of the Board,
unless Cannavino is then serving in such capacity, in which case such action
will be taken by the Board.
18. Notices. Any notice to PSC that is required or permitted by this
Agreement must be addressed to PSC at its principal office to the attention of
the Chairman of the Board (unless Cannavino is then the Chairman of the Board,
in which case to the attention of the Board of Directors), with a copy to the
General Counsel. Any notice to Cannavino that is required or permitted by this
Agreement must be addressed to Cannavino at the most recent address for
Cannavino reflected in the appropriate records of PSC, with copies to Proskauer
Rose Goetz &
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<PAGE> 8
Mendelsohn LLP, 1585 Broadway, New York, New York 10036, Attention: Michael S.
Sirkin (telecopy: 212-969-2900). Either party may at any 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. Whenever
this Agreement requires or permits any notice from one party to another, the
notice must be in writing and must be sent by courier, overnight delivery
service, facsimile or certified mail, return receipt requested, and such notice
will be deemed to be given (a) if sent by courier, on the date actually
delivered, (b) if sent by overnight delivery service, one day after being sent,
(c) if sent by telecopy, on the date that confirmation of transmission is
received by the sender, or (d) if sent by certified mail, on the third business
day after being mailed.
19. Enforcement. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the choice of
law rules thereof. PSC will be entitled, in addition to any other remedies it
may have at law or in equity, to temporary and permanent injunctive and other
equitable relief to enforce the provisions of this Agreement. Any action to
enforce the provisions of, or otherwise relating to, this Agreement may be
brought in the appropriate courts in Dallas, Dallas County, Texas, and
Cannavino hereby consents to the personal jurisdiction of such courts in any
such action; provided that, at the request of PSC or Cannavino, any claim or
dispute arising out of or relating to this Agreement or Cannavino's employment
by PSC or the termination of such employment, including any federal or state
statutory claims, will be resolved without resort to the courts solely through
mediation and, if mediation is not successful, through binding arbitration
pursuant to the rules of the American Arbitration Association. Neither party
will be liable to the other for punitive damages for any such claim or dispute.
If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party will be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which that party may be entitled; provided that, if Cannavino becomes
liable for any such fees, costs or other disbursements, such amounts will
become Obligations under the applicable Note secured by this Agreement.
20. Entire Agreement. This Agreement and the other documents and
instruments specifically referenced herein constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof, and except as expressly set forth herein or therein, there are no
agreements or representations, written or oral, express or implied, with
respect to such subject matter. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by Cannavino and PSC. No waiver by either party
hereto of any condition or provision of this Agreement to be performed by the
other party will be deemed a waiver of any other provisions or conditions at
the same or at any prior or subsequent time.
21. Severability. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, the validity and enforceability of all
other provisions of this Agreement will not be affected thereby.
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<PAGE> 9
22. Counterparts. This Agreement may be executed in any number of
multiple counterparts and by different parties on separate counterparts, all of
which when taken together will constitute one and the same agreement.
23. Assignment. Neither party may assign this Agreement or any rights or
obligations hereunder.
IN WITNESS WHEREOF, and intending to be legally bound, Cannavino and a
duly-authorized representative of PSC have executed this Agreement as of the
date first above written.
/s/ JAMES A. CANNAVINO
-----------------------------------
James A. Cannavino
PEROT SYSTEMS CORPORATION
By: /s/ PETER ALTABEF
-------------------------------
Name: Peter Altabef
-----------------------------
Title: Vice President and General
----------------------------
Counsel
Page 9
<PAGE> 1
EXHIBIT 10.17
MODIFICATION AGREEMENT
This Modification Agreement (the "Modification Agreement") is made as of
March 7, 1997, by and between Perot Systems Corporation, a Delaware Corporation
("PSC"), and James A. Cannavino ("Cannavino").
WHEREAS, PSC (as a Texas corporation) granted Cannavino the option to
purchase 1,000,000 shares of PSC's common stock pursuant to a Stock Option
Grant dated as of July 27, 1995 (the "Option Grant");
WHEREAS, in accordance with the Option Grant, PSC agreed to extend credit
to Cannavino pursuant to the terms of the Purchase Price Note, the Covered
Claims Note and the General Note (as such terms are defined in the Option
Grant);
WHEREAS, on December 18, 1995, Cannavino exercised his right under the
Option Grant and purchased 1,000,000 shares of PSC's common stock at $2.00 per
share, or $2,000,000 in total, by tendering a check in the amount of $600,000
and executing and delivering the Purchase Price Note in the principal sum of
$1,400,000;
WHEREAS, PSC and Cannavino executed a Pledge Agreement dated as of
December 18, 1995 (the "Pledge Agreement") to secure payment of the Purchase
Price Note, the Covered Claims Note and the General Note;
WHEREAS, on December 19, 1995, PSC became a Delaware corporation and
implemented a two for one stock split of its common stock, resulting in the
conversation of Cannavino's 1,000,000 common shares as a Texas corporation into
2,000,000 PSC common shares as a Delaware corporation;
WHEREAS, Cannavino executed and delivered the General Note on March 11,
1996, dated as of January 1, 1996;
WHEREAS, PSC advanced $614,587.50 in principal under the General Note to
Cannavino on March 11, 1996;
WHEREAS, PSC and Cannavino desire to modify and amend the Option Grant,
the General Note, and the Pledge Agreement to (1) increase the principal sum of
the General Note to $2,415,000 and amend the General Note as described below;
(2) secure payment of the General Note, as amended by this Modification
Agreement, under the Pledge Agreement; and (3) delete any reference to the
Covered Claims Note;
WHEREAS, in addition to the modifications set forth above, PSC agrees to
loan Cannavino an additional $1,000,000 in connection with his purchase of a
home in the greater Dallas area under a general recourse note, payable no later
than 5 years from the date of the note, with substantially the terms set forth
for the new loans otherwise provided for by this Modification Agreement, and
additionally secured by a mortgage on such property;
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<PAGE> 2
NOW THEREFORE, in consideration of mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, PSC and Cannavino agree as follows:
1. Option Grant. The Option Grant is hereby amended as follows:
a. Section 10 is hereby deleted in its entirety;
b. Exhibit D is hereby deleted in its entirety;
c. Any reference to "the Pledge Agreement" in the Option Grant
shall hereinafter mean the Pledge Agreement as amended by this
Modification Agreement.
d. Section 11 is hereby amended to read in its entirety as follows:
11. General Advance. At the request of Cannavino at any time prior
to December 31, 1997, PSC will loan Cannavino amounts up to
$2,415,000 ($614,587.50 of which has been previously advanced
pursuant to that certain promissory note dated January 1, 1996, in
the original principal sum of $1,500,000 (the "Prior General
Note")) pursuant to the terms thereof, which Prior General Note has
been modified and increased by that certain Modification Agreement
between PSC and Cannavino dated as of March 7, 1997 (the
"Modification Agreement") (the Prior General Note as modified and
increased by the Modification Agreement shall hereinafter be
referred to as the "General Note"). Any loan under the General
Note will be secured by the Pledge Agreement. Any loan, or portion
of such loan, under the General Note that is repaid by Cannavino
may not be reborrowed. Cannavino may use the proceeds of such loan
under the General Note for any purpose, including without
limitation, purchasing a house or furnishings for a house or for
other personal expenditures. PSC will not be required to advance
any funds under the General Note after Cannavino's death or after
the date on which the General Note would be due in accordance with
its terms.
e. Section 12 is hereby amended by deleting the reference to the
Covered Claims Note
2. Pledge Agreement. The Pledge Agreement is hereby amended as follows:
a. All references to "a Covered Claims Note" in the Pledge
Agreement are hereby deleted;
b. Any reference to "the Option Grant" in the Pledge Agreement
shall hereinafter mean the Option Grant as amended by this
Modification Agreement;
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<PAGE> 3
c. Any reference to "a General Note" in the Pledge Agreement
shall hereinafter mean the General Note as amended by this
Modification Agreement; and
d. Any reference to "the Notes" in the Pledge Agreement shall
hereinafter mean the Purchase Price Note and the General Note as it
is the intent of PSC and Cannavino that the Pledge Agreement as
amended by this Modification Agreement shall secure payment and
performance of all Cannavino's obligations under the Purchase Price
Note and the General Note;
4. Cannavino and PSC hereby acknowledge that the unpaid principal balance of
the General Note as of the date hereof is Six Hundred Fourteen Thousand
Five Hundred Eighty-Seven and 70/100 Dollars ($614,587.70) plus interest
thereon.
5. General Note. The General Note is hereby amended as follows:
a. The principal Sum of the General Note is increased and
amended to read $2,415,000;
b. The lead in paragraph and paragraphs 1 - 4 are deleted in
their entirety and substituted in lieu thereof are the following:
FOR VALUE RECEIVED, James A. Cannavino ("Cannavino"), promises to pay
to Perot Systems Corporation, a Delaware corporation ("PSC"), or
order, at the principle offices of PSC or at such other place as the
holder of this Note may designate, the principal sum of Two Million
One Hundred Fifteen Thousand Dollars ($2,415,000), or such lesser
amount as may be advanced by PSC to Cannavino hereunder, together
with interest (a) on all unpaid portions of the Initial Advance (as
defined below) from the date of advance until repayment at the
"Applicable Federal Rate," which is necessary to prevent such
interest from being treated as "below market," as such terms are
defined in the Internal Revenue Code of 1986, as amended, for the
month in which this Note is executed and delivered, compounded
annually, and (b) on all unpaid portions other than the Initial
Advance from the date of the advance until repayment at the greater
of (i) seven and one-quarter percent (7.25%) per annum or (ii) the
"Applicable Federal Rate," which is necessary to prevent such
interest from being treated as "below market," as such terms are
defined in the Internal Revenue Code of 1986, as amended, for the
month in which the advance is made, compounded annually.
1. Payment. Reference is made to the Stock Option Grant, dated as
of July 27, 1995, by PSC in favor of Cannavino as modified and
amended by that certain Modification Agreement dated as of March, 7
1997 executed by and between Cannavino and PSC (the "Modification
Agreement") (the Stock Option Grant as modified by the Modification
Agreement is hereafter called the "Option Grant"). Capitalized terms
used in this Note that are not otherwise defined have the meanings
given to such terms in the Option Grant. Principal plus interest on
this Note shall be payable as follows:
(a) The principal and all accrued interest on the initial
advance made
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under this Note in the amount of $614,587.70 (the "Initial
Advance") will be payable in full on the earliest to occur of
the following dates (or earlier if otherwise required by this
Note):
(i) the fifteenth anniversary of the Effective Date;
(ii) three years after the Restricted Stock is Publicly
Traded; or
(iii) six months after the first date on which the
Restricted Stock is Publicly Traded and on which, for
the preceding ten consecutive trading days, the product
of (i) the closing price of the Restricted Stock
multiplied by (ii) the number of shares of Vested Stock
then owned by Cannavino is equal to or greater than two
times the aggregate outstanding balance of principal
and interest on this Note and the Purchase Price Note
at such time.
(b) The principal and all accrued interest on all advances
made after the Initial Advance will be payable in full on the
earliest to occur of the following dates (or earlier if
otherwise required by this Note):
(i) the fifteenth anniversary of the Effective Date;
(ii) five years after the Restricted Stock is Publicly
Traded; or
(iii) six months after the first date on which the
Restricted Stock is Publicly Traded and on which, for
the preceding ten consecutive trading days, the product
of (i) the closing price of the Restricted Stock
multiplied by (ii) the number of shares of Vested Stock
then owned by Cannavino is equal to or greater than two
times the aggregate outstanding balance of principal
and interest on this Note and the Purchase Price Note
at such time.
2. Security. Payment of this Note is secured pursuant to a
Pledge Agreement dated as of December 18, 1995, between PSC and
Cannavino as modified by the Modification Agreement (the "Pledge
Agreement").
3. Prepayment. Cannavino may prepay this Note in whole or in
part at any time or from time to time, without premium or penalty.
If Cannavino sells any of the Restricted Stock, then Cannavino will
promptly (and in any event within five days after the completion of
each such sale) make a prepayment in an amount equal to the
proceeds of such sale, less any federal income taxes incurred by
Cannavino as a result of such sale, which will be applied to this
Note and the Purchase Price Note as follows (but, in each case, not
to exceed the unpaid balance of principal and interest then
outstanding under such Notes, if any): (a) to the Purchase Price
Note, in an amount equal to $.70 for each share of Restricted Stock
(such Restricted Stock being the shares existing after PSC's two
for one stock split effective December 1995) sold, plus the accrued
interest on the Purchase Price Note applicable to such $.70 per
share; (b) to this Note; and (c) to any remaining balance on the
Purchase Price Note; provided that, if Restricted Stock is sold
upon exercise of the Put Option under the circumstances described
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<PAGE> 5
in the last sentence of Section 9 of the Option Grant, Cannavino
may apply the proceeds of such sale to his excise tax liability
before making the payments required by clauses (b) and (c). Any
prepayment under this paragraph resulting from the sale of
Restricted Stock will be applied first to accrued but unpaid
interest and then to principal in the order of borrowings with the
earliest borrowed principal paid first. Any prepayment other than
resulting from the sale of Restricted Stock will be applied first
to accrued but unpaid interest and then to principal in the order
of borrowings with the latest borrowed principal paid first. With
each prepayment, Cannavino will give PSC a written statement
indicating whether the prepayment is a result of the sale of
Restricted Stock.
4. Recourse. Recourse of the holder of this Note is limited to
(a) full recourse and liability for all amounts advanced hereunder
except the Initial Advance and interest thereon and (b) the
Collateral (as defined in the Pledge Agreement), and Cannavino has
no personal or other liability for the Initial Advance and interest
thereon except as to such Collateral on the terms set forth in the
Pledge Agreement; provided that if, prior to the maturity date of
this Note, (i) Cannavino's employment with PSC is terminated for
Cause (as defined in the Employment Agreement) or (ii) Cannavino
terminates his employment with PSC without Good Reason (as defined
in the Employment Agreement), then, beginning on the date of such
transfer or termination, the holder of this Note will have full
recourse against Cannavino and Cannavino will be personally liable
for all of the obligations evidenced hereby.
5. Except as provided herein, the terms and provisions of the General Note,
the Purchase Price Note, the Pledge Agreement and the Option Grant shall
remain unchanged and shall remain in full force and effect. Any
modification herein of the General Note, the Purchase Price Note, the
Pledge Agreement and the Option Grant shall in no way affect the security
of the Pledge Agreement for the payment of the General Note, the Purchase
Price Note. The General Note and the Purchase Price Note, the Pledge
Agreement and the Option Grant as modified and amended hereby are hereby
ratified and confirmed in all respects. All security interests granted or
created by or existing under the Pledge Agreement remain unchanged and
continue, unabated, in full force and effect, to secure Cannavino's
obligation to repay the General Note and the Purchase Price Note.
6. In addition to the modifications set forth above, PSC agrees to loan
Cannavino up to an additional $1,000,000 in connection with his purchase
of a home in the greater Dallas area under a general recourse note,
payable no later than 5 years from the date of the note, with
substantially the terms set forth for the new loans otherwise provided for
by this Modification Agreement, and additionally secured by a mortgage on
such property, pursuant to documentation satisfactory to both PSC and
Cannavino. As a condition to such a loan, the property in question must
have an appraised value of at least the amount of principal borrowed under
the loan and the borrowing must take place prior to December 31, 1997.
7. This Agreement supersedes and merges all prior and contemporaneous
promises, representations and agreements. No provision of this Agreement,
the General Note, the Purchase Price Note, the Pledge Agreement or the
Option Grant may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Cannavino and
PSC. No waiver by either party hereto of any condition or provision
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<PAGE> 6
of this Agreement, the General Note, the Purchase Price Note, the Pledge
Agreement or the Option Grant to be performed by the other party will be
deemed a waiver of any other provisions or conditions at the same or at
any prior or subsequent time.
8. This Agreement may be executed in any number of counterparts with the same
effect as if all parties hereto had signed the same document. All such
counterparts shall be construed together and shall constitute one
instrument, but in making proof hereof it shall only be necessary to
produce one such counterpart.
9. If any covenant, condition, or provision herein contained is held to be
invalid by final judgment of any court of competent jurisdiction, the
invalidity of such covenant, condition, or shall not in any way affect any
other covenant, condition or provision herein contained.
10. This Agreement will be governed by and construed in accordance with the
laws of the State of Texas, without regard to the choice of law rules
thereof. PSC will be entitled, in addition to any other remedies it may
have at law or in equity, to temporary and permanent injunctive and other
equitable relief to enforce the provisions of this Agreement. Any action
to enforce the provisions of, or otherwise relating to, this Agreement may
be brought in the appropriate courts in Dallas, Dallas County, Texas, and
Cannavino hereby consents to the personal jurisdiction of such courts in
any such action; provided that, at the request of PSC or Cannavino, any
claim or dispute arising out of or relating to this Agreement will be
resolved without resort to the courts solely through mediation and, if
mediation is not successful, through binding arbitration pursuant to the
rules of the American Arbitration Association. Neither party will be
liable to the other for punitive damages for any such claim or dispute.
If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party will be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition
to any other relief to which that party may be entitled; provided that, if
Cannavino becomes liable for any such fees, costs or other disbursements,
such amounts will become Obligations under the applicable Note secured by
this Agreement.
11. The terms and provisions hereof shall be binding upon and inure to the
benefit of the parties hereto, their heirs, representatives, successors
and assigns.
IN WITNESS WHEREOF, and intending to be legally bound, Cannavino and a
duly-authorized representative of PSC have executed this Agreement as of the
date first above written.
/s/ JAMES A. CANNAVINO
-------------------------------------------
James A. Cannavino
PEROT SYSTEMS CORPORATION
By: /s/ PETER ALTABEF
-------------------------------------
Name: Peter Altabef
-------------------------------------
Title: Vice President and General Counsel
-------------------------------------
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<PAGE> 1
EXHIBIT 10.18
2402
PREPARED BY THE STATE BAR OF TEXAS FOR USE BY LAWYERS ONLY.
REVISED 10/85; 12/87
DEED OF TRUST
Date: April , 1997
Grantor: James A. Cannavino
Grantor's Mailing Address (including county): 12377 Merit Drive
Suite 1100
Dallas, Texas 75251
Trustee: Peter Altabef
Trustee's Mailing Address (including county): 12377 Merit Drive
Suite 1100
Dallas, Texas 75251
Beneficiary: Perot Systems Corporation
Beneficiary's Mailing Address (including county): 12377 Merit Drive
Suite 1100
Dallas, Texas 75251
Note(s)
Date: April , 1997
Amount: $1,000,000.00
Maker: James A. Cannavino
Payee: Perot Systems Corporation
Final Maturity Date:
Terms of Payment (optional):
Property (including any improvements):
Being Lot 22A and Lot 21A, in Block 15/6378, of A Replat of Lots 21 and 22,
Block 15/6378 of THE ESTATES, an Addition to the City of Dallas, Texas,
according to the Revised Map thereof recorded in volume 94153, Page 4248, Map
Records of Dallas County, Texas. SAVE AND EXCEPT that certain 0.1151 acres
conveyed to B. R. McMahon in deed recorded in Volume 96011, Page 477, Deed
Records of Dallas County, Texas.
Prior Lien(s) (including recording information):
None
<PAGE> 2
Other Exceptions to Conveyance and Warranty:
See Exhibit B attached hereto and made a part hereof.
For value received and to secure payment of the note, Grantor conveys
the property to Trustee in trust. Grantor warrants and agrees to defend the
title to the property. If Grantor performs all the covenants and pays the note
according to its terms, this deed of trust shall have no further effect, and
Beneficiary shall release it at Grantor's expense.
GRANTOR'S OBLIGATIONS
Grantor agrees to:
1. keep the property in good repair and condition;
2. pay all taxes and assessments on the property when due;
3. preserve the lien's priority as it is established in this
deed of trust;
4. maintain, in a form acceptable to Beneficiary, an insurance
policy that:
a. covers all improvements for their full insurable value
as determined when the policy is issued and renewed,
unless Beneficiary approves a smaller amount in writing;
b. contains an 80% coinsurance clause;
c. provides fire and extended coverage, including
windstorm coverage;
d. protects Beneficiary with a standard mortgage clause;
e. provides flood insurance at any time the property is in
a flood hazard area; and
f. contains such other coverage as Beneficiary may
reasonably require;
5. comply at all times with the requirements of the 80%
coinsurance clause;
6. deliver the insurance policy to Beneficiary and deliver
renewals to Beneficiary at least ten days before expiration;
7. keep any buildings occupied as required by the insurance
policy; and
8. if this is not a first lien, pay all prior lien notes that
Grantor is personally liable to pay and abide by all prior
lien instruments.
BENEFICIARY'S RIGHTS
1. Beneficiary may appoint in writing a substitute or
successor trustee, succeeding to all rights and
responsibilities of Trustee.
2. If the proceeds of the note are used to pay any debt
secured by prior liens, Beneficiary is subrogated to all of
the rights and liens of the holders of any debt so paid.
3. Beneficiary may apply any proceeds received under the
insurance policy either to reduce the note or to repair or
replace damaged or destroyed improvements covered by the
policy.
4. If Grantor fails to perform any of Grantor's obligations,
Beneficiary may perform those obligations and be reimbursed
by Grantor on demand at the place where the note is payable
for any sums so paid, including attorney's fees, plus
interest on those sums from the dates of payment at the
rate stated in the note for matured, unpaid amounts. The
sum to be reimbursed shall be secured by this deed of
trust.
5. If Grantor defaults on the note or fails to perform any of
Grantor's obligations or if default occurs on a prior lien
note or other instrument, and the default continues after
Beneficiary gives Grantor notice of the default and the time
within which it must be cured, as may be required by law or
by written agreement, then Beneficiary may:
a. declare the unpaid principal balance and earned
interest on the note immediately due;
b. request Trustee to foreclose this lien, in which case
Beneficiary or Beneficiary's agent shall give notice of
the foreclosure sale as provided by the Texas Property
Code as then amended; and
c. purchase the property at any foreclosure sale by
offering the highest bid and then have the bid credited
on the note.
TRUSTEE'S DUTIES
If requested by Beneficiary to foreclose this lien, Trustee shall:
1. either personally or by agent give notice of the
foreclosure sale as required by the Texas Property Code as
then amended;
2. sell and convey all or part of the property to the highest
bidder for cash with a general warranty binding Grantor,
subject to prior liens and to other exceptions to
conveyance and warranty; and
3. from the proceeds of the sale, pay, in this order:
a. expenses of foreclosure, including a commission to
Trustee of 5% of the bid;
b. to Beneficiary, the full amount of principal, interest,
attorney's fees, and other charges due and unpaid;
c. any amounts required by law to be paid before payment to
Grantor; and
d. to Grantor, any balance.
<PAGE> 3
GENERAL PROVISIONS
1. If any of the property is sold under this deed of trust, Grantor
shall immediately surrender possession to the purchaser. If Grantor fails to do
so, Grantor shall become a tenant at sufferance of the purchaser, subject to an
action for forcible detainer.
2. Recitals in any Trustee's deed conveying the property will be
presumed to be true.
3. Proceeding under this deed of trust, filing suit for foreclosure,
or pursuing any other remedy will not constitute an election of remedies.
4. This lien shall remain superior to liens later created even if the
time of payment of all or part of the note is extended or part of the property
is released.
5. If any portion of the note cannot be lawfully secured by this deed
of trust, payments shall be applied first to discharge that portion.
6. Grantor assigns to Beneficiary all sums payable to or received by
Grantor from condemnation of all or part of the property, from private sale in
lieu of condemnation and from damages caused by public works or construction on
or near the property. After deducting any expenses incurred, including
attorney's fees, Beneficiary may release any remaining sums to Grantor or
apply such sums to reduce the note. Beneficiary shall not be liable for
failure to collect or to exercise diligence in collecting any such sums.
7. Grantor assigns to Beneficiary absolutely, not only as collateral,
all present and future rent and other income and receipts from the property.
Leases are not assigned. Grantor warrants the validity and enforceability of
the assignment. Grantor may as Beneficiary's licensee collect rent and other
income and receipts as long as Grantor is not in default under the note or this
deed of trust. Grantor will apply all rent and other income and receipts to
payment of the note and performance of this deed of trust, but if the rent and
other income and receipts exceed the amount due under the note and deed of
trust, Grantor may retain the excess. If Grantor defaults in payment of the
note or performance of this deed of trust. Beneficiary may terminate Grantor's
license to collect and then as Grantor's agent may rent the property if it is
vacant and collect all rent and other income and receipts. Beneficiary neither
has nor assumes any obligations as lessor or landlord with respect to any
occupant of the property. Beneficiary may exercise Beneficiary's rights and
remedies under this paragraph without taking possession of the property.
Beneficiary shall apply all rent and other income and receipts collected under
this paragraph first to expenses incurred in exercising Beneficiary's rights
and remedies and then to Grantor's obligations under the note and this deed of
trust in the order determined by Beneficiary. Beneficiary is not required to
act under this paragraph, and acting under this paragraph does not waive any of
Beneficiary's other rights or remedies. If Grantor becomes a voluntary or
involuntary bankrupt, Beneficiary's filing a proof of claim in bankruptcy will
be tantamount to the appointment of a receiver under Texas law.
8. Interest on the debt secured by this deed of trust shall not
exceed the maximum amount of nonusurious interest that may be contracted for,
taken, reserved, charged, or received under law; any interest in excess of that
maximum amount shall be credited on the principal of the debt or, if that has
been paid, refunded. On any acceleration or required or permitted prepayment,
any such excess shall be canceled automatically as of the acceleration or
prepayment or, if already paid, credited on the principal of the debt or, if
the principal of the debt has been paid, refunded. This provision overrides
other provisions in this and all other instruments concerning the debt.
9. When the context requires, singular nouns and pronouns include the
plural.
10. The term note includes all sums secured by this deed of trust.
11. This deed of trust shall bind, inure to the benefit of, and be
exercised by successors in interest of all parties.
12. If Grantor and Maker are not the same person, the term Grantor shall
include Maker.
13. Grantor represents that this deed of trust and the note are given
for the following purposes:
<PAGE> 4
/s/ JAMES A. CANNAVINO
-----------------------------
James A. Cannavino
(Acknowledgment)
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on the 14th day of April, 1997
by James A. Cannavino.
CELESTE F. HAMID /s/ CELESTE F. HAMID
Notary Public State of Texas ------------------------------
My Commission Expires Notary Public, State of Texas
[NOTARY STAMP] APRIL 15, 2000 Notary's name (printed):
Notary's commission expires:
(Corporate Acknowledgment)
STATE OF TEXAS
COUNTY OF
This instrument was acknowledged before me on the day of ,19 .
by
of
a corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
AFTER RECORDING RETURN TO: PREPARED IN THE LAW OFFICE OF:
<PAGE> 5
Exhibit B
Subject to the following:
1. Restrictive covenants recorded in Volume 91065, Page 1421, Deed Records
of Dallas County, Texas. And amended in Volume 92184, Page 5886; Volume
92184, Page 5894; Volume 92248, Page 3119; Volume 93005, Page 2307; Volume
94004, Page 2273; Volume 94006, Page 6440; Volume 95226, Page 247; Volume
96123, Page 4747; Volume 96160, Page 3429; Volume 96152, Page 4159 and
Volume 96242, Page 4918, all Deed Records of Dallas County, Texas. Any
covenant, condition or restriction indicating a preference, limitation or
discrimination based on race, color, religion, sex, handicap, familial
status, or national origin to the extent such covenants, conditions or
restrictions violate 42 USC 3604(c), is deleted.
2. Restrictive covenants described in instrument recorded in Volume 94153,
Page 4248, Map Records of Dallas County, Texas. Any covenant, condition or
restriction indicating a preference, limitation or discrimination based on
race, color, religion, sex, handicap, familial status, or national origin
to the extent such covenants, conditions or restrictions violate 42 USC
3604(c), is deleted.
3. Terms, conditions, easements and liens contained in instrument recorded
in Volume 91065, Page 1421, Deed Records of Dallas County, Texas. And any
and all amendments thereto. Assessment liens are subordinate to purchase
money liens.
4. 15' sanitary sewer easement in the Southeast corner of lot shown on the
plat recorded in Volume 94153, Page 4248, Map Records of Dallas County,
Texas. (adjacent to drainage easement) (Affects Lot 22A)
5. Wall maintenance & landscape easement across Northwest corner and North
line of lot shown on the plat recorded in Volume 94153, Page 4248, Map
Records of Dallas County, Texas. (Affects Lot 22A)
6. 18' drainage easement across East line of lot shown on the plat
recorded in Volume 94153, Page 4248, Map Records of Dallas County, Texas.
(Affects Lots 22A & 21A)
7. 5' ROW to City of Dallas across North line of lot shown on the plat
recorded in Volume 94153, Page 4248, Map Records of Dallas County, Texas.
(Affects Lot 22A)
8. 8' water line easement across North line of lot shown on the plat
recorded in Volume 94153, Page 4248, Map Records of Dallas County, Texas.
(Affects Lot 22A)
9. Terms and conditions contained in instrument recorded in Volume 95109,
Page 6177, Deed Records of Dallas County, Texas.
10. 15' sanitary sewer easement across East line (adjacent to drainage
easement) of lot shown on the plat recorded in Volume 94153, Page 4248, Map
Records of Dallas County, Texas. (Affects Lot 21A)
11. Rights of parties in possession.
12. Consequences, if any, arising from non-compliance with Section 5.11 of
the Declaration recorded in Volume 91065, Page 1421, Deed Records of Dallas
County, Texas.
<PAGE> 1
EXHIBIT 10.19
[CERTIFICATION STAMP]
/s/ ILLEGIBLE
---------------------
PROMISSORY NOTE
$1,000,000.00 April 14, 1997
Dallas, Texas
FOR VALUE RECEIVED, James A. Cannavino ("Cannavino"), promises to pay
to Perot Systems Corporation, a Texas corporation ("PSC"), or order, at the
principal offices of PSC or at such other place as the holder of this Note may
designate, the principal sum of One Million and No/100ths Dollars
($1,000,000.00), together with interest on all unpaid portions of such amount
from the date of advance until repayment at the greater of (a) seven and
one-quarter percent (7 1/4%) per annum or (b) the "Applicable Federal Rate,"
which is necessary to prevent such interest from being treated as "below
market," as such terms are defined in the Internal Revenue Code of 1986, as
amended, for the month in which this Note is executed and delivered.
1. Payment. The principal on this Note will be payable in full on
the fifth (5th) anniversary of the date hereof. Accrued and unpaid interest
shall be due and payable annually on or before December 31 of each year during
the term hereof, commencing December 31, 1997, and at maturity.
2. Security. Payment of this Note is secured pursuant to a Deed
of Trust of even date herewith between Peter Altabef, Trustee, and Cannavino
(the "Deed of Trust"), covering a residence located at Dallas, Texas (the
"Property").
3. Prepayment. Cannavino may prepay this Note in whole or in part
at any time or from time to time, without premium or penalty. If Cannavino
sells the Property, then Cannavino will promptly prepay this Note in full. Any
prepayment under this paragraph will be applied first to accrued but unpaid
interest and then to principal.
4. Events of Default. This Note will become immediately due and
payable without additional notice or demand upon the occurrence at any time of
any of the following events of default (individually, an "Event of Default" and
collectively, "Events of Default"):
(a) the failure by Cannavino to make any required payment
of principal or interest on this Note within five (5) days after PSC
gives notice of such failure to Cannavino;
(b) the failure by Cannavino to satisfy his other
obligations under the Deed of Trust within thirty (30) days after PSC
gives written notice of such failure to Cannavino;
(c) the institution against Cannavino of any proceedings
under the United States Bankruptcy Code or any other federal or state
bankruptcy, reorganization,
Page 1 of 3
<PAGE> 2
receivership, insolvency or other similar law affecting the rights of
creditors generally, which proceeding is not dismissed within sixty
(60) days of filing; or
(d) the institution by Cannavino of any proceedings under
the United States Bankruptcy Code or any other federal or state
bankruptcy, reorganization, receivership, insolvency or other similar
law affecting the rights of creditors generally or the making by
Cannavino of a composition or an assignment or trust mortgage for the
benefit of creditors.
5. Default Interest. Every amount overdue under this Note shall
bear interest from and after the date on which such amount first became overdue
at an annual rate (compounded annually) which is the lessor of (a) two
percentage points above the rate otherwise applicable under this Note or (b)
the maximum amount permitted by law. Such interest on overdue amounts under
this Note shall be payable on demand and shall accrue until the obligation of
Cannavino with respect to the payment of such interest has been discharged
(whether before or after judgment).
6. Maximum Rate. In no event shall any interest charged,
collected or reserved under this Note exceed the maximum rate then permitted by
applicable law and if any such payment is paid by Cannavino, then such excess
sum shall be credited by the holder as a payment of principal.
7. Collection Costs. Cannavino agrees to pay on demand all costs
of collection, including reasonable attorneys' fees, incurred by holder in
enforcing the obligations of Cannavino under this Note.
8. Waivers. No delay or omission on the part of the holder in
exercising any right under this Note or the Pledge Agreement shall operate as a
waiver of such right or of any other right of such holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion. Cannavino hereby waives presentment,
demand, protest and notices of every kind and assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, and to the addition or release
of any other party or person primarily or secondarily liable.
9. Amendments. None of the terms or provisions of this Note may
be excluded, modified or amended except by a written instrument duly executed
on behalf of the holder expressly referring to this Note and setting forth the
provision so excluded, modified or amended.
10. Enforcement. This Note will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the choice of
law rules thereof. Any action to enforce the provisions of, or otherwise
relating to, this Note may be brought in the appropriate courts in Dallas,
Dallas County, Texas, and Cannavino hereby consents to the personal
jurisdiction of such courts in any such action; provided that, at the request
of PSC or Cannavino,
Page 2 of 3
<PAGE> 3
any claim or dispute arising out of or relating to this Note or the
indebtedness evidenced hereby will be resolved without resort to the courts
solely through mediation and, if mediation is not successful, through binding
arbitration pursuant to the rules of the American Arbitration Association. A
judgment upon the award rendered by the arbitrators may be entered by any court
having jurisdiction. Neither party will be liable to the other for punitive
damages for any such claim or dispute.
/s/ JAMES A. CANNAVINO
--------------------------------
James A. Cannavino
Page 3 of 3
<PAGE> 1
EXHIBIT 10.20
[PEROT SYSTEMS CORPORATION LETTERHEAD]
ASSOCIATE AGREEMENT
This Associate Agreement (this "Agreement") is made as of July 8, 1996 by and
between Perot Systems Corporation, a Delaware Corporation, or one of its
subsidiaries or affiliates (Perot Systems Corporation and all its subsidiaries
and affiliates are collectively referred to as "Perot Systems" and the
organization employing the Associate, which is Perot Systems Corporation
itself, will be referred to as "Company") and James Champy ("Champy"), an
individual who, subject to satisfaction of any conditions stated in his offer
of employment, will become an employee of Company beginning on August 12 , 1996
(the "Effective Date").
1. Employment.
(a) Subject to the terms and conditions specified in this Agreement,
Company hereby agrees to employ Champy on a full time basis (subject to Section
3) as Chairman of Perot Systems' Management Consulting Business ("Management
Consulting") reporting directly to Company's current Chief Executive Officer
("CEO") and Chairman of the Board (the "Chairman"), Morton H. Meyerson. If
Morton H. Meyerson ceases to serve as CEO, Champy will report jointly to Morton
H. Meyerson and the new CEO as long as Morton H. Meyerson remains the Company
Chairman. If Morton H. Meyerson ceases to serve as the Company Chairman,
Champy will report directly to the then current CEO. The Company agrees that
during the term of this Agreement Champy shall at all times be one of the most
senior executive officers of the Company.
(b) As Chairman of Management Consulting, Champy's responsibilities and
authority shall consist (subject to ultimate control of the CEO and the
Chairman) of the direction and control of Management Consulting, including
developing strategy and direction for Management Consulting, hiring senior
executives for Management Consulting and participating in general marketing
activities and consulting for key clients. Champy agrees to perform these
responsibilities and other duties normally associated with such position,
subject to such legal and ethical policies and guidelines as may be reasonably
established from time to time by the Board of Directors (the "Board"), the
Chairman or the CEO of Company.
(c) The term of Champy's employment by Company hereunder will commence on
the Effective Date and will continue until and unless terminated in accordance
with Section 8. Perot Systems' management will recommend to the Board that it
elect Champy as a member of the Board at the first scheduled Board meeting
after the Effective Date.
1
Associate Agreement Revised (May 96)
<PAGE> 2
2. Compensation and Benefits.
(a) During the term of this Agreement, Company will pay Champy (in
accordance with the Company's normal payroll policies) a salary of $41,666.67
per month, which salary the Board shall review at least once in each calendar
year to determine whether an upward adjustment is warranted (as so adjusted
from time to time, the "Base Salary"), plus a bonus payable as of the end of
each calendar year to be determined in accordance with the then current bonus
plan applicable to the most senior executive officers of the Company.
(b) Champy will receive medical coverage, dependent medical coverage and
disability coverage on the same terms as the other most senior executive
officers of Company. Champy will be entitled to indemnification and will
receive directors' and officers' liability insurance to the maximum extent
provided to other directors and most senior executive officers of Company.
Champy will be entitled to receive benefits related to travel, as established
or revised by Company from time to time for Company's CEO and Chief Operating
Officer ("COO"). Champy will receive life insurance coverage in the amount of
$1,000,000 on the same terms as provided to the Company's current Chairman, if
Champy submits to a physical examination and receives an insurability rating
that provides for no higher premium than that paid by Company for the current
Chairman; provided that, if Champy's premium would be higher than that paid by
Company for the current Chairman, Champy may obtain a lower amount of coverage,
so as to reduce the premium to that paid for the current Chairman, or may
obtain equivalent coverage by paying the difference between his actual rate and
the rate paid for the current Chairman. Champy shall also receive other fringe
benefits, and be entitled to vacation time, consistent with the other fringe
benefits and vacation time afforded to the other most senior executive officers
of the Company.
(c) Company will provide Champy office space, a full time assistant and
telephone and electronic equipment and services reasonably necessary or
appropriate to permit him to perform his duties. Champy's office will be
located in Cambridge or Boston, Massachusetts, which will be the principal
location from which Champy will perform services hereunder.
(d) Company shall reimburse Champy for all reasonable expenses incurred or
paid by Champy in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement in accordance with
Company's normal expense reimbursement policies applicable to its most senior
executive officers.
3. Outside Activities. While employed by Company, Champy will not (a)
engage in any other business activity or (b) work for or have any financial
interest in any business enterprise, including any sole proprietorship, without
Company's prior consent; provided, however, that Champy shall be permitted (i)
to make and maintain passive personal investments for himself, members of his
immediate family and any trust or custodial account for his or their benefit,
and (ii) participate in civic, charitable, religious and other not-for-profit
organizations so long as his activities pursuant to the forgoing clauses (i)
and (ii) do not unreasonably interfere with the performance by him of his
duties and responsibilities hereunder. In addition, notwithstanding the
2
Associate Agreement Revised (May 96)
<PAGE> 3
foregoing, Champy may (subject to Section 5) prepare and deliver speeches and
participate in writing books pursuant to the provisions of Section 9
4. Certain Policies. Champy will comply with all Perot Systems' policies that
are communicated to him from time to time, including but not limited to its
Standards and Ethical Principles. Champy understands that Perot Systems'
policies are intended for general guidance only and that Perot Systems may
amend or cancel those policies at any time. Champy will not knowingly engage
in or tolerate illegal or unethical conduct within Perot Systems. Champy
agrees to be tested at Company's request, at any time or from time to time, to
detect drugs, controlled substances, alcohol or inhalants, by giving blood
samples, urine samples or both.
5. Confidential Information.
(a) Champy acknowledges that Perot Systems is continuously developing or
receiving Confidential Information, and that during his employment he will
receive Confidential Information from Perot Systems, its customers and
suppliers and special training related to Perot Systems' business
methodologies. He further acknowledges and agrees that his employment by
Company creates a relationship of confidence and trust between the parties that
extends to all Confidential Information that becomes known to him.
Accordingly, Champy will not disclose or use any Confidential Information,
except in connection with the good faith performance of his duties as an
employee, and will take reasonable precautions against the unauthorized
disclosure or use of Confidential Information. Upon Company's request, Champy
will execute and comply with a third party's reasonable agreement to protect
its confidential and proprietary information. In addition, Champy will not
solicit or induce the unauthorized disclosure or use of confidential or
proprietary information for the benefit of Perot Systems.
(b) For purposes of this Agreement, "Confidential Information" means all
written, machine-reproducable, oral and visual data, information and material,
including but not limited to business, financial and technical information,
computer programs, documents and records (including those that Champy develops
in the scope of his employment) that (i) Perot Systems or any of its customers
or suppliers treats as proprietary or confidential through markings or
otherwise, (ii) relates to Perot Systems or any of its customers or suppliers
or any of their business activities, products or services (including software
programs and techniques) and is competitively sensitive or not generally known
in the relevant trade or industry, or (iii) derives independent economic value
from not being generally known to, and is not readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use. Confidential Information does not include any data, information or
material that is: (i) approved by Company for unrestricted public disclosure;
(ii) known to Champy without obligations of confidentiality prior to the time
that he learns of such data, information or material as a result of his
employment by the Company; or (iii) is or becomes publicly known without a
breach of this Agreement.
6. No Competition/ Non-Solicitation. Champy acknowledges that, in the course
and as a result of employment with the Company, Champy will obtain special
training and knowledge and will come in contact with the Company's customers
and potential customers, which training,
3
Associate Agreement Revised (May 96)
<PAGE> 4
knowledge and contacts potentially could provide invaluable benefits to
competitors of the Company. Accordingly, and in consideration of Company's
agreement to hire Champy hereunder, which Champy acknowledges is conditioned on
the covenants contained herein, Champy agrees that for one year after his
employment by Company ends, for any reason, except with the prior written
consent of Company, Champy will comply with the following covenants:
(a) except for Exempted Activities (as defined below), Champy will not
solicit or perform (or assist a third party in soliciting or performing)
services (a "Restricted Solicitation or Performance"), as an employee,
independent contractor, subcontractor or otherwise, for any Person (including
any Persons known by Champy to be affiliates or subsidiaries of the specified
Person) that is or was a customer or prospect of the Company for which Champy
solicited business or performed services on behalf of the Company during the
two-year period prior to the Restricted Solicitation or Performance (a "PSC
Customer or Prospect"); and
(b) Champy will not knowingly recruit or employ or knowingly assist any
Person in recruiting any person who is, or at any time within the preceding one
year was, an employee of the Company.
The following activities by Champy shall constitute "Exempted Activities" for
purposes of clause (a) above:
(i) soliciting or performing services for any of the Persons listed
on Exhibit A (including subsidiaries and affiliates of such Persons);
(ii) the performance by Champy of consulting services or the like as
an independent contractor working solely for himself and by himself other
than for administrative and editorial support (or a business of which
Champy is the owner of all of the equity and the sole non-administrative,
non-editorial employee); provided, however, that the performance of such
services by Champy for a PSC Customer or Prospect only shall constitute
an Exempted Activity if Champy has obtained the written consent of the
Company's Chairman or CEO, which consent shall not be unreasonably
withheld;
(iii) the presentation by Champy of speeches, seminars or the like
as an independent contractor working solely for himself and (except as to
participation on a panel or with a group of unrelated persons) by himself
other than for administrative support (or a business of which Champy is
the owner of all of the equity and the sole non-administrative employee)
and publishing of books and articles by Champy; and
(iv) serving as a member of the faculty or administration of an
academic or non-profit institution.
For purposes of this Agreement, "Person" includes an individual, corporation,
partnership, association, trust, unincorporated organization, governmental
entity, other entity or group.
4
Associate Agreement Revised (May 96)
<PAGE> 5
If a court of competent jurisdiction finds any provision of this Section 6 to
be unreasonable, then that provision shall be considered to be amended to
provide the broadest scope of protection to Perot Systems that such court would
find reasonable and enforceable.
7. Proprietary Rights.
(a) Champy agrees to disclose to Company all works of authorship and
inventions that Champy produces, conceives or develops, working alone or
jointly with others while Champy is employed by Company, including all computer
programs, documents, and records, together with all related ideas, know-how and
techniques. Except as provided in Section 9, all copyrights, patent rights and
other intellectual property rights in and to all works of authorship and
inventions that Champy produces, conceives or develops while Champy is employed
by the Company, working alone or jointly with others, are intended to be and
will be owned solely by Company, whether or not they are produced using
Company's equipment, facilities, supplies or Confidential Information.
(b) Except as provided in Section 9, Champy assigns to Company all of his
rights in and to all works of authorship and inventions that Champy produces,
conceives or develops, working alone or jointly with others while Champy is
employed by the Company, and waives all moral or similar rights therein. Champy
will sign, without additional compensation, all necessary documents and will
otherwise assist Company, at its expense, to apply for, register and enforce
all copyrights, patents and other intellectual property rights in works of
authorship and inventions assigned by Champy to the Company pursuant to this
Agreement. Champy appoints Company as his attorney-in-fact for the sole
purpose of executing all necessary documents relating to the application for,
registration of, or enforcement of Company's copyrights, patents and other
intellectual property rights in works of authorship and inventions assigned by
Champy to the Company pursuant to this Agreement. Notwithstanding the
foregoing, Champy does not assign works of authorship or inventions which (i)
he developed entirely on his own time without using Company's equipment,
facilities, supplies or Confidential Information, and (ii) do not relate to
either (A) Perot Systems' business, (B) Perot Systems' actual or demonstrably
anticipated research or development, or (C) work done by him for Perot Systems.
(c) Company can waive the rights in any work of authorship or invention to
which it otherwise has rights under this Agreement only through a written
instrument signed by an officer of Company after Champy has materially
disclosed in writing the existence and nature of that work of authorship or
invention.
(d) Champy will not disclose to Perot Systems or use for Perot Systems'
benefit any Third Party Intellectual Property. "Third Party Intellectual
Property" means any confidential or proprietary information owned by any Person
other than Perot Systems.
8. Termination.
(a) Company may terminate Champy's employment under this Agreement at any
time for Cause or Substantial Misconduct. "Cause" means termination of
employment for (i) a felony
5
Associate Agreement Revised (May 96)
<PAGE> 6
conviction of Champy for a crime involving moral turpitude; or (ii) actions by
Champy relating to his employment by the Company and constituting moral
turpitude, theft or dishonesty in a material matter. "Substantial Misconduct"
means termination of employment for (i) a knowing and material breach by Champy
of any obligation under Sections 3, 5 or 7; (ii) actions involving a knowing
and material lack of business ethics or a knowing and material failure to
comply with Perot Systems' Standards and Ethical Principles; or (iii) a felony
conviction of Champy other than for a crime involving moral turpitude. If
Company wishes to terminate Champy for Substantial Misconduct under clause (i)
or (ii) in the previous sentence, Company may only do so if Champy does not
substantially cure such breach within 15 days after receipt of notice from
Company specifying the breach, or, if such breach is not susceptible to a cure,
Champy does not within such 15 days (i) remedy the breach to the extent
possible; (ii) provide an appropriate apology; and (iii) agree in writing that
if he commits a similar breach in the future, such breach will constitute
Substantial Misconduct without any cure period. In addition, before Company
may terminate Champy for Cause or Substantial Misconduct, Company shall give
Champy written notification of the proposed termination. Champy shall have one
week from the date of the notice of the proposed termination to submit a
written statement to the Board concerning the proposed termination (in the case
of a termination for Substantial Misconduct under clauses (i) and (ii) the
one-week period shall not begin until the end of the 15-day cure period). If
Champy fails to submit such a statement, his employment with Company shall
terminate automatically at the end of the one-week period. In the event Champy
does submit such a statement within the one-week period, and the Board has not
decided to continue Champy's employment by the end of a second one-week period,
Champy's employment will terminate automatically at the end of such second
one-week period.
(b) Company may terminate Champy's employment under this Agreement at any
time for any reason other than Cause or Substantial Misconduct upon 30 days'
prior written notice to Champy. If on or before August 12, 1997, (i) Company
terminates Champy's employment for any reason other than Cause or Substantial
Misconduct or (ii) Champy is Constructively Terminated (as defined below), upon
such termination, Company will (A) pay Champy severance pay equal to Champy's
then current Base Salary for one year from the date of termination, to be paid
in semi-monthly payments, less appropriate withholdings pursuant to Company's
payroll practices; (B) continue all of Champy's benefits under Section 2(b)
until the expiration of such severance period; and (C) pay Champy any other
amounts due him hereunder that have accrued or been incurred prior to the date
of termination. If after August 12, 1997, (i) Company terminates Champy's
employment for any reason other than Cause or Substantial Misconduct or (ii)
Champy is Constructively Terminated (as defined below), upon such termination,
Company will (A) pay Champy severance pay equal to Champy's then current Base
Salary for six months from the date of termination, to be paid in semi-monthly
payments, less appropriate withholdings pursuant to Company's payroll
practices; (B) continue all of Champy's benefits under Section 2(b) until the
expiration of such severance period; and (C) pay Champy any other amounts due
him hereunder that have accrued or been incurred prior to the date of
termination. "Constructively Terminated" or "Constructive Termination" means
the occurrence of any of the circumstances set forth below, if within 90 days
after such occurrence, Champy delivers written notice to the Board stating that
he will terminate his employment with Company
6
Associate Agreement Revised (May 96)
<PAGE> 7
if such circumstance is not substantially cured within 30 days, and such
circumstance is not substantially cured within such 30-day period.
(i) Removal of Champy as Chairman of Management Consulting (unless
such removal is in conjunction with a promotion accepted by Champy) or a
material diminution, on a cumulative basis, in Champy's duties,
authority, position, Base Salary or other compensation or benefits
(excluding any diminution of bonus or other discretionary payments);
(ii) If Champy is not elected to the Board at the first scheduled
Board meeting after the Effective Date or ceases to serve as a member of
the Board other than as a result of (i) his death, permanent disability,
resignation or refusal to serve on the Board; or (ii) his removal from
the Board in connection with a termination of Champy's employment for
Cause or Substantial Misconduct or Champy's resignation of employment
with the Company;
(iii) the relocation of Champy's offices, or the principal location
at which he is to perform services hereunder, outside of
Cambridge/Boston, Massachusetts; or
(iv) the material breach by the Company of any of its material
covenants or agreements contained in this Agreement.
(c) In the event a Change in Control of Company (as defined below) occurs
on or before August 12, 1997, and Champy's employment with Company is
terminated by either party (other than a termination by Company for Cause)
within one year after such Change in Control, upon such termination, Company
will (A) pay Champy severance pay equal to Champy's then current Base Salary
for one year from the date of termination, to be paid in semi-monthly payments,
less appropriate withholdings pursuant to Company's payroll practices; (B)
continue all of Champy's benefits under Section 2(b) until the expiration of
the severance period; and (C) pay Champy any other amounts due him hereunder
that have accrued or been incurred prior to the date of termination. If a
Change in Control of Company (as defined below) occurs after August 12, 1997,
and Champy's employment with Company is terminated by either party (other than
a termination by Company for Cause) within one year after such Change in
Control, upon such termination, Company will (A) pay Champy severance pay equal
to Champy's then current Base Salary for six months from the date of
termination, to be paid in semi-monthly payments, less appropriate withholdings
pursuant to Company's payroll practices; (B) continue all of Champy's benefits
under Section 2(b) until the expiration of the severance period; and (C) pay
Champy any other amounts due him hereunder that have accrued or been incurred
prior to the date of termination
(d) "Change in Control" of Company is defined to mean any of the following
events:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal entity and as a result of such merger,
consolidation or reorganization less than 50% of the combined equity
interests or voting power of the then
7
Associate Agreement Revised (May 96)
<PAGE> 8
outstanding securities of the remaining corporation or legal entity or
its ultimate parent immediately after such transaction are received in
respect of or in exchange for voting securities of the Company pursuant
to such transaction;
(ii) The Company sells all or substantially all of its assets to
any other corporation or other legal entity and, immediately following
such sale, the equity owners of the Company prior to such sale own less
than 50% of the combined equity interests or voting power of the then
outstanding securities of such other corporation or legal entity or its
ultimate parent; or
(iii) any person (including any "person" as such term is used in
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) has become the beneficial owner
(as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities which, when added to any securities already owned by such
person, represent in the aggregate (i) 50% or more, if the Company's
common stock is not Publicly Traded (as defined in the Restricted Stock
Agreement between the Company and Champy of even date herewith) at such
time, or (ii) 40% or more, if the Company's common stock is Publicly
Traded at such time, of the outstanding securities of the Company which
are entitled to vote to elect directors.
provided, however, that notwithstanding subsection (1), (2) or (3) above, the
ownership or acquisition of securities by Swiss Bank Corporation ("SBC") or its
affiliates (subject to the limitations of any agreement between SBC or its
affiliates and Perot Systems) or Ross Perot or his affiliates or family members
or affiliates of his family will not constitute, or be deemed to cause, a
Change in Control.
(e) In addition to Champy's other rights to terminate this Agreement, (i)
effective at the expiration of the first year of this Agreement, Champy may
terminate his employment under this Agreement upon written notice of such
termination given to Company at least 30 days' prior to the expiration of such
first year, and (ii) effective at any time after the expiration of the second
year of the term of this Agreement, Champy may terminate his employment under
this Agreement upon 30 days' prior written notice to the Company. In the
event of a termination by Champy pursuant to this Section 9(e), Company will
have no further obligations to Champy hereunder, except for: (i) payment of
accrued Base Salary and provision of benefits pursuant to Section 2(b) through
the date of termination, (ii) payment of any other amounts due Champy hereunder
that have accrued or been incurred prior the date of termination; and (iii)
payments to Champy pursuant to Section 9.
(f) If Champy brings a claim against Company or its directors, officers or
employees related to his employment by Company or termination thereof, he shall
concurrently return to Company any severance payments previously made to him
pursuant to this Agreement and Company's obligation to make additional
severance payments as provided in this Agreement shall be suspended pending the
outcome of such claim. If Champy is not the prevailing party with respect to
such claim, Champy and Company will request the arbitrator or judge before
8
Associate Agreement Revised (May 96)
<PAGE> 9
whom the claim was brought to determine whether the claim was frivolous or
brought by Champy in bad faith (any such claim, a "Bad Faith Claim"). If the
judge or arbitrator determines that the claim brought by Champy was a Bad Faith
Claim, Champy will forfeit his right to any severance payments returned by him
to Company, any severance payments which have been suspended and any future
severance payments. If the judge or arbitrator determines that the claim
brought by Champy was not a Bad Faith Claim, the Company promptly will pay to
Champy all severance pay provided for under this Agreement plus simple interest
at 8% per annum from the date Champy brings the claim (and returns previously
paid severance payments, if any) to the date Company tenders such severance
payments to Champy.
9. Speeches and Publications. During the term of this Agreement, Champy may
(subject to Section 5) prepare and participate in writing and publishing books,
newspaper columns and articles for general distribution to the public (as
opposed to for use primarily in connection with Perot Systems' clients or
prospective client projects). Such books, newspaper columns and articles of
general distribution are referred to herein as "Publications." Champy shall
notify the Company reasonably promptly upon his participation in preparing
books, newspaper columns or articles that constitute Publications under this
Section 9. Champy will own the copyright in connection with any Publications.
During the term of this Agreement, Champy will determine the timing and method
of any publishing, sale, lease or distribution of any Publication, but will
consult with the CEO or the CEO's designee in connection with these matters and
will take into account the reasonable requests and interests of the Company as
to these matters. After the termination of this Agreement, Company shall be
entitled to distribute copies of the Publications under arrangements with the
current or future publisher as determined by Champy or the Company; provided,
however, the Company shall not be entitled to make any editorial modifications
to or based on such Publications without Champy's consent In connection with
preparing any Publications while Champy is employed by the Company, Company
agrees to provide Champy with secretarial assistance and pay other reasonable
expenses, including expenses relating to editorial/writing and marketing
assistance. Company shall be entitled to receive all royalty income generated
by any Publication, including advances and publisher assistance in writing the
Publication, until Company has been reimbursed for all out-of-pocket expenses
and costs paid by Company to third parties (other than compensation costs of
Perot Systems' employees) relating to the Publication. After Company has been
reimbursed for all such expenses and costs, Company and Champy will share in
the royalty income generated from the Publication (whether arising during or
after the term of this Agreement) with each party receiving fifty percent of
the royalty income. After the term of this Agreement, Champy will not interfere
with customary efforts by either the Company or the publisher to promote any
Publication in order to commercially exploit the value thereof.
During the term of this Agreement, Champy shall also be entitled to prepare and
deliver speeches. To the extent Champy receives income from third parties for
speeches and similar events while Champy is employed by the Company, such
income will be the property of the Company, and Champy will submit payment to
the Company for such income promptly upon receipt of such income from third
parties. To the extent Champy receives income from third parties for speeches
and similar events after Champy ceases to be employed by the Company, such
income will be the property of Champy.
9
Associate Agreement Revised (May 96)
<PAGE> 10
10. End of Employment.
(a) Promptly after the end of his employment, Champy will return to the
Company all tangible forms of Confidential Information and all equipment,
records and other physical property in his possession or under his control that
was furnished to him, or is owned, by Perot Systems.
(b) CHAMPY EXPRESSLY AUTHORIZES PEROT SYSTEMS TO OFFSET ANY AMOUNTS
PAYABLE OR REIMBURSABLE TO PEROT SYSTEMS BY HIM AGAINST, AND TO WITHHOLD SUCH
AMOUNTS FROM, ANY AMOUNTS PAYABLE OR REIMBURSABLE TO HIM BY PEROT SYSTEMS,
INCLUDING WITHOUT LIMITATION ANY BASE SALARY, COMMISSIONS, OTHER INCENTIVE
COMPENSATION, AND EXPENSE REIMBURSEMENTS TO THE MAXIMUM EXTENT PERMITTED BY
LAW.
11. Governing Law. This Agreement will be governed by the laws of Texas,
excluding any conflicts of law provisions thereof.
12. Legal Fees. Company will pay all reasonable legal fees incurred by Champy
through the Effective Date in connection with the negotiation and documentation
of this Agreement and the Restricted Stock Agreement executed simultaneously
herewith, including any related loan agreements with NationsBank of Texas, N.A.
13. Withholding. Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as may be required pursuant
to any law or government regulation or ruling.
14. ARBITRATION. ANY DISPUTE ARISING BETWEEN CHAMPY AND PEROT SYSTEMS UNDER
THIS AGREEMENT OR WITH RESPECT TO THE SUBJECT MATTER OR INTERPRETATION HEREOF
SHALL BE SETTLED BY ARBITRATION. SUCH ARBITRATION SHALL BE CONDUCTED IN
WASHINGTON, D.C. IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT) BEFORE A SINGLE ARBITRATOR. SUCH ARBITRATOR SHALL BE SELECTED
BY AGREEMENT OF CHAMPY AND PEROT SYSTEMS OR, IF THEY ARE UNABLE TO AGREE UPON
SUCH SINGLE ARBITRATOR, BY THE WASHINGTON, D.C. OFFICE OF THE AMERICAN
ARBITRATION ASSOCIATION. ANY AWARD RENDERED BY THE ARBITRATOR SHALL BE FINAL
AND BINDING UPON THE PARTIES HERETO. JUDGMENT UPON THE AWARD MAY BE ENTERED IN
ANY COURT OF COMPETENT JURISDICTION. THE ARBITRATOR SHALL BE ALLOWED TO
DETERMINE THE COSTS OF ARBITRATION (INCLUDING THE PARTIES' LEGAL AND OTHER
COSTS AND EXPENSES) AND ALLOCATE WHICH PARTY SHOULD BEAR THE COSTS OF
ARBITRATION. THE ARBITRATOR SHALL HAVE NO AUTHORITY TO AWARD DAMAGES IN EXCESS
OR IN CONTRAVENTION OF THIS AGREEMENT. NEITHER PARTY WILL BE LIABLE TO THE
OTHER FOR SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS FOR ANY
CLAIMS ARISING OUT A BREACH OR ALLEGED BREACH OF THIS AGREEMENT, AND CHAMPY AND
PEROT SYSTEMS EACH HEREBY WAIVES ANY CLAIMS AGAINST THE OTHER FOR SUCH DAMAGES.
NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 14 SHALL BE CONSTRUED TO
LIMIT THE RIGHT OF A PARTY TO SEEK INJUNCTIVE RELIEF WITH RESPECT TO ANY ACTUAL
OR THREATENED BREACH OF THIS AGREEMENT FROM A COURT OF COMPETENT JURISDICTION.
10
Associate Agreement Revised (May 96)
<PAGE> 11
15. Continuing Obligations. Sections 2(d), 5, 6, 7, 8, 9, 10, 11, 12 and 14
will continue to be enforceable after Champy's employment with Company ends and
the termination of this Agreement for any reason. Champy acknowledges and
agrees that any breach of Champy's obligations with respect to intellectual
property or proprietary rights will cause irreparable injury for which there
are no adequate remedies at law and that Company will be entitled to equitable
relief in addition to all other remedies that may be available.
16. Entire Agreement. This Agreement and the other documents and instruments
specifically referenced herein (together with the Restricted Stock Agreement
and indemnification letter agreement, both of even date herewith) constitute
the entire agreement between Company and Champy with respect to the subject
matter hereof. Such agreements supersede any prior discussions, promises, or
agreements on these subjects. This Agreement cannot be changed except in a
writing signed by an officer of Company and Champy. If any part of this
Agreement is too broad to be fully enforced, it will be enforced to the extent
permitted by law.
17. Successors and Assigns; Assignment. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective heirs,
successors and assigns; provided, however, that no party hereto may assign its
rights or delegate its obligations hereunder without the prior written consent
of the other party hereto.
18. Notices. Any notice to Perot Systems or Company that is required or
permitted by this Agreement shall be addressed to the attention of the CEO with
a copy to the General Counsel at its principal office. Any notice to Champy
that is required or permitted by this Agreement shall be addressed to Champy at
the most recent address for Champy reflected in the appropriate records of the
Company, with a copy to David E. Redlick, Esq., Hale and Dorr, 60 State Street,
Boston, MA 02109. Either party may at any 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. Whenever this
Agreement requires or permits any notice from one party to another, the notice
must be in writing to be effective. If mailed, a notice hereunder shall be
deemed to have been given on the third business day after the same is enclosed
in an envelope, addressed to the party to be notified at the appropriate
address, properly stamped, sealed and deposited in the United States mail,
certified mail, return receipt requested. If given in any other manner, the
notice will be deemed given when actually received by the recipient.
11
Associate Agreement Revised (May 96)
<PAGE> 12
James Champy COMPANY
Perot Systems Corporation
Signed: /s/ JAMES CHAMPY Signed: /s/ MORTON H. MEYERSON
------------------------------- ----------------------------
Name: Morton H. Meyerson
----------------------------
Date: July 9, 1996 Date: July 9, 1996
------------------------------- ----------------------------
12
Associate Agreement Revised (May 96)
<PAGE> 13
Exhibit A
o General Electric
o Pepsico
o Cynergy
o Wisconsin Energy and Northern States Power
(individually and/or combined)
o Factory Mutual Life Insurance Company
o Royal Dutch Shell
o Chrysler
o AMR (American Airlines including SABRE)
o State Street Bank
o ENRON
13
Associate Agreement Revised (May 96)
<PAGE> 1
EXHIBIT 10.21
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, dated as of July 8, 1996, is by and between Perot Systems
Corporation ("Perot Systems"), a Delaware corporation and James Champy
("Participant").
WITNESSETH:
WHEREAS, Perot Systems has adopted the Perot Systems Corporation Restricted
Stock Plan (the "Plan"), a copy of which is attached hereto as Attachment E, to
enable employees of Perot Systems and its subsidiaries, if any (collectively,
the "Company") to acquire shares of Class A Common Stock, $0.01 par value, of
Perot Systems ("Common Stock") in accordance with the provisions of the Plan;
and
WHEREAS, the Restricted Stock Committee of Perot Systems (the "Committee") has
selected Participant to participate in the Plan and granted Participant the
right to purchase shares of Common Stock in accordance with the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and other terms and conditions set forth in this Agreement, Perot Systems and
Participant agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the respective meanings indicated as follows:
(a) "Holding Period" shall mean, (i) for one-half of the shares of Vested
Stock vesting on a particular Vesting Date the period of time
commencing on the Vesting Date upon which such shares become Vested
Stock and ending two years thereafter, and (ii) for the other
one-half of the shares of Vested Stock vesting on a particular
Vesting Date, a period of time consisting of the day upon which such
shares become Vested Stock; provided, however, that there shall be no
Holding Period for any shares of Vested Stock from and after the date
that the Participant's employment with Company is terminated (whether
by the Company or Participant) for any reason.
(b) "Market Value" of a share of Restricted Stock on a given date shall
mean (i) if the Common Stock is Publicly Traded the closing sale
price for Common Stock on such date or, if no closing sale price is
available for such date, on the most recent prior date for which a
closing sale price is available or, if no closing sale price is
available, the average of the closing bid and ask prices on such date
or, if no closing bid and ask prices are available for such date,
the average of the closing bid and ask prices on the most recent
prior date for which such bid and ask prices are available, or (ii)
if the Restricted Stock is not Publicly Traded, its fair market
value, as determined in good faith by the Board of Directors, as of
the most recent Valuation Date before or after the date.
Page 1 of 16
<PAGE> 2
(c) "Person" will be broadly construed to include an individual,
corporation, partnership, association, trust, unincorporated
organization, governmental entity, other entity or group.
(d) "Publicly Traded" means Perot Systems Common Stock has been listed on
a registered national securities exchange or approved for quotation
in the National Association of Securities Dealers Automated Quotation
("NASDAQ") system.
(e) "Restricted Stock" shall mean the Common Stock issued to Participant
pursuant to the Plan and this Agreement, together with any successor
security, property or cash issued or distributed by Perot Systems or
any successor entity, whether by way of merger, consolidation, share
exchange, reorganization, liquidation, recapitalization, dividend or
otherwise.
(f) "Transfer" or "transfer" or derivations thereof includes any sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition.
(g) "Unvested Stock" shall mean all shares of Restricted Stock other than
Vested Stock.
(h) "Valuation Date" means each June 30 and December 31 of every year,
beginning on January 1, 1991, or any other date as of which the Board
of Directors determines the Market Value of Restricted Stock.
(i) "Vesting Date" shall mean a date upon which shares of Restricted
Stock vest to Participant or Participant's estate pursuant to this
Agreement.
(j) "Vesting Period" shall mean the period of time commencing on the date
of this Agreement and ending on the last Vesting Date.
(k) "Vested Stock" shall mean those shares of Restricted Stock that have
vested to Participant or Participant's estate pursuant to this
Agreement.
Other terms used in this Agreement are defined in the context in which
they occur and shall have the meanings there indicated.
2. Purchase and Sale. Subject to the terms, conditions, and restrictions set
forth in this Agreement, on the Effective Date under the Associate
Agreement between Perot Systems and Participant of even date herewith (the
"Associate Agreement") Perot Systems shall sell to Participant, and
Participant shall purchase from Perot Systems, for a purchase price of
$2.50 per share, payable on the Effective Date, the number of shares of
Common Stock specified on Attachment A hereto, which shares shall vest to
Participant in accordance with the vesting schedule set forth on
Attachment A hereto for so long as Participant is an employee of the
Company and as follows:
Page 2 of 16
<PAGE> 3
(a) If Company terminates Participant's employment effective on or before
August 12, 1997, for any reason other than Cause or Substantial
Misconduct (each as defined in the Associate Agreement), the
Restricted Stock scheduled to vest on the Vesting Dates in 1997 and
1998 will vest on such Vesting Dates notwithstanding such
termination.
(b) If (i) Participant's employment with Company is terminated by Company
for any reason other than Cause or Substantial Misconduct effective
after August 12, 1997 and on or before August 12, 1998 or (ii)
Participant is Constructively Terminated (as defined in the Associate
Agreement) on or before August 12, 1998, then the Restricted Stock
scheduled to vest on each Vesting Date to and including the Vesting
Date in 2000 will vest on such Vesting Dates (to the extent not
previously vested) notwithstanding such termination. If (i)
Participant's employment with Company is terminated by Company for
any reason other than Cause or Substantial Misconduct effective after
August 12, 1998 or (ii) Participant is Constructively Terminated
after August 12, 1998, then the Restricted Stock scheduled to vest on
each Vesting Date up to the date occurring two years after the date
of termination will vest on such Vesting Dates (to the extent not
previously vested) notwithstanding such termination.
(c) If a Change in Control (as defined in the Associate Agreement)
occurs on or before August 12, 1998, and Champy's employment with the
Company is terminated by either party within one year after such
Change in Control (other than a termination by the Company for
Cause), then the Restricted Stock scheduled to vest on each Vesting
Date to and including the Vesting Date in 2000 will vest on such
Vesting Dates (to the extent not previously vested) notwithstanding
such termination. If a Change in Control occurs after August 12,
1998, and Champy's employment with the Company is terminated by
either party within one year after such Change in Control (other than
a termination by the Company for Cause), then the Restricted Stock
scheduled to vest on each Vesting Date up to the date occurring two
years after the date of termination will vest on such Vesting Dates
(to the extent not previously vested) notwithstanding such
termination.
(d) If Participant's employment is terminated as a result of
Participant's death or disability, then the Restricted Stock
scheduled to vest on each Vesting Date to and including the Vesting
Date one year following such termination will vest on such Vesting
Dates (to the extent not previously vested) notwithstanding such
termination.
If a termination occurs that is covered by the provisions of both
subsection (a) and subsection (c) above, the terms of subsection (c) above
shall govern.
3. Restrictions on Transfer. All shares of Restricted Stock shall be subject
to the following restrictions on transfer unless the Company shall
otherwise agree in writing:
(a) Shares of Unvested Stock may not be sold or otherwise transferred.
(b) Shares of Vested Stock may not be sold or otherwise transferred
during the Holding Period for those shares.
Page 3 of 16
<PAGE> 4
(c) For the benefit of Perot Systems and the underwriters of the initial
underwritten public offering of Perot Systems Common Stock registered
under the Securities Act of 1933, as amended (the "Securities Act"),
Participant will not effect any transfer of Vested Stock without the
written consent of the representatives of such underwriters for the
same period as the underwriters request from the top five executive
officers of Perot Systems (as designated by the CEO of Perot
Systems), but in no event for a period of more than 270 days.
(d) Shares of Vested Stock may not be sold or otherwise transferred after
the Holding Period for those shares and prior to the date the Common
Stock is Publicly Traded unless Participant has given Perot Systems
any notice required under Section 4 and Perot Systems has waived or
failed to exercise its option to purchase those shares pursuant to
Section 4 hereof.
(e) Notwithstanding the foregoing restrictions on transfer, Participant
may transfer, while he is alive or as a distribution upon his death,
all or a portion of the Restricted Stock to a maximum of five
transferees, but only if each transferee is Participant's spouse,
descendant or a trust for their benefit. Any such transfer must be
effected pursuant to documentation reasonably acceptable in form and
substance to Perot Systems, and such documentation must provide that
the Restricted Stock transferred remains subject to all of the
vesting provisions, transfer restrictions, repurchase options and
other provisions of this Agreement, in each case as if such
Restricted Stock continued to be held by Participant. Without
limiting the generality of the foregoing, a transferee under this
paragraph will hold the Restricted Stock subject to Perot Systems'
repurchase options and other rights under Section 4, Section 6 and
Section 9 hereof.
Perot Systems shall not be obligated to recognize any purported sale or
other transfer of Restricted Stock in violation of this Section 3 and,
unless it elects to do otherwise, may treat any such purported sale or
transfer as null, void, and of no effect.
4. Options to Purchase Vested Stock. Unless and until waived by Perot
Systems and regardless of whether or not Participant is still employed by
the Company, Perot Systems shall have the following options to purchase
Vested Stock:
If, after the Holding Period therefor and prior to the date the Common
Stock is Publicly Traded, Participant, or any subsequent holder of
Vested Stock, desires or is obligated to sell or otherwise transfer
any shares of Vested Stock (other than a transfer upon Participant's
death), the holder of such shares shall give Perot Systems written
notice of the proposed sale or transfer, including the identity of the
proposed purchaser or transferee, and, for a period of 30 days after
receipt of such notice, Perot Systems shall have the option to
purchase for cash any or all of such shares at the Market Value
thereof.
Page 4 of 16
<PAGE> 5
5. Manner of Stock Buy Back. Whenever Perot Systems has a right to buy back
shares of Restricted Stock pursuant to this Agreement, Perot Systems may
exercise its right by notifying Participant or the subsequent holder of
Perot Systems' election to exercise its right within the designated
exercise period. In the case of a buy back under Section 4 or Section 9,
the giving of such notice will give rise to an obligation on the part of
Participant or the subsequent holder to tender to Perot Systems, within
ten days, any previously issued certificate representing shares of
Restricted Stock to be bought back, duly endorsed in blank or having a
duly executed stock power attached in proper form for transfer. If any
such endorsed certificate or stock power is not tendered within ten days,
Perot Systems may cancel any outstanding certificate representing shares
to be bought back (subject to Perot Systems issuing a new certificate as
to shares included in the outstanding certificate but not subject to the
buy back right exercised by Perot Systems). Perot Systems is required to
tender the purchase price within ten days of the tender of the shares. If
the person from whom the shares are to be bought back has not complied
with an obligation to return a certificate and stock power representing
shares to be bought back, however, Perot Systems is not required to tender
the purchase price until ten days after the certificate is returned or ten
days after it cancels the certificate (as provided above in this Section
5), whichever occurs first.
6. Termination of Employment. In the event that, during the Vesting Period,
Participant's employment with the Company is voluntarily or involuntarily
terminated for any reason, Perot Systems shall be entitled, by notice to
Participant within 90 days after such termination, to exercise the rights
specified in Section 9(b) below, but only as to Unvested Stock, other than
Unvested Stock that will vest at or following such termination pursuant to
Section 2(a), (b), (c) or (d) hereof.
7. Stock Repurchase. If Participant's employment is terminated for any
reason, at Participant's option, Perot Systems shall repurchase all or
such portion as shall be requested by Participant of the Restricted Stock
purchased and still held by Participant at the price paid by Participant
(subject to adjustment in the event of stock splits, stock dividends,
combinations and recapitalizations affecting such shares) plus simple
interest on such amount at the rate of 8% per annum from the date of
payment by Participant to the date of tender of payment by Perot Systems,
minus the amount or value, as applicable, of any dividends or
distributions paid on such Restricted Stock to and retained by Participant
pursuant to Section 11, provided Participant gives Perot Systems written
notice of his election to exercise such option and tenders to Perot
Systems any previously issued certificate representing shares of
Restricted Stock to be bought back, duly endorsed in blank or having a
duly executed stock power attached in proper form for transfer, within 30
days of the date of termination. Perot Systems is required to tender the
purchase price within ten days of the tender of the shares to it.
8. Competition. Participant acknowledges that, in the course and as a result
of employment with the Company, Participant will obtain special training
and knowledge and will come in contact with the Company's customers and
potential customers, which training, knowledge and contacts could provide
invaluable benefits to competitors of the Company.
Page 5 of 16
<PAGE> 6
Accordingly, and in consideration of Perot Systems' agreement to issue
Restricted Stock to Participant hereunder, which Participant acknowledges
is conditioned on the covenants contained herein, Participant agrees that
Perot Systems shall be entitled to exercise the rights specified in
Section 9 below in the event that, during the time Participant is employed
by the Company or within one year thereafter, except with the prior
written consent of the Company, Participant, either directly or
indirectly, does any of the following:
(a) except for Exempted Activities (as defined below), solicits or
performs (or assists a third party in soliciting or performing)
services (a "Restricted Solicitation or Performance"), as an
employee, independent contractor, subcontractor or otherwise (other
than as an employee of the Company), for any Person (including any
Persons known by Participant to be affiliates or subsidiaries of the
specified Person) that is or was a customer or prospect of the
Company for which Participant solicited business or performed
services on behalf of the Company during the two-year period prior to
the Restricted Solicitation or Performance (a "PSC Customer or
Prospect");
(b) knowingly recruits or employs or knowingly assists any Person in
recruiting any person who is, or at any time within the preceding one
year was, an employee of the Company; and
(c) provides services to, or otherwise is associated with, as an
employee, independent contractor, subcontractor or otherwise (except
as an employee of the Company), any of the companies or divisions
listed on Attachment C attached hereto and their more than 50% owned
subsidiaries (cumulatively the "Named Competitors"). Upon
termination of Participant's employment with Company for any reason,
Perot Systems will have ten days to add up to six additional Named
Competitors to the list set forth on Attachment C by notice to
Participant. Notwithstanding the foregoing, this Section 8( c) will
not apply if Participant's employment is Constructively Terminated,
terminated within one year following a Change in Control or
terminated by Company other than for Cause.
The following activities by Participant shall constitute "Exempted
Activities" for purposes of clause (a) above:
(i) soliciting or performing services for any of the Persons
listed on Exhibit A to the Associate Agreement (including
subsidiaries and affiliates of such Persons);
(ii) the performance by Participant of consulting services or the
like as an independent contractor working solely for himself
and by himself other than for administrative and editorial
support (or a business of which Participant is the owner of
all of the equity and the sole non-administrative,
non-editorial employee); provided, however, that the
performance of such services by Participant for a PSC
Customer or Prospect only shall constitute an Exempted
Activity if Participant has obtained the written consent of
the Company's Chairman or CEO, which consent shall not be
unreasonably withheld;
Page 6 of 16
<PAGE> 7
(iii) the presentation by Participant of speeches, seminars or the
like as an independent contractor working solely for himself
and (except as to participation on a panel or with a group of
unrelated persons) by himself other than for administrative
support (or a business of which Participant is the owner of
all of the equity and the sole non-administrative employee)
and publishing of books and articles by Participant; and
(iv) serving as a member of the faculty or administration of an
academic or non-profit institution.
If any provision of this Section 8 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, and/or scope, 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, and/or scope set forth shall be changed to be the maximum
period of time, the largest territory, and/or the broadest scope, as the
case may be, which would be found reasonable and enforceable by such
court.
9. Rights Upon Termination or Competition.
(a) If Participant has engaged in any conduct prohibited by Section 8 or
if Participant's employment was terminated by the Company for Cause
(as defined in the Associate Agreement), Perot Systems will have the
right for 150 days after the Committee discovers the relevant facts
(but in no event later than two years after the date on which
Participant ceased to be an employee of the Company) to:
(i) cancel any remaining vesting that has not yet occurred, but
is scheduled to occur in the future under Section 2(a), (b),
(c) or (d) hereof;
(ii) require Participant to sell to Perot Systems all or any part
of the Restricted Stock (both Vested Stock and Unvested
Stock) then held by Participant, at the price per share paid
by Participant (subject to adjustment in the event of stock
splits, stock dividends, combinations and recapitalizations
affecting such shares) plus simple interest on such amount at
the rate of 8% per annum from the date of payment by
Participant to the date of tender of payment by Perot Systems
as set forth in Section 5 above, minus the amount or value,
as applicable, of any dividends or distributions paid on such
Restricted Stock to and retained by Participant pursuant to
Section 11; and
(iii) if any shares of Restricted Stock have been sold or otherwise
transferred by Participant (including any sale to the
Company), require Participant to pay to Perot Systems an
amount in cash with respect to each share of Restricted Stock
not still so held equal to (i) in the case of a sale or
transfer to a non-affiliate in a bona fide, arms length
transaction, the value of the net proceeds received by
Participant for such share, or (ii) in the case of all other
transfers, the Market Value of such share
Page 7 of 16
<PAGE> 8
on the first date on which such share is no longer held by
Participant (or transferees under Section 3(e)), less in
either case the price paid by Participant for such share
(subject to adjustment in the event of stock splits, stock
dividends, combinations and recapitalizations affecting such
shares) plus simple interest on such amount at the rate of 8%
per annum from the date of payment by Participant to the date
of tender of payment by Perot Systems as set forth in Section
5 above, minus the amount or value, as applicable, of any
dividends or distributions paid on such Restricted Stock to
and retained by Participant pursuant to Section 11;
provided that (i) the total number of shares of Restricted Stock as
to which future vesting is canceled pursuant to subsection (i), plus
(ii) the total number of shares of Restricted Stock that are
repurchased by PSC pursuant to subsection (ii), plus (iii) the total
number of shares of Restricted Stock with respect to which
Participant is required to make the payment described in subsection
(iii), may not exceed the lesser of fifty percent (50%) of the Vested
Stock or 100,000 shares (as adjusted to reflect any stock split,
stock dividend or similar event affecting the total number of shares
of Common Stock outstanding). Perot Systems will exercise its
remedies under this Section 9 in the order of subsections (i) through
(iii), above, until the foregoing share limit is reached.
(b) If and when Perot Systems is entitled to exercise the rights
specified in this Section 9, as provided in Section 6 above, then,
upon the demand of Perot Systems, Participant shall sell to Perot
Systems all or any part of the Unvested Stock then held by
Participant, other than Unvested Stock that will vest at or following
termination pursuant to Section 2(a), (b), (c) or (d), at the price
per share paid by Participant (subject to adjustment in the event of
stock splits, stock dividends, combinations and recapitalizations
affecting such shares) plus simple interest on such amount at the
rate of 8% per annum from the date of payment by Participant to the
date of tender of payment by Perot Systems as set forth in Section 5
above, minus the amount or value, as applicable, of any dividends or
distributions paid on such Unvested Stock to and retained by
Participant.
10. Compliance with Securities Laws. Participant hereby represents and
warrants that Participant has acquired the Restricted Stock for
Participant's own account and not with a view to any resale or
distribution thereof. Participant agrees that he will not sell or
otherwise transfer any shares of Restricted Stock in any way that may
result in a violation of any federal or state securities laws or
regulations. Participant further acknowledges and agrees that Perot
Systems may require any subsequent purchaser or other transferee from
Participant of shares of Restricted Stock that cannot be publicly traded
to provide Perot Systems, prior to such sale or other transfer, with such
representations, commitments and opinions regarding compliance with
applicable securities laws and regulations as Perot Systems may reasonably
deem necessary or advisable.
11. Stock Certificate. Promptly upon the occurrence of each Vesting Date,
Perot Systems will issue and deliver to Participant certificates
representing any shares of Vested Stock held by Participant. Perot
Systems may require that any certificates or other property representing
Page 8 of 16
<PAGE> 9
shares of Unvested Stock remain in the possession of the Company or an
escrow agent designated by the Committee. Each certificate representing
Vested Stock or Unvested Stock shall bear such legends as are provided on
Attachment D to this Agreement or as are required under applicable
securities laws. Whether or not certificates representing such shares
have been issued or delivered, Participant shall have all the rights of a
shareholder of Restricted Stock, including voting, dividend and
distribution rights, with respect to all shares of Restricted Stock, both
Vested Stock and Unvested Stock, held by Participant, but any and all
stock and/or cash dividends (other than normal periodic cash dividends),
distributions in property, or other distributions made on or in respect of
the Unvested Stock, whether resulting from a subdivision, combination or
reclassification of the Unvested Stock of any issuer thereof or received
in exchange for Unvested Stock or any part thereof or as a result of any
merger, consolidation, acquisition or other exchange of assets to which
any such issuer may be a party or otherwise, and any and all cash and
other property received in exchange for the Unvested Stock or received in
payment of the principal of or in redemption of the Unvested Stock (either
at maturity, upon call for redemption or otherwise), shall remain in the
possession of Perot Systems.
12. Income Tax Withholding. Participant acknowledges and agrees that
Participant shall, upon request by the Company from time to time,
reimburse the Company for, or the Company may withhold from sums otherwise
payable to Participant, any amounts the Company is required to remit to
applicable taxing authorities as income tax withholding with respect to
the Restricted Stock. If Participant fails to reimburse the Company for
any such amount when requested, the Company shall have the right to
recover that amount by selling sufficient shares of Participant's
Restricted Stock.
13. Compliance with Plan. Participant acknowledges that this Agreement is
entered into, and the Restricted Stock is issued, pursuant to the Plan and
agrees to comply with the provisions of the Plan, as it may be amended
from time to time, to the extent that such provisions are not inconsistent
with the provisions of this Agreement and do not increase Participant's
obligations under this Agreement.
14. Participant's Representations and Warranties. Participant represents and
warrants that he is an "accredited investor" as that term is defined in
Rule 501 of Regulation D under the Securities Act by virtue of the fact
that Participant (i) had individual income in excess of $200,000 in each
of the last two calendar years and reasonably expects to have an
individual income in excess of $200,000 in the current calendar year; (ii)
had joint income with his spouse in excess of $300,000 in each of the last
two calendar years and reasonably expects to have a joint income in excess
of $300,000 in the current calendar year; or (iii) has an individual net
worth, or has joint net worth with his spouse, in excess of $1,000,000.
15. Notices. Any notice to Perot Systems or Company that is required or
permitted by this Agreement shall be addressed to the attention of the CEO
of Perot Systems with a copy to General Counsel at its principal office.
Any notice to Participant that is required or permitted by this Agreement
shall be addressed to Participant at the most recent address for
Participant reflected in the appropriate records of the Company, with a
copy to David E.
Page 9 of 16
<PAGE> 10
Redlick, Esq., Hale and Dorr, 60 State Street, Boston, MA 02109. Either
party may at any 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. Whenever this Agreement requires or
permits any notice from one party to another, the notice must be in
writing to be effective. If mailed, a notice hereunder shall be deemed to
have been given on the third business day after the same is enclosed in an
envelope, addressed to the party to be notified at the appropriate
address, properly stamped, sealed and deposited in the United States mail,
certified mail, return receipt requested. If given in any other manner,
the notice will be deemed given when actually received by the recipient.
16. REMEDIES AND ARBITRATION. ANY DISPUTE ARISING BETWEEN PARTICIPANT AND
PEROT SYSTEMS UNDER THIS AGREEMENT OR WITH RESPECT TO THE SUBJECT MATTER
OR INTERPRETATION HEREOF SHALL BE SETTLED BY ARBITRATION. SUCH
ARBITRATION SHALL BE CONDUCTED IN WASHINGTON, D.C., IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION
(EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT) BEFORE A SINGLE
ARBITRATOR. SUCH ARBITRATOR SHALL BE SELECTED BY AGREEMENT OF PARTICIPANT
AND PEROT SYSTEMS OR, IF THEY ARE UNABLE TO AGREE UPON SUCH SINGLE
ARBITRATOR, BY THE WASHINGTON, D.C. OFFICE OF THE AMERICAN ARBITRATION
ASSOCIATION. ANY AWARD RENDERED BY THE ARBITRATOR SHALL BE FINAL AND
BINDING UPON THE PARTIES HERETO. JUDGMENT UPON THE AWARD MAY BE ENTERED
IN ANY COURT OF COMPETENT JURISDICTION. THE ARBITRATOR SHALL BE ALLOWED
TO DETERMINE THE COSTS OF ARBITRATION (INCLUDING THE PARTIES' LEGAL AND
OTHER COSTS AND EXPENSES) AND ALLOCATE WHICH PARTY SHOULD BEAR THE COSTS
OF ARBITRATION. THE ARBITRATOR SHALL HAVE NO AUTHORITY TO AWARD DAMAGES
IN EXCESS OR IN CONTRAVENTION OF THIS AGREEMENT. NEITHER PARTY WILL BE
LIABLE TO THE OTHER FOR SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST
PROFITS FOR ANY CLAIMS ARISING OUT OF A BREACH OR ALLEGED BREACH OF THIS
AGREEMENT, AND PARTICIPANT AND PEROT SYSTEMS EACH HEREBY WAIVES ANY CLAIMS
AGAINST THE OTHER FOR SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING,
NOTHING IN THIS SECTION 16 SHALL BE CONSTRUED TO LIMIT THE RIGHT OF A
PARTY TO SEEK INJUNCTIVE RELIEF WITH RESPECT TO ANY ACTUAL OR THREATENED
BREACH OF THIS AGREEMENT FROM A COURT OF COMPETENT JURISDICTION.
17. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal
representatives, successors, and assigns. However, Participant shall not,
and shall not have the power to, assign this Agreement or any rights
relating to this Agreement without the prior written consent of Perot
Systems.
18. Attorneys' Fees. Subject to Section 16, if any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs,
and necessary disbursements in addition to any other relief to which that
party may be entitled.
19. Severability. If any provision of this Agreement is held invalid or
unenforceable for any reason, the validity and enforceability of all other
provisions of this Agreement shall not be affected thereby.
Page 10 of 16
<PAGE> 11
20. Headings. The section headings used herein are for reference and
convenience only and shall not enter into the interpretation hereof.
21. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
choice of law rules in such law.
22. Entire Agreement. This Agreement together with the Plan (as provided in
and limited by Section 13) and the Associate Agreement and indemnification
letter agreement of even date herewith constitute the entire agreement
between the parties hereto with respect to the subject matter hereof.
This Agreement may be waived or modified only in a writing signed by both
parties hereto.
23. Future Favorable Modifications. If after the date of this Agreement and
prior to Participant's termination of employment with Company for any
reason, Perot Systems offers to modify the terms relating to all or
substantially all of the Common Stock issued to Perot Systems' employees
as a group or to the most senior executive officers of the Company as a
group under the Plan prior to the date of this Agreement, then such offer
will also be made to Participant, to accept or reject on the same terms
offered to such employees or executives as a group.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a
duly-authorized representative of Perot Systems have executed this Agreement as
of the date first above written.
PARTICIPANT PEROT SYSTEMS CORPORATION
/s/ JAMES A. CHAMPY By: /s/ MORTON H. MEYERSON
- ------------------------------------ ------------------------------
SIGNATURE TITLE: Chief Executive Officer
James A. Champy
- ------------------------------------
PRINTED NAME
Page 11 of 16
<PAGE> 12
CONSENT OF SPOUSE
As the spouse of Participant, I consent to be bound by this Restricted Stock
Agreement and agree that this consent shall be binding on my interest under
this Agreement and on my heirs, legatees and assigns.
/s/ LOIS CHAMPY
---------------------------------------------
SIGNATURE
Lois Champy
---------------------------------------------
PRINTED NAME
Page 12 of 16
<PAGE> 13
ATTACHMENT A
TO
RESTRICTED STOCK AGREEMENT
FOR
JAMES CHAMPY
1. Number of Shares of Restricted Stock: 500,000
2. Vesting Schedule:
<TABLE>
<CAPTION>
Percentage of Number of
Vesting Date Shares Vesting* Shares Vesting*
------------ --------------- ---------------
<S> <C> <C>
August 12, 1997 10% 50,000
August 12, 1998 10% 50,000
August 12, 1999 10% 50,000
August 12, 2000 10% 50,000
August 12, 2001 10% 50,000
August 12, 2002 10% 50,000
August 12, 2003 10% 50,000
August 12, 2004 10% 50,000
August 12, 2005 10% 50,000
August 12, 2006 10% 50,000
TOTAL 100% 500,000
==== =======
</TABLE>
*Incremental percentage and number of shares vesting on the designated Vesting
Date. Thus, total Vested Shares equals the number vesting on the particular
Vesting Date and all prior Vesting Dates. Additional vesting is specified in
Section 2.
Page 13 of 16
<PAGE> 14
ATTACHMENT B
NOTICE OF EXERCISE OF RIGHT TO PURCHASE SHARES
OF RESTRICTED STOCK
JAMES CHAMPY
I hereby notify Perot Systems Corporation that I am exercising my right under
the Restricted Stock Agreement between me and Perot Systems dated July 8, 1996
and purchasing 500,000 shares of Common Stock of the Corporation at $2.50 per
share, or $1,250,000 in total, which I herewith tender in cash, by check or an
executed note payable to Perot Systems Corporation.
In connection with this purchase, I hereby represent to Perot Systems
Corporation that I am purchasing these shares for investment and not with a
view to any resale or distribution thereof.
-------------------------------
James Champy
-------------------------------
Dated
Page 14 of 16
<PAGE> 15
ATTACHMENT C
o Anderson Consulting
o AT&T and The Solutions Company of AT&T
o Booze Allen
o Cambridge Technology
o Cap Gemini Sogeti
o Computer Sciences Corporation and CSC Index
o Daimler-Benz
o Deloitte & Touche
o Electronic Data Systems Corporation
o Ernst & Young
o IBM and Integrated Systems Solutions Corporation
o KPGM Peat Marwick
o MCI and SHL System House Inc.
o Price Waterhouse
o Siemens
o UNYSIS
Page 15 of 16
<PAGE> 16
ATTACHMENT D
THE CORPORATION WILL FURNISH THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT
CHARGE, UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE, (1) A COMPLETE COPY OF THE RESTRICTED STOCK
AGREEMENT (THE "AGREEMENT") AND THE PEROT SYSTEMS CORPORATION RESTRICTED STOCK
PLAN (THE "PLAN"), PROVISIONS OF WHICH, AMONG OTHER TERMS AFFECTING THE
OWNERSHIP OF THE SHARES, MAY INCLUDE RESTRICTIONS ON TRANSFERABILITY, NOTICE
REQUIREMENTS, AND PURCHASE OPTIONS OF THE CORPORATION (IT BEING UNDERSTOOD AND
AGREED THAT THE PLAN ONLY IS APPLICABLE AS PROVIDED IN AND LIMITED BY SECTION
13 OF THE AGREEMENT); (2) A COMPLETE COPY OF THE BYLAWS OF THE CORPORATION; AND
(3) A COMPLETE COPY OF THE RESTATED ARTICLES OF INCORPORATION OF THE
CORPORATION, AS AMENDED, ON FILE IN THE OFFICE OF THE SECRETARY OF STATE OF THE
STATE OF DELAWARE, WHICH CONTAIN A FULL STATEMENT OF THE DENIAL OF PRE-EMPTIVE
RIGHTS FOR THE CORPORATION'S COMMON STOCK. THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND THE HOLDER HEREOF CANNOT MAKE ANY
SALE, ASSIGNMENT OR OTHER TRANSFER OF SUCH STOCK WITHOUT REGISTRATION UNDER, OR
EXEMPTION FROM, SUCH ACTS OR LAWS, REASONABLE EVIDENCE OF WHICH REGISTRATION OR
EXEMPTION THE CORPORATION MAY REQUIRE PRIOR TO ANY TRANSFER.
Page 16 of 16
<PAGE> 1
EXHIBIT 10.22
July 8, 1996
Mr. James Champy
330 Beacon Street
Boston, MA 02108
Dear Jim:
You (Champy) and Perot Systems Corporation, a Delaware corporation (PSC),
propose to enter into an Associate Agreement and a Restricted Stock Agreement,
both of even date herewith. PSC has agreed to the matters set forth below in
this letter agreement in order to induce Champy to enter into the Associate
Agreement and Restricted Stock Agreement.
PSC agrees to indemnify Champy and hold Champy harmless from and against any
and all claims, losses, damages, liabilities, costs and expenses (including
reasonable attorneys fees, except as otherwise specifically provided below)
(collectively, Liabilities and Costs) arising out of or relating to the
employment of Champy by PSC or actions taken by Champy as an employee of PSC
constituting or being alleged to constitute a breach of any employment,
confidentiality, noncompetition, nonsolicitation or similar agreement between
Champy and Computer Sciences Corporation and/or any subsidiary or affiliated
company of Computer Science Corporation (collectively CSC).
If any claim is asserted by CSC for which Champy desires to seek
indemnification from PSC pursuant to this letter agreement, Champy shall
promptly notify PSC thereof (although the failure of Champy to give such notice
shall not relieve PSC from its obligations hereunder except to the extent PSC
is prejudiced thereby). PSC shall thereupon assume the defense of such claim
with counsel selected by PSC and reasonably satisfactory to Champy. PSC shall
control the defense and settlement of any such claim; provided, however, that
Champy may participate in such defense with counsel of his own choosing and at
his own expense; and provided further, however, that PSC shall not enter into
any settlement that imposes any liability or obligation on Champy without
Champys prior written consent.
This letter agreement is binding upon and shall inure to the benefit of PSC and
Champy and their respective heirs, successors and assigns; provided, however,
that neither Champy nor PSC may assign its rights or delegate its obligations
under this letter agreement without the prior written consent of the other.
All notices hereunder shall be given in the manner specified in the
PSC acknowledges that Champy has provided PSC with copies of (i) the Major
Inside Stockholder Non-Competition Agreement between Champy and CSC dated as of
September 6, 1988 and (ii) the form of agreement between Index Systems, Inc.
and its employees of which Champy believes he executed a counterpart but is
unable to locate a copy thereof. To the extent that the disclosure in this
paragraph is inconsistent with the last sentence of Section 3 of the Associate
Agreement, this paragraph amends and supersedes such sentence.
Associate Agreement. This letter agreement shall be construed and enforced in
accordance with the laws of the State of Texas. Any dispute between Champy and
PSC hereunder shall be subject to arbitration in accordance with Section 14 of
the Associate Agreement.
Very truly yours,
PEROT SYSTEMS CORPORATION
By: /s/ MORTON H. MEYERSON
-------------------------------
Title: Chief Executive Officer
Agreed to and accepted:
/s/ JAMES A. CHAMPY
- -------------------------
James A. Champy
<PAGE> 1
EXHIBIT 10.23
PROMISSORY NOTE
June 17, 1996
$125,000.00
FOR VALUE RECEIVED, Guillermo G. Marmol ("Associate"), promises to pay to Perot
Systems Corporation, a Delaware corporation (the "Company"), or order, at the
principal offices of the Company or at such other place as the holder of this
Note may designate, the principal sum of one hundred twenty-five thousand
dollars ($125,000.00), payable, along with interest calculated at eight percent
per annum (8%), on or before June 17, 1999, or earlier if otherwise required
pursuant to the terms of this Note. Interest, unless required to be paid
earlier pursuant to the terms of this Note, will be payable annually, beginning
June 17, 1997.
The Company has the right to offset amounts due under this Note against
payroll payments to be made by the Company to Associate.
This Note shall become immediately due and payable in full without
notice or demand upon the earlier of (i) termination of AssociateGs employment
with the Company or any subsidiary of the Company, for any reason, with or
without cause, or (ii) on the one year anniversary after common stock of the
Company, or any successor company, or stock of the type issued in exchange for
any common stock of the Company pursuant to a merger or otherwise, is publicly
traded on a stock exchange or the NASDAQ. In addition, if Associate sells any
of the Company common stock purchased in connection with the issuance of this
Note, Associate shall, within thirty days of such sale, prepay this Note to the
extent of the net proceeds of such sale, less any income taxes payable by
Associate with respect to income derived from such sale.
Payment of this Note is secured pursuant to a Pledge Agreement of even
date herewith between PSC and Associate (the "Pledge Agreement").
Nothing in this Note shall confer upon Associate any right to continue
to in the employ of the Company or any subsidiary of the Company or interfere
in any way with the right of the Company or any subsidiary of the Company to
terminate such employment at any time.
Every amount overdue under this Note shall bear interest from and after
the date on which such amount first became overdue at an annual rate
(compounded annually) which is the lesser of (a) two percentage points above
the rate designated from time to time by NationsBank of Texas as its prime
lending rate or (b) the maximum amount permitted by law. Such interest on
overdue amounts under this Note shall be payable on demand and shall accrue
until the obligation of Associate with respect to the payment of such interest
has been discharged (whether before or after judgment).
In no event shall any interest charged, collected or reserved under this
Note exceed the maximum rate then permitted by applicable law and if any such
payment is paid by Associate, then such excess sum shall be credited by the
holder as a payment of principal.
All payments by Associate under this Note shall be made without set-off
or counterclaim and be free and clear and without any deduction or withholding
for any taxes or fees of any nature whatever, unless the obligation to make
such deduction or withholding is imposed by law.
Associate agrees to pay on demand all costs of collection, including
reasonable attorneys' fees, incurred by the holder in enforcing the obligations
of Associate under this Note.
<PAGE> 2
No delay or omission on the part of the holder in exercising any right
under this Note or the Pledge Agreement under which the Restricted Stock is
pledged shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion.
Associate hereby waives presentment, demand, protest and notices of every kind
and assents to any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange or release of collateral, and
to the addition or release of any other party or person primarily or
secondarily liable.
This Note may be prepaid in whole or in part at any time or from time to
time in the sole discretion of the holder. Any such prepayment shall be
without premium or penalty.
None of the terms or provisions of this Note may be waived, modified or
amended except by a written instrument duly executed on behalf of the holder
expressly referring to this Note and setting forth the provision so waived,
modified or amended.
All rights and obligations hereunder shall be governed by the laws of
the State of Texas. Any action to enforce the provisions of, or otherwise
relating to, this Note may be brought in the appropriate courts in Dallas
County, Texas.
/s/ GUILLERMO G. MARMOL
-----------------------------------------
(Signature)
Guillermo G. Marmol
-----------------------------------------
<PAGE> 1
EXHIBIT 10.24
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement") is made as of June 17, 1996, by
and between Perot Systems Corporation, a Delaware corporation ("PSC"), and
Guillermo G. Marmol ("Pledgor").
WHEREAS, PSC has granted Pledgor the option to purchase 100,000 shares
of PSC's common stock pursuant to a Restricted Stock Agreement dated as of June
17, 1996 (the "Restricted Stock Agreement");
WHEREAS, PSC has extended credit to Pledgor and may extend additional
credit pursuant to the terms of a Promissory Note, dated as of the date hereof,
in the amount of one hundred twenty-five thousand dollars ($125,000) to finance
in part the acquisition of the Restricted Stock purchased pursuant to the
Restricted Stock Agreement (the "Note");
NOW, THEREFORE, to secure the Obligations (as defined below), Pledgor
and PSC hereby agree as follows:
1. Definitions. Capitalized terms that are not otherwise defined in
this Agreement have the meanings assigned to such terms in the Restricted Stock
Agreement or the Note, as appropriate.
2. Pledge of Securities. Pledgor hereby pledges and grants to PSC a
security interest in the following:
(a) the Restricted Stock purchased by Pledgor pursuant to the
Restricted Stock Agreement, together with any other shares of capital
stock of PSC that may be distributed with respect to such Restricted
Stock (collectively, the "Securities"), and all rights and privileges
pertaining thereto;
(b) all proceeds, products, cash, securities, dividends,
increases, distributions and profits received from or on the Securities
(the "Proceeds"), including without limitation distributions or payments
in partial or complete liquidation or redemption, or as a result of
reclassifications, readjustments, reorganizations or changes in the
capital structure of the issuer of the Securities; and
(c) all subscriptions, warrants, options, preemptive rights
and other rights issued or otherwise granted by the issuer of the
Securities or any other person on or in connection with the Securities
or any other item of the Collateral (as defined below);
(all of such property and rights described in items (a), (b) and (c)
above are herein collectively called the "Collateral");
Page 1
<PAGE> 2
TO HAVE AND TO HOLD the Collateral, together with all rights, titles,
interests, privileges and preferences appertaining to or incidental thereto,
unto PSC, and its respective successors and assigns, forever, subject, however,
to the terms, covenants and conditions hereinafter set forth. The security
interest granted and the assignments made hereunder are made as security only
and shall not subject PSC to, or transfer or in any way affect or modify, any
obligation of Pledgor with respect to any of the Collateral or any transaction
involving or giving rise thereto.
3. Obligations Secured. The pledge and security interest in the
Collateral granted hereby secures payment and performance of the following
obligations of Pledgor to PSC, whether now outstanding or incurred after the
date hereof (the "Obligations"): (a) all principal, interest, fees, expenses,
obligations and liabilities of Pledgor arising pursuant to or represented by
the Note; (b) all taxes, assessments, insurance premiums, brokerage fees,
reasonable attorneys' fees and other expenses of sale of the Collateral; (c)
Pledgor's performance of his obligations under the Note, this Agreement and the
Restricted Stock Agreement; and (d) all renewals, extensions and modifications
of the indebtedness and obligations referred to in the foregoing clauses, or
any part thereof.
4. Pledgor's Warranties and Indemnity. Pledgor represents, warrants
and covenants to PSC (a) that Pledgor is and will be the lawful owner of the
Securities, (b) that the Securities are and will remain free and clear of all
liens, encumbrances and security interests other than the security interest
granted by Pledgor hereunder, and (c) that Pledgor has the right and authority
to pledge the Securities and otherwise to comply with the provisions hereof.
If any adverse claim is asserted in respect of the Securities or any portion
thereof, except such as may result from an act of PSC not authorized hereunder,
Pledgor shall indemnify PSC and hold PSC harmless from and against any losses,
liabilities and expenses (including reasonable counsel fees) incurred by PSC in
exercising any right, power or remedy of PSC hereunder or defending, protecting
or enforcing the security interests created hereunder. Any such loss,
liability or expense so incurred shall be paid by Pledgor upon demand, and
shall become part of the Obligations of Pledgor secured pursuant to this
Agreement. Pledgor agrees to execute a stock power in blank for each
certificate evidencing any of the Securities and to deliver all such Securities
certificates with stock powers to PSC. PSC hereby consents to the pledge of
the Securities to PSC hereunder, notwithstanding any restrictions on transfer
of the Securities set forth in the Restricted Stock Agreement.
5. Negative Covenants. Pledgor covenants and agrees that, unless
PSC otherwise consents in writing Pledgor will not: (a) sell, assign or
transfer any rights of Pledgor in the Collateral; or (b) create any lien in, or
security interest in, or otherwise encumber, the Collateral, or any part
thereof, or permit the same to be or become subject to any lien, attachment,
execution, sequestration, other legal or equitable process, or any encumbrance
of any kind or character, except the security interest herein created in favor
of PSC.
6. Dividends and Other Distributions.
(a) Pledgor shall cause all non-cash dividends and
distributions with respect to the Securities (including without
limitation any stock dividends and any distributions made on or in
respect of the Securities, whether resulting from a subdivision,
Page 2
<PAGE> 3
combination or reclassification of the Securities or received in
exchange for or in respect of the Securities or any part thereof or as a
result of any merger, consolidation, acquisition or other transaction)
to be distributed directly to PSC, to be held by PSC as additional
Collateral; and if any such distribution is made to Pledgor, he shall
receive such distribution in trust for PSC and shall immediately
transfer it to PSC.
(b) So long as no Event of Default or Potential Default has
occurred and is continuing, Pledgor shall be entitled to receive any
cash dividends payable in respect of the Securities; provided that, upon
receipt of any such cash dividend, Pledgor will promptly (and in any
event within 30 days) pay to PSC in respect of the Obligations (to the
extent of the Obligations then outstanding) the full amount of such cash
dividend less any income taxes payable by Pledgor as a result of such
cash dividend, and, pending such payment, such cash dividend will
continue to constitute Collateral hereunder.
7. Voting Rights. So long as no Event of Default or Potential
Default has occurred and is continuing, Pledgor shall be entitled to exercise
any and all voting rights pertaining to the Securities for any purpose not
inconsistent with the terms of the Note or this Agreement.
8. Termination of Rights. During any period when an Event of
Default has occurred and is continuing, all rights of Pledgor to receive
dividends pursuant to Section 6(b) or to exercise voting rights pursuant to
Section 7 shall cease and all such rights shall thereupon become vested in PSC,
which shall have the sole and exclusive right and authority to dispose of the
Securities and to receive dividends and exercise voting rights in respect of
the Securities. Further, PSC shall have the right, during the continuance of
any Event of Default, to notify and direct the issuer of the Securities to make
all payments, distributions, dividends and any other distributions payable in
respect thereof directly to PSC. The issuer of the Securities making any
payment or distribution to PSC hereunder shall be fully protected in relying on
the written statement of PSC that it then holds a security interest that
entitles PSC to receive such payments and distributions. Any and all money and
other property paid over to or received by PSC pursuant to the provisions of
this Section 8 shall be retained by PSC as additional collateral hereunder and
may be applied in accordance with the provisions hereof.
9. Rights and Remedies of PSC Upon and After Default.
(a) Remedies. Upon the occurrence of an Event of Default, and
in addition to any and all other rights and remedies which PSC may then
have under this Agreement, the Restricted Stock Agreement, the laws of
the United States or the Uniform Commercial Code, as then in effect in
Texas (the "Code"), or otherwise, PSC may: (i) declare the entire unpaid
balance of principal of and all accrued interest on the Obligations
immediately due and payable, without notice (including notice of
intention to accelerate and notice of acceleration) except as required
under the Note, demand or presentment, which are hereby waived; (ii)
reduce its claim to judgment, foreclose or otherwise enforce its
security interest in all or any part of the Obligations by any available
judicial procedure; (iii) after notification, if any, expressly provided
for herein, sell or otherwise dispose of, at the office of PSC, or
elsewhere as chosen by PSC, all or
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<PAGE> 4
any part of the Collateral, and any such sale or other disposition may
be as a unit or in parcels, by public or private proceedings, and by way
of one or more contracts, (it being agreed that the sale of any part of
the Collateral shall not exhaust the power of sale granted hereunder,
but sales may be made from time to time until all of the Collateral has
been sold or until the Obligations have been paid in full), and at any
such sale it shall not be necessary to exhibit the Collateral; (iv) at
PSC's discretion, retain the Collateral in satisfaction of the
Obligations whenever the circumstances are such that PSC is entitled to
do so under the Code; (v) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and
Pledgor hereby consents to any such appointment; (vi) purchase the
Collateral at any public sale; (vii) purchase the Collateral at any
private sale if permitted by the Code; and/or (viii) exercise the rights
set forth in Section 10 hereof.
(b) Sale of Securities. Pledgor recognizes that PSC may be
unable to effect a public sale of any or all of the Securities by reason
of certain prohibitions contained in the federal securities laws and
applicable state or foreign securities laws, and thus may resort to one
or more private sales thereof to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees that
any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner.
PSC shall be under no obligation to delay a sale of any of the
Securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the federal
securities laws, or under applicable state securities laws, even if such
issuer would agree to do so. Upon the consummation of any private or
public sale, PSC shall have the right to deliver, assign, and transfer
to the purchaser thereof the Securities so sold. Each purchaser at any
such sale shall hold the property sold absolutely free from any claim or
right of whatsoever kind, and Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal which
it has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. PSC shall give Pledgor notice
of PSC's intention to make any such public or private sale at broker's
board or on a securities exchange to the extent required hereunder or by
the Code. Such notice, in case of sale at broker's board or on a
securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Securities, or that portion
thereof so being sold, will first be offered for sale at such board or
exchange. At any such sale the Securities may be sold in one lot as an
entirety or in separate parcels, as PSC may determine. PSC shall not be
obligated to make any such sale pursuant to any such notice if PSC shall
determine not to do so, regardless of the fact that notice of sale of
the Securities may have been given. PSC may without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which
the same may be so adjourned. In case of any sale of all or any part of
the Securities on credit or for future delivery, the Securities so sold
may be
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<PAGE> 5
retained by PSC until the selling price is paid by the purchaser
thereof, but PSC shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Securities so sold and, in
case of any such failure, such Securities may again be sold upon like
notice. PSC may also, at its discretion, proceed by a suit or suits at
law, or in equity to foreclose its security interest and sell the
Securities, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction. If any consent, approval or
authorization of any state, municipal or other governmental department,
agency or authority should be necessary to effectuate any sale or other
disposition of the Securities or any part thereof, Pledgor shall execute
all such applications and other instruments as may be required in
connection with securing any such consent, approval or authorization,
and will otherwise use Pledgor's best efforts to secure the same.
(c) Notification. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification
of the time after which any private sale or other intended disposition
of the Collateral is to be made, shall be sent to Pledgor and to any
other person entitled under the Code to notice; provided, that if the
Collateral threatens to decline quickly in value, or if otherwise
permitted by the Code, PSC may (but shall not be obligated to) sell or
otherwise dispose of the Collateral without notification, advertisement
or other notice of any kind. It is agreed that notice sent or given not
less than ten calendar days prior to the taking of the action to which
the notice relates is reasonable notification and notice for the
purposes of this section.
(d) Application of Proceeds. Upon the maturity of the
Obligations or any part thereof, whether such maturity be by such terms
of such instruments or through the exercise of any power of
acceleration, PSC is authorized and empowered to apply any and all funds
realized from the sale of the Collateral not previously credited against
the Obligations first toward the payment of the costs, charges and
expenses, if any, incurred in connection with the collection of such
funds hereunder, and then toward the payment of the Obligations in such
order as PSC, in its sole discretion, shall deem appropriate, and shall
pay the balance remaining (if any) to Pledgor as prescribed by the Code
or as a court of competent jurisdiction may direct.
10. Attorney-in-Fact. Pledgor hereby appoints PSC as the attorney-
in-fact for Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which PSC may deem
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, PSC shall have the right and power to receive, endorse and
collect all checks and other orders for the payment of money made payable to
Pledgor and included within the Collateral and to give full discharge for the
same. Neither PSC nor any director or officer of the issuer of the Securities
shall have any liability for the distribution to and collection of the Proceeds
by PSC, but shall be fully protected in relying on the written statement of PSC
as to its authorization pursuant to this paragraph. Any and all amounts
collected by PSC pursuant hereto shall be applied against the Obligations in
the manner that PSC shall determine, in PSC's sole and absolute discretion.
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<PAGE> 6
11. Certain Other Rights of PSC.
(a) Duty of Care. PSC's only duty with respect to the
Collateral shall be to exercise reasonable care to secure the safe
custody thereof. PSC shall not have a duty to fix or preserve rights
against prior parties to the Collateral, and shall never be liable for
its failure to use diligence to collect any amount payable with respect
to the Collateral, but shall be liable only to the account of Pledgor
for what PSC may actually collect or receive thereon.
(b) Financing Statement. PSC shall have the right at any time
to execute and file this Agreement or a copy of this Agreement as a
financing statement, but the failure of PSC to do so shall not impair
the validity or enforceability of this Agreement.
(c) Payment of Expenses. At PSC's option, PSC may discharge
taxes, liens and interest, perform or cause to be performed, for and on
behalf of Pledgor, any actions and conditions, obligations or covenants
which Pledgor has failed or refused to perform and may pay for the
repair, maintenance or preservation of any of the Collateral, and all
sums so expended, including, but not limited to, attorneys' fees, court
costs, agents' fee or commissions, or any other costs or expenses, shall
bear interest from the date of payment at the highest legal rate and
shall be deemed to constitute part of the Obligations secured by this
Agreement.
12. Cumulative Rights and Remedies. All rights and remedies of PSC
hereunder are cumulative of each other and of every other right or remedy which
PSC may otherwise have at law or in equity or under any other contract or other
writing for the enforcement of the security interest herein or the collection
of the Obligations, and the exercise by PSC of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of other
rights or remedies. Should Pledgor have heretofore executed or hereafter
executed any other security agreement in favor of PSC in which a security
interest is created as security for the debts of another or others, in respect
of which Pledgor may not be personally liable, the security interest therein
created and all other rights, powers and privileges vested in PSC by the terms
thereof shall exist concurrently with the security interest created herein,
and, in addition, all property in which PSC holds a security interest under any
such other security agreement shall also be part of the Collateral hereunder,
and all or any part of the proceeds of the sale or other disposition of such
property may, in the discretion of PSC, be applied by PSC in accordance with
the terms hereof, and of such other security agreement, or agreements, or any
of them.
13. Termination. Upon payment in full by Pledgor of all Obligations
in accordance with their terms, this Agreement shall terminate and PSC shall
return to Pledgor all certificates evidencing the Securities (and any related
stock powers) then held under this Agreement.
14. Repurchase Option. If PSC exercises its right to cancel or
repurchase any of the Securities under the Restricted Stock Agreement, PSC
shall be entitled to release such Securities from the pledge under this
Agreement and cancel or repurchase such Securities in accordance with the terms
of the Restricted Stock Agreement.
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<PAGE> 7
15. Further Assurances. Pledgor agrees to execute and deliver such
further instruments and take such further actions as PSC may reasonably request
from time to time to preserve or give effect to its rights under this
Agreement.
16. Action by PSC. Any election, consent, waiver or other action
that may be taken by PSC hereunder will be taken by the Chairman of the Board,
unless Pledgor is then serving in such capacity, in which case such action will
be taken by the Board.
17. Notices. Any notice to PSC that is required or permitted by this
Agreement must be addressed to PSC at its principal office to the attention of
the President, with a copy to the General Counsel. Any notice to Pledgor that
is required or permitted by this Agreement must be addressed to Pledgor at the
most recent address for Pledgor reflected in the appropriate records of PSC.
Either party may at any 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. Whenever this Agreement requires or permits
any notice from one party to another, the notice must be in writing and must be
sent by courier, overnight delivery service, facsimile or certified mail,
return receipt requested, and such notice will be deemed to be given (a) if
sent by courier, on the date actually delivered, (b) if sent by overnight
delivery service, one day after being sent, (c) if sent by telecopy, on the
date that confirmation of transmission is received by the sender, or (d) if
sent by certified mail, on the third business day after being mailed.
18. Enforcement. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the choice of
law rules thereof. PSC will be entitled, in addition to any other remedies it
may have at law or in equity, to temporary and permanent injunctive and other
equitable relief to enforce the provisions of this Agreement. Any action to
enforce the provisions of, or otherwise relating to, this Agreement may be
brought in the appropriate courts in Dallas, Dallas County, Texas, and Pledgor
hereby consents to the personal jurisdiction of such courts in any such action;
provided that, at the request of PSC or Pledgor, any claim or dispute arising
out of or relating to this Agreement or Pledgor's employment by PSC or the
termination of such employment, including any federal or state statutory
claims, will be resolved without resort to the courts solely through mediation
and, if mediation is not successful, through binding arbitration pursuant to
the rules of the American Arbitration Association. Neither party will be
liable to the other for punitive damages for any such claim or dispute. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party will be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to
which that party may be entitled; provided that, if Pledgor becomes liable for
any such fees, costs or other disbursements, such amounts will become
Obligations under the applicable Note secured by this Agreement.
19. Entire Agreement. This Agreement and the other documents and
instruments specifically referenced herein constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof, and except as expressly set forth herein or therein, there are no
agreements or representations, written or oral, express or implied, with
respect to such subject matter. No provision of this Agreement may be
modified, waived or
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discharged unless such waiver, modification or discharge is agreed to in
writing signed by Pledgor and PSC. No waiver by either party hereto of any
condition or provision of this Agreement to be performed by the other party
will be deemed a waiver of any other provisions or conditions at the same or at
any prior or subsequent time.
20. Severability. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, the validity and enforceability of all
other provisions of this Agreement will not be affected thereby.
21. Counterparts. This Agreement may be executed in any number of
multiple counterparts and by different parties on separate counterparts, all of
which when taken together will constitute one and the same agreement.
22. Assignment. Pledgor may not assign this Agreement or any rights
or obligations hereunder.
IN WITNESS WHEREOF, and intending to be legally bound, Pledgor and a
duly-authorized representative of PSC have executed this Agreement as of the
date first above written.
/s/ GUILLERMO G. MARMOL
-----------------------------------------
Guillermo G. Marmol ("Pledgor")
PEROT SYSTEMS CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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<PAGE> 1
EXHIBIT 10.25
[PEROT SYSTEMS LETTERHEAD]
June 17, 1996
NationsBank of Texas, N.A. Mr. Guillermo G. Marmol
Professional and Executive Banking 6123 DeLoache Ave.
1401 Elm Street, 4th Floor Dallas, TX 75225
P.O. Box 831101
Dallas, TX 75283-1101
Attn: Ms. Joanne Gruber
Re: Perot Systems Class A Common Stock Purchase
Dear Madam or Sir:
1. The purpose of this letter is to provide for the agreement among Perot
Systems Corporation ("PSC"), NationsBank of Texas, N.A.
("NationsBank") and Guillermo G. Marmol ("Associate") with respect to
the purchase by Associate of one hundred thousand (100,000) shares
(the "Shares") of Perot Systems Class A Common Stock ("Common Stock"),
where some of the payment price for such Shares is being borrowed by
Associate from NationsBank. The Shares are being purchased from PSC
pursuant to the Restricted Stock Agreement, dated as of June 17, 1996,
between PSC and Associate (the "Stock Agreement").
2. Each of the parties recognizes that Associate is obtaining funding
from NationsBank in the original principal amount of $125,000 (the "NB
Principal") pursuant to a promissory note, dated as of June 17, 1996,
by Associate payable to the order of NationsBank (the "NB Promissory
Note"), secured by a security agreement of even date with the NB
Promissory Note (the "NB Security Agreement"). In addition, each of
the parties recognizes that Associate is obtaining funding from PSC
(in the original principal amount of $125,000 (the "PSC Principal")
pursuant to a promissory note, dated as of June 17, 1996, executed by
Associate payable to the order of PSC (the "PSC Promissory Note") and
secured by a pledge agreement of even date with the PSC Promissory
Note (the "PSC Pledge Agreement").
<PAGE> 2
NationsBank of Texas, N.A.
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Page 2
3. Each of the parties hereby agrees that if PSC repurchases any Shares
from Associate pursuant to the Stock Agreement, that it will
distribute the repurchase price to PSC and to NationsBank pro-rata in
accordance with the relative amounts of the unpaid NB Principal and
the PSC Principal (if any) to apply to any amounts outstanding under
the NB Promissory Note and under the PSC Promissory Note (if any).
When PSC has been paid in full under the PSC Promissory Note (if any)
it will send the entire balance of the repayment directly to
NationsBank regardless of the size of that amount (and even if in
excess of the NationsBank Principal), unless and until it receives a
signed authorization from Associate and NationsBank instructing it to
send any additional funds directly to Associate.
4. If, by the later of June 30, 1998 or the date of the maturity of the
NB Promissory Note, PSC has not completed an initial public offering
(the "IPO") whereby the Common Stock (or any successor security) is
listed on a registered national securities exchange or approved for
quotation in the National Association of Securities Dealers Automated
Quotation System, then PSC will, within thirty days of NationsBank's
written request, purchase the outstanding NB Promissory Note from
NationsBank, for the then outstanding principal (which shall never
exceed the original NB Principal) plus accrued but unpaid interest
thereunder. In connection with such sale, NationsBank will endorse
without recourse the NB Promissory Note to the order of PSC, transfer
to PSC good title to the NB Security Agreement, under which the Shares
shall be pledged, deliver any and all Shares in its possession owned
by Associate, along with any signed stock powers thereto, and which
Shares shall be free and clear of additional liens and encumbrances
created by, through, or under NationsBank other than the NB Security
Agreement, which shall be assigned to PSC.
5. If the Associate sells a portion of the Shares as part of the IPO or
thereafter (with NationsBank's and PSC's consent, if needed), then
Associate agrees to use the sale proceeds (after estimated income tax)
to prepay the NB Promissory Note and the PSC Promissory Note, in the
same manner as provided in the third paragraph of this letter until
principal and interest under both Notes have been paid in full.
6. If the IPO occurs before the maturity of the NB Promissory Note but
the Associate wishes to retain ownership of all Shares of publicly
traded stock, the Associate will agree to collateralize the NB
Promissory Note with such PSC vested Shares or other acceptable
marketable securities that have a market value equal to or exceeding
150% of the loan balance outstanding under the NB Promissory Note, and
NationsBank and the Associate will execute a
<PAGE> 3
NationsBank of Texas, N.A.
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Page 3
NationsBank collateral maintenance agreement that will control the
continuing need for shares pledged as collateral and any adjustments
thereto. This paragraph will not affect the PSC Promissory Note or the
PSC Pledge Agreement. PSC will give notice to NationsBank from time to
time of the principal outstanding under the PSC Promissory Note.
7. The parties agree that Associate will execute both the NB Security
Agreement and the PSC Pledge Agreement. Associate agrees to execute a
stock power in blank for each certificate evidencing any of the Shares
and to deliver all such certificates with stock powers to PSC or
NationsBank as appropriate (after the IPO, NationsBank will hold the
certificates representing vested Shares to the extent needed under
Paragraph 6). Notwithstanding anything in those agreements to the
contrary, the parties agree that NationsBank and PSC will both have a
security interest in the Shares and whichever of PSC or NationsBank
holds such Shares under the PSC Pledge Agreement or the NB Security
Agreement shall hold the Shares for the benefit of both and PSC and
NationsBank will cooperate with one another to enforce their
respective rights under the NB Security Agreement and the PSC Pledge
Agreement, and will share in any proceeds as set forth herein, until
the amounts due under one of the PSC or NB Promissory Notes have been
paid in full, and thereafter the balance will revert to the holder of
the other Promissory Note until the amounts due under that Promissory
Note have been paid in full except all proceeds received from the sale
by NationsBank or by sale with NationsBank's consent of PSC publicly
held shares subsequent to the IPO shall first be applied to payment of
debt owed under the NB Promissory Note before any amounts shall revert
to or be distributed to PSC. The Associate shall not be deemed to have
violated either the PSC Pledge Agreement or the NB Security Agreement,
or to have breached any representations, warranties or covenants
therein, solely by virtue of signing both Agreements.
By signature below, Associate irrevocably authorizes PSC and
NationsBank to make the payments, as provided in this letter, and agrees to
indemnify and hold PSC and NationsBank harmless against any loss, damage or
claim in connection with making payments as provided above.
For purposes of notice under this letter, the parties' addresses shall
be deemed the addresses as provided above in this letter, unless the other
parties receive written notice, at least 15 days in advance, of a new address.
<PAGE> 4
NationsBank of Texas, N.A.
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Page 4
If the terms of this letter are acceptable to you, please execute your
consent below.
Very truly yours,
/s/ ROB MORGAN
----------------------------
Title: Assistant Secretary
----------------------
AGREED: AGREED:
NATIONSBANK OF TEXAS, N.A. ASSOCIATE
By: /s/ JOANNE GRUBER /s/ GUILLERMO G. MARMOL
---------------------------- ----------------------------
Name: Joanne Gruber Name: Guillermo G. Marmol
-------------------------- -----------------------
Title: Vice President
-------------------------
Date: 6/21/96 Date: June 17, 1996
-------------------------- -----------------------
<PAGE> 1
EXHIBIT 10.26
NATIONSBANK SIMPLE INTEREST PROMISSORY NOTE AND
NationsBank of Texas, N.A. SECURITY AGREEMENT FIXED OR VARIABLE RATE
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C>
80 29 - 1319660 901 MAIN STREET Officer Account Number Date of Note
PO BOX 831400
DALLAS TX 75283-1400
DALLAS COUNTY 8521 0001017215912 96/06/17
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Borrower's Name and Address Interest Rate
-----------------------------------------------------------------------------------------
GUILLERMO G MARMOL [X] Fixed Rate of 9.500% per annum or The Consumer Base Rate or Other Rate are
6123 DELOACHE AVE [ ] Lender's Consumer Base Rate plus % defined to be that named rate as announced or
per annum or published by the entity indicated in the
DALLAS TX 75225 [ ] Other Rate adjoining box from time to time and which may
not be the lowest interest rate charged by
Lender. For purposes of this Note, the
Interest Rate will be deemed to be at least
N/A % per annum even if the actual rate is
lower.
- ------------------------------------------------------------------------------------------------------------------------------------
I promise to pay to the order of NationsBank of Texas, N.A. ("Lender") the principal of $125,000.00 ("Amount of Note") plus interest
on the unpaid principal balance at the interest rate indicated above. The Amount of Note will be advanced to me in one lump sum.
Payment(s) will be made at the address shown above and in accordance with the Payment Schedule set out in the Federal Truth in
Lending Disclosure. I also agree to pay any other charges authorized by this Promissory Note. Items proceeded by a box are
applicable only if checked.
====================================================================================================================================
FEDERAL TRUTH IN LENDING DISCLOSURE
====================================================================================================================================
ANNUAL PERCENTAGE RATE FINANCE CHARGE AMOUNT FINANCED TOTAL OF PAYMENTS
The cost of my credit as The dollar amount the The amount of credit provided The amount I will have paid after
a yearly rate. credit will cost me. to me or on my behalf. I have made all payments as scheduled.
9.500% $24,205.43 $125,000.00 $149,205.43
====================================================================================================================================
MY PAYMENT SCHEDULE WILL BE:
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No. of Payments Amount of Payments When Payments are due
- ------------------------------------------------------------------------------------------------------------------------------------
1 $1,464.03 FIRST PAYMENT DUE AUGUST 1, 1996
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22 VARIES MONTHLY BEGINNING SEPTEMBER 1, 1996
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1 $125,976.02 FINAL PAYMENT DUE JULY 1, 1998
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[X] The amount of each payment varies because a finance charge is applied to the unpaid Amount of Note and the largest payment
is $1,008.57 and the smallest payment is $910.96.
Security: I am giving a security interest in:
[X] Goods or Property Being Purchased
[ ]
Collateral securing other loans with you may also secure this loan, except that my primary dwelling will not secure this loan.
VARIABLE RATE: If this is a variable rate loan, the Interest Rate may increase during the term of this transaction if your Consumer
Base Rate or Other Rate increases. Any increase will take form of [ ] higher payment amounts, or [ ] a larger amount
due at maturity. For this Promissory Note, the Interest Rate will never be less than N/A% per annum.
If my loan were for $ N/A at N/A % for N/A months, and the rate increased 1% at the end of N/A months, my regular
payment would increase by $ N/A, or my final payment would increase by $ N/A.
The variable rate index used to determine your Other Rate, if applicable, is indicated in the Promissory Note above
this Federal Truth in Lending Disclosure.
PREPAYMENT: If I pay this loan off early, I will not have to pay a penalty. Filing Fees: $ N/A
I will see this Promissory Note and other loan documents for additional information about nonpayment, default, any required
repayment in full before the scheduled date, prepayment refunds and penalties and for further information about Lender's security
interest.
====================================================================================================================================
Itemization of the Amount Financed
1. Amount given to me directly $ 125,000.00
2. Amount paid on my Bank loan account $ .00
3. Amount paid to others on my behalf:
A. For Credit Life and A/H Insurance To: Insurance Company $ .00
B. Filing Fees To: Public Officials $ .00
C. Attorney Fees To: $ .00
D. For: To: $ .00
E. For: To: $ .00
F. For: To: $ .00
G. For: To: $ .00
Total A through G $ .00
TOTAL AMOUNT FINANCED (Add 1, 2 and 3) $ 125,000.00
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I hereby authorize you to draft my Account Number Signature
deposit account for the loan payments. N/A
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER INSURANCE: I am not required to take credit life or credit accident and health insurance to obtain this loan. Such coverage
will not be provided unless I sign the request below and agree to pay the additional cost. The amount of insurance coverage I have
will be the amount stated in the insurance policy/certificate or the Total of Payments, whichever is less and the premium for this
Insurance is included in the Amount Financed. If a Co-Borrower also signs this Promissory Note, he or she is only entitled to take
joint credit life insurance.
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INSURANCE PREMIUM TERM PREMIUM TERM
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Life N/A N/A Accident and Health N/A N/A
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I elect the insurance indicated by the premiums shown above Signature
------------------------------------------------------------
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[ ] REQUIRED PROPERTY INSURANCE. IF THIS BOX IS CHECKED, PROPERTY INSURANCE IS REQUIRED IN CONNECTION WITH THIS LOAN AND I HAVE THE
OPTION OF FURNISHING THE REQUIRED INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR CONTROLLED BY ME OR OF PROCURING
AND FURNISHING EQUIVALENT INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS.
- ------------------------------------------------------------------------------------------------------------------------------------
COLLATERAL & SECURITY AGREEMENT
Collateral will consist of:
100000 SHARES PEROT SYSTE00
AGREEMENT LETTER DATED 6/00 AMONG PEROT & N
Collateral will be used by me primarily for: [X] Personal, Family, or Household Purposes or [ ] Business
Collateral will be located in DALLAS County at [X] Borrower's Address [ ] Other Address
I grant to you a security interest in the above described Collateral, together with all parts and equipment used in connection
therewith, additions, replacements, accessories, proceeds, products, and similar after-acquired property, provided this security
interest shall not attach to after-acquired consumer goods, except accessories, unless I acquire rights in such after-acquired
consumer goods within ten days after you give value. This security interest is given to secure payment of all my present and future
indebtedness of any type to you, including without limitation: future advances; all expenditures by you for taxes, insurance,
repairs to and maintenance of Collateral; and the reasonable cost for repossessing, storing, preparing for sale or selling the
Collateral. THE TERMS OF THIS SECURITY AGREEMENT INCLUDE THE PROVISIONS PRINTED ON THE REVERSE SIDE.
SIGNATURES FOR PARTY SIGNING SECURITY AGREEMENT ONLY, I grant Lender/Secured Party a security interest in the Collateral but do not
assume personal liability on the Promissory Note.
(Warning: I will not sign here if I signed below: X
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL TERMS of the PROMISSORY NOTE (Words not defined elsewhere in this Promissory Note have the meanings shown in the Federal
Truth in Lending Disclosure.)
AMOUNT OF PAYMENTS: The Amount of Payments shown in the Federal Truth in Lending Disclosure assumes I will make the payments exactly
when they are due and if the Interest Rate is tied to your Consumer Base Rate or Other Rate, that such Rates do not change, I will
make payments in the Amount of Payments shown in the Federal Truth in Lending Disclosure. If this Promissory Note is payable in
equal monthly installments (except for a final balloon payment, if any), and the Interest Rate is tied to your Consumer Base Rate or
Other Rate, the amount of my monthly payment may change at the end of each 12-month period to an amount sufficient to repay in full
at the then-current Interest Rate. In substantially equal monthly installments, the unpaid balance as if this Note were to be due
and payable N/A months from its date. In such event, you will send me a new payment book specifying the new payment amount. If
payments vary, I will pay the fixed part of the Amount of Payments as set out in the Truth in Lending Disclosure on each payment
date plus all accrued and unpaid interest. If payments are equal, each payment shall be applied first to interest due and then to
the unpaid Amount Financed. In any event, I will pay the unpaid principal balance of the Promissory Note plus all accrued and unpaid
interest on the final payment due date as set out in the Truth in Lending disclosure. If the Interest Rate is tied to your Consumer
Base Rate or Other Rate, the Interest Rate shall change with each change in your Consumer Base Rate or Other Rate as of the date of
any such change without notice to me, but shall not exceed the higher of the indicated rate ceiling in effect from time to time
under Article 5069-1.04 of V.A.T.S., or any ceiling authorized by any other applicable law.
PLEASE READ THE ADDITIONAL TERMS OF THIS PROMISSORY NOTE ON THE REVERSE SIDE BEFORE SIGNING.
- ------------------------------------------------------------------------------------------------------------------------------------
NOTICE TO CONSUMER: UNDER TEXAS LAW, IF YOU CONSENT TO THIS AGREEMENT, YOU MAY BE SUBJECT TO A FUTURE RATE AS HIGH AS 24% PER YEAR
(NOTICE NOT APPLICABLE TO FIXED RATE NOTES.)
BORROWER'S SIGNATURE(S) FOR PROMISSORY NOTE AND SECURITY AGREEMENT. I/We agree to the terms of this Promissory Note and Security
Agreement ("This Agreement") and acknowledge receiving a completed copy of this Agreement and all other documents signed by Borrower
in connection with this loan. The terms and conditions on the reverse side are made a part of this Agreement and are incorporated
herein by reference. If signing as a Co-Borrower, I/We acknowledge reading the Notice to Cosigner on the reverse side. As used in
this Promissory Note, the words "you", "your", "yours" mean the Lender. The words, "I", "we", "my", "our", "me", "mine", mean each
Borrower or Co-Borrower, jointly and severally, if there is more than one Borrower.
X /s/ GUILLERMO G MARMOL
- ----------------------------------------- ----------------------------------------- -----------------------------------------
GUILLERMO G MARMOL
The additional Terms and Conditions printed on the reverse side are incorporated into this Promissory Note and Security Agreement.
</TABLE>
Original Note - White Customer Copy - Pink Bank Copy - Blue
<PAGE> 1
EXHIBIT 10.27
[PEROT SYSTEMS CORPORATION LETTERHEAD]
August 26, 1996
NationsBank of Texas, N.A. Donald D. Drobny
Professional & Executive Banking 12377 Merit Drive
1401 Elm Street, 4th Floor Dallas, Texas 75251
P.O. Box 831101
Dallas, TX 75283-1101
Attn: Ms. Joanne Gruber
Re: NationsBank Financing
Dear Madam or Sir:
1. The purpose of this letter is to provide for the agreement among Perot
Systems Corporation ("PSC"), NationsBank of Texas, N.A. ("NationsBank")
and Donald D. Drobny ("Associate") with respect to the loan from
NationsBank.
2. Each of the parties recognizes that Associate is obtaining funding from
NationsBank in the original principal amount of $350,000.00 (the "NB
Principal") pursuant to a promissory note, dated as of August 26, 1996,
by Associate payable to the order of NationsBank (the "NB Promissory
Note"), secured by a security agreement of even date with the NB
Promissory Note (the "NB Security Agreement"). Each of the parties
recognizes that PSC is not loaning Associate any funds.
3. Each of the parties hereby agrees that if PSC repurchases any Shares
from Associate pursuant to the Stock Agreement, that it will send the
entire balance of the repayment directly to NationsBank, regardless of
the size of that amount (and even if in excess of the NationsBank
Principal), unless and until it receives a signed authorization from
Associate and NationsBank instructing it to send any additional funds
directly to Associate.
<PAGE> 2
NationsBank of Texas, N.A.
July 12, 1996
Page 2
4. If, by the later of June 30, 1998 or the date of the maturity of the NB
Promissory Note, PSC has not completed an initial public offering (the
"IPO") whereby the Common Stock (or any successor security) is listed on
a registered national securities exchange or approved for quotation in
the National Association of Securities Dealers Automated Quotation
System, then PSC will, within thirty days of NationsBank's written
request, purchase the outstanding NB Promissory Note from NationsBank,
for the then outstanding principal (which shall never exceed the
original NB Principal) plus accrued but unpaid interest thereunder. In
connection with such sale, NationsBank will endorse without recourse the
NB Promissory Note to the order of PSC, transfer to PSC good title to
the NB Security Agreement, under which the Shares shall be pledged,
deliver any and all Shares in its possession owned by Associate, along
with any signed stock powers thereto, and which Shares shall be free and
clear of additional liens and encumbrances created by, through, or under
NationsBank other than the NB Security Agreement, which shall be
assigned to PSC.
5. If the Associate sells a portion of the Shares as part of the IPO or
thereafter (with NationsBank's and PSC's consent, if needed), then
Associate agrees to use the sale proceeds (after estimated income tax)
to prepay the NB Promissory Note in the same manner as provided in the
third paragraph of this letter until principal and interest under the
Note have been paid in full.
6. If the IPO occurs before the maturity of the NB Promissory Note but the
Associate wishes to retain ownership of all Shares of publicly traded
stock, the Associate will agree to collateralize the NB Promissory Note
with such PSC vested Shares or other acceptable marketable securities
that have a market value equal to or exceeding 150% of the loan balance
outstanding under the NB Promissory Note, and NationsBank and the
Associate will execute a NationsBank collateral maintenance agreement
that will control the continuing need for shares pledged as collateral
and any adjustments thereto.
7. The parties agree that Associate will execute the NB Security Agreement.
Associate agrees to execute a stock power in blank for each certificate
evidencing any of the Shares and to deliver all such certificates with
stock powers to PSC or NationsBank as appropriate (after the IPO,
NationsBank will hold the certificates representing vested Shares to the
extent needed under Paragraph 6). Notwithstanding anything in the NB
Security Agreement to the contrary, the parties agree that NationsBank
will have a security interest in the Shares and whichever of PSC or
NationsBank holds such Shares shall hold the Shares for the benefit of
NationsBank.
<PAGE> 3
NationsBank of Texas, N.A.
July 12, 1996
Page 3
By signature below, Associate irrevocably authorizes PSC and NationsBank
to make the payments as provided in this letter, and agrees to indemnify and
hold PSC and NationsBank harmless against any loss, damage or claim in
connection with making payments as provided above.
For purposes of notice under this letter, the parties' addresses shall
be deemed the addresses as provided above in this letter, unless the other
parties receive written notice, at least 15 days in advance, of a new address.
If the terms of this letter are acceptable to you, please execute your
consent below.
Very truly yours,
-------------------------------------
Title:
-------------------------------
AGREED: AGREED:
NATIONSBANK OF TEXAS, N.A. ASSOCIATE
By: /s/ DONALD D. DROBNY
---------------------------------- -------------------------------------
Name: Name: Donald D. Drobny
-------------------------------- -------------------------------
Title:
-------------------------------
Date: Date:
-------------------------------- --------------------------------
<PAGE> 1
EXHIBIT 10.28
NATIONSBANK SIMPLE INTEREST PROMISSORY NOTE AND
NationsBank of Texas, N.A. SECURITY AGREEMENT FIXED OR VARIABLE RATE
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C>
80 29 - 1394452 901 MAIN STREET Officer Account Number Date of Note
PO BOX 831400
DALLAS TX 75283-1400
DALLAS COUNTY 8521 0001017488378 96/08/26
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower's Name and Address Interest Rate
-----------------------------------------------------------------------------------------
DONALD D DROBNY [X] Fixed Rate of 9.500% per annum or The Consumer Base Rate or Other Rate are
5011 SOUTHERN HILLS DR [ ] Lender's Consumer Base Rate plus % defined to be that named rate as announced or
per annum or published by the entity indicated in the
FRISCO TX 75248 [ ] Other Rate adjoining box from time to time and which may
not be the lowest interest rate charged by
Lender. For purposes of this Note, the
Interest Rate will be deemed to be at least
N/A % per annum even if the actual rate is
lower.
- ------------------------------------------------------------------------------------------------------------------------------------
I promise to pay to the order of NationsBank of Texas, N.A. ("Lender") the principal of $350,000.00 ("Amount of Note") plus interest
on the unpaid principal balance at the interest rate indicated above. The Amount of Note will be advanced to me in one lump sum.
Payment(s) will be made at the address shown above and in accordance with the Payment Schedule set out in the Federal Truth in
Lending Disclosure. I also agree to pay any other charges authorized by this Promissory Note. Items proceeded by a box are
applicable only if checked.
====================================================================================================================================
FEDERAL TRUTH IN LENDING DISCLOSURE
====================================================================================================================================
ANNUAL PERCENTAGE RATE FINANCE CHARGE AMOUNT FINANCED TOTAL OF PAYMENTS
The cost of my credit as The dollar amount the The amount of credit provided The amount I will have paid after
a yearly rate. credit will cost me. to me or on my behalf. I have made all payments as scheduled.
9.670% $116,511.65 $350,000.00 $466,511.65
====================================================================================================================================
MY PAYMENT SCHEDULE WILL BE:
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Payments Amount of Payments When Payments are due
- ------------------------------------------------------------------------------------------------------------------------------------
1 $16,761.64 FIRST PAYMENT DUE FEBRUARY 26, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
2 VARIES ANNUALLY BEGINNING FEBRUARY 26, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
1 $383,250.00 FINAL PAYMENT DUE FEBRUARY 26, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
[X] The amount of each payment varies because a finance charge is applied to the unpaid Amount of Note and the largest payment
is $33,250.01 and the smallest payment is $33,250.00.
Security: I am giving a security interest in:
[X] Goods or Property Being Purchased
[ ]
Collateral securing other loans with you may also secure this loan, except that my primary dwelling will not secure this loan.
VARIABLE RATE: If this is a variable rate loan, the Interest Rate may increase during the term of this transaction if you Consumer
Base Rate or Other Rate increases. Any increase will take form of [ ] higher payment amounts, or [ ] a larger amount
due at maturity. For this Promissory Note, the Interest Rate will never be less than N/A% per annum.
If my loan were for $ N/A at N/A % for N/A months, and the rate increased 1% at the end of N/A months, my regular
payment would increase by $ N/A, or my final payment would increase by $ N/A.
The variable rate index used to determine your Other Rate, if applicable, is indicated in the Promissory Note above
this Federal Truth in Lending Disclosure.
PREPAYMENT: If I pay this loan off early, I will not have to pay a penalty. Filing Fees: $ N/A
I will see this Promissory Note and other loan documents for additional information about nonpayment, default, any required
repayment in full before the scheduled date, prepayment refunds and penalties and for further information about Lender's security
interest.
====================================================================================================================================
Itemization of the Amount Financed
1. Amount given to me directly $ 350,000.00
2. Amount paid on my Bank loan account $ .00
3. Amount paid to others on my behalf:
A. For Credit Life and A/H Insurance To: Insurance Company $ .00
B. Filing Fees To: Public Officials $ .00
C. Attorney Fees To: $ .00
D. For: To: $ .00
E. For: To: $ .00
F. For: To: $ .00
G. For: To: $ .00
Total A through G $ .00
TOTAL AMOUNT FINANCED (Add 1, 2 and 3) $ 350,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
I hereby authorize you to draft my Account Number Signature
deposit account for the loan payments. N/A
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER INSURANCE: I am not required to take credit life or credit accident and health insurance to obtain this loan. Such coverage
will not be provided unless I sign the request below and agree to pay the additional cost. The amount of insurance coverage I have
will be the amount stated in the insurance policy/certificate or the Total of Payments, whichever is less and the premium for this
Insurance is included in the Amount Financed. If a Co-Borrower also signs this Promissory Note, he or she is only entitled to take
joint credit life insurance.
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE PREMIUM TERM PREMIUM TERM
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Life N/A N/A Accident and Health N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
I elect the insurance indicated by the premiums shown above Signature
------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] REQUIRED PROPERTY INSURANCE. IF THIS BOX IS CHECKED, PROPERTY INSURANCE IS REQUIRED IN CONNECTION WITH THIS LOAN AND I HAVE THE
OPTION OF FURNISHING THE REQUIRED INSURANCE EITHER THROUGH EXISTING POLICIES OF INSURANCE OWNED OR CONTROLLED BY ME OR OF PROCURING
AND FURNISHING EQUIVALENT INSURANCE COVERAGES THROUGH ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS.
- ------------------------------------------------------------------------------------------------------------------------------------
COLLATERAL & SECURITY AGREEMENT
Collateral will consist of:
140000 SHRS PEROT SYSTEM 00
LETTER AGREEMENT AMONG PE00 DROBNY & NB
Collateral will be used by me primarily for: [X] Personal, Family, or Household Purposes or [ ] Business
Collateral will be located in DALLAS County at [X] Borrower's Address [ ] Other Address
I grant to you a security interest in the above described Collateral, together with all parts and equipment used in connection
therewith, additions, replacements, accessories, proceeds, products, and similar after-acquired property, provided this security
interest shall not attach to after-acquired consumer goods, except accessories, unless I acquire rights in such after-acquired
consumer goods within ten days after you give value. This security interest is given to secure payment of all my present and future
indebtedness of any type to you, including without limitation: future advances; all expenditures by you for taxes, insurance,
repairs to and maintenance of Collateral; and the reasonable cost for repossessing, storing, preparing for sale or selling the
Collateral. THE TERMS OF THIS SECURITY AGREEMENT INCLUDE THE PROVISIONS PRINTED ON THE REVERSE SIDE.
SIGNATURES FOR PARTY SIGNING SECURITY AGREEMENT ONLY, I grant Lender/Secured Party a security interest in the Collateral but do not
assume personal liability on the Promissory Note.
(Warning: I will not sign here if I signed below: X
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL TERMS of the PROMISSORY NOTE (Words not defined elsewhere in this Promissory Note have the meanings shown in the Federal
Truth in Lending Disclosure.)
AMOUNT OF PAYMENTS: The Amount of Payments shown in the Federal Truth in Lending Disclosure assumes I will make the payments exactly
when they are due and if the Interest Rate is tied to your Consumer Base Rate or Other Rate, that such Rates do not change, I will
make payments in the Amount of Payments shown in the Federal Truth in Lending Disclosure. If this Promissory Note is payable in
equal monthly installments (except for a final balloon payment, if any), and the Interest Rate is tied to your Consumer Base Rate or
Other Rate, the amount of my monthly payment may change at the end of each 12-month period to an amount sufficient to repay in full
at the then-current Interest Rate. In substantially equal monthly installments, the unpaid balance as if this Note were to be due
and payable N/A months from its date. In such event, you will send me a new payment book specifying the new payment amount. If
payments vary, I will pay the fixed part of the Amount of Payments as set out in the Truth in Lending Disclosure on each payment
date plus all accrued and unpaid interest. If payments are equal, each payment shall be applied first to interest due and then to
the unpaid Amount Financed. In any event, I will pay the unpaid principal balance of the Promissory Note plus all accrued and unpaid
interest on the final payment due date as set out in the Truth in Lending disclosure. If the Interest Rate is tied to your Consumer
Base Rate or Other Rate, the Interest Rate shall change with each change in your Consumer Base Rate or Other Rate as of the date of
any such change without notice to me, but shall not exceed the higher of the indicated rate ceiling in effect from time to time
under Article 5069-1.04 of V.A.T.S., or any ceiling authorized by any other applicable law.
PLEASE READ THE ADDITIONAL TERMS OF THIS PROMISSORY NOTE ON THE REVERSE SIDE BEFORE SIGNING.
- ------------------------------------------------------------------------------------------------------------------------------------
NOTICE TO CONSUMER: UNDER TEXAS LAW, IF YOU CONSENT TO THIS AGREEMENT, YOU MAY BE SUBJECT TO A FUTURE RATE AS HIGH AS 24% PER YEAR
(NOTICE NOT APPLICABLE TO FIXED RATE NOTES.)
BORROWER'S SIGNATURE(S) FOR PROMISSORY NOTE AND SECURITY AGREEMENT. I/We agree to the terms of this Promissory Note and Security
Agreement ("This Agreement") and acknowledge receiving a completed copy of this Agreement and all other documents signed by Borrower
in connection with this loan. The terms and conditions on the reverse side are made a part of this Agreement and are incorporated
herein by reference. If signing as a Co-Borrower, I/We acknowledge reading the Notice to Cosigner on the reverse side. As used in
this Promissory Note, the words "you", "your", "yours" mean the Lender. The words, "I", "we", "my", "our", "me", "mine", mean each
Borrower or Co-Borrower, jointly and severally, if there is more than one Borrower.
X /s/ DONALD D DROBNY
- ----------------------------------------- ----------------------------------------- -----------------------------------------
DONALD D DROBNY
The additional Terms and Conditions printed on the reverse side are incorporated into this Promissory Note and Security Agreement.
Original Note - White Customer Copy - Pink Bank Copy - Blue
</TABLE>
<PAGE> 1
EXHIBIT 10.29
NATIONSBANK
NationsBank, N.A. PROMISSORY NOTE
Amount Date
$ 40,000,000 July 31, 1996
------------ -------------
LOAN
For Value Received, PEROT SYSTEMS CORPORATION ("Borrower") unconditionally (and
jointly and severally, if more than one) promise (s) to pay to the order of
NationsBank, N.A. ("Bank"), at its offices at Charlotte, North Carolina, or at
such other place as may be designated by Bank, in immediately available funds,
the principal sum of Forty Million and 00/100 dollars ($40,000,000), together
with interest from the date hereof on the unpaid principal balance hereunder,
computed daily at the interest RATE indicated below, payable in accordance with
the PAYMENT SCHEDULE indicated below. - SEE ADDENDUM FOR ADDITIONAL PROVISIONS -
RATE
[ ] the RATE shall be the Prime Rate of Bank (defined below) plus ____________
(____%) Percent.
[X] the RATE shall be (i) Adjusted Eurodollar Rate plus one percent (1%) or
(ii) the Prime Rate as provided in the Addendum.
[ ] If this block is checked also, this is a variable rate, consumer purpose
loan secured by a one to four unit residential structure and shall have a
maximum interest rate of _______% or the maximum rate authorized by
applicable law, whichever is less.
Interest will be payable: [X] in arrears [ ] in advance
Interest at the RATE set forth above, unless otherwise indicated, will be
calculated on the basis of the 365/360 method, which computes a daily amount of
interest for a hypothetical year of 360 days, then multiplies such amount by
the actual number of days elapsed in an interest calculation period. If
interest is not to be computed using this method, describe the method to be
used:__________________________________________________________________________
The "Prime Rate of Bank" is the fluctuating rate of interest established by
Bank from time to time as its "Prime Rate," whether or not such rate shall be
otherwise published. Such Prime Rate is established by Bank as an index or base
rate and may or may not at any time be the best or lowest rate charged by Bank
on any loan. Any RATE based on a fluctuating index or base rate will, unless
otherwise provided, change each time and as of the date that the index or base
rate changes. If the Rate is to change on any other date or at any other
interval, describe:____________________________________________________________
Whenever there is a default under this note (this "Note") or, if this Note is a
demand note, whenever there is non-payment upon demand, the RATE of interest on
the unpaid principal and interest shall, at the option of Bank, become the
Default Rate (defined on the reverse side).
Notwithstanding any other provision contained in this Note, Bank does not
intend to charge and Borrower shall not be required to pay any amount of
interest or other fees or charges that is in excess of the maximum permitted by
applicable law. Any payment in excess of such maximum shall be refunded to
Borrower or credited against principal, at the option of Bank. - SEE ADDENDUM
FOR ADDITIONAL PROVISIONS -
PAYMENT SCHEDULE
All payments received hereunder may be applied, at Bank's option, first to the
payment of any expenses or charges payable hereunder and accrued interest, with
the balance being applied to principal, or in such other order as Bank shall
determine. Borrower may not prepay this Note, in whole or in part, without the
express consent of Bank or any holder hereof. If any payment is not made in
immediately available funds, Bank may postpone the crediting of such payment
until the payment is actually collected.
[X] DEMAND/TIME Principal shall be paid in a single payment on July 31,
(WITH DEMAND 1998; interest thereon shall be paid: [X] monthly or [ ]
FEATURE) quarterly, or [ ] _________ commencing on August 31, 1996,
and continuing on the same day of each successive
month/quarter/or other period (as applicable) thereafter,
with a final payment of all unpaid interest at the time of
the payment of the principal. - AS PROVIDED IN THE ADDENDUM -
[ ] TERM Principal shall be paid in __________(_____) equal:
[ ] monthly or [ ] quarterly or [ ] ________ installments of
$ ___________________ each, commencing on __________, 19__,
together with accrued interest thereon at the RATE set forth
above, and continuing on the same day of each successive
month/quarter/or other period (as applicable) thereafter,
with a final payment of all unpaid principal and interest
thereon on ________, 19__.
[ ] TERM-LEVEL Principal and interest shall be paid in _______(___) equal:
PAYMENTS [ ] monthly, [ ] quarterly or [ ] ________ installments of
$________________ each, commencing on ___________, 19__;
continuing on the same day of each successive
month/quarter/or other period (as applicable) thereafter,
with a final payment of all unpaid principal and interest
thereon on __________________, 19__; provided that, if
accrued interest on any payment date exceeds the installment
amount set forth above, Borrower will pay an additional
amount equal to such excess interest.
[ ] OTHER ____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
[ ] If this box is checked, Borrower authorizes Bank to effect payment of sums
due under this Note by means of debiting Borrower's account number
___________ _________; provided, that such authorization shall not affect
the obligation of Borrower to pay such sums when due, without notice, if
there are insufficient funds in such account to make such payment in full
on the due date thereof.
JURY TRIAL BORROWER, OBLIGORS (DEFINED ON THE REVERSE SIDE) AND BANK
WAIVER AND EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM,
VENUE SUIT OR PROCEEDING ON OR ARISING OUT OF THIS NOTE, THE
AGREEMENT OBLIGATIONS, THE CONDUCT OF THE RELATIONSHIP BETWEEN BANK
AND BORROWER, AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
BANK AND OBLIGORS. ANY LITIGATION ARISING HEREUNDER OR
RELATED HERETO MAY BE TRIED BY THE NORTH CAROLINA COURTS FOR
MECKLENBURG COUNTY OR THE FEDERAL COURT OF THE WESTERN
DISTRICT OF NORTH CAROLINA.
The Security Provisions and Additional Terms And Conditions Set Forth On The
Reverse Side Of This Note Are A Part Of This Note.
WITNESS the hand(s) and seal(s) of the undersigned, each of the undersigned
having adopted the word (Seal) as its seal for the purpose of executing and
delivering this Note under Seal.
WITNESS/ATTEST: BORROWER:
(Seal)
- ------------------------------------- -------------------------------------
Individual
(Seal)
- ------------------------------------- -------------------------------------
Individual
Perot Systems Corporation
-------------------------------------
[Name of Corporation, Partnership, etc.]
By: /s/ JOHN VONESH (Seal)
- ------------------------------------- ----------------------------------
John Vonesh
Title: Treasurer
-------------------------------
<PAGE> 2
SECURITY
[ ] If this box in checked, repayment of this Note and all other obligations
of Borrower to Bank or the holder hereof is secured by and Borrower hereby
grant(s) a security interest in all collateral given by Borrower in
connection with the loan evidenced by this Note, including any
modifications, extensions or renewals thereof. "Obligations" of Borrower
as used herein shall include this Note and all other obligations,
liabilities or indebtedness of every kind any party to this Note in
whatever capacity to Bank, whether direct or indirect, absolute or
contingent, due or to become due, or now or hereafter existing or arising.
Bank is entitled to the benefits of the security agreements, pledge
agreements, deeds of trust or other collateral documents executed in
connection with this Note for all obligations. All collateral documents
now or hereafter securing this Note and the obligations of Borrower are
referred herein as the "Security Documents." Failure to check this box
shall not, however, affect the validity or enforceability of any security
interest for the obligations created by the Security Documents or
otherwise. A description of the collateral follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The collateral also includes the proceeds and products thereof and any and all
additions, accessions and substitutions to or for the collateral, as well as
any personal property or funds belonging to Borrower, which now or hereafter
are in the control or possession of or on deposit in or with Bank for any
reason or purpose.
ADDITIONAL TERMS AND CONDITIONS - SEE ADDENDUM FOR ADDITIONAL PROVISIONS -
1. The maker and any co-maker, any endorser hereof or any other party hereto
or any guarantor hereof (collectively "Obligors") and each of them: (i) waive(s)
presentment, demand, notice of demand and notice of acceleration of maturity,
protest, notice of protest and notice of nonpayment, notice of dishonor, and any
other notice required to be given under the law to any Obligors, in connection
with the delivery, acceptance, performance, default or enforcement of this Note,
of any endorsement or guaranty of this Note or of any of the Security Documents;
(ii) consent(s) to any and all delays, extensions, renewals or other
modifications of this Note or the Security Documents, or waivers of any term
hereof or of the Security Documents, or release or discharge by Bank of any of
Obligors, or release, substitution or exchange of any security for the payment
hereof or the failure to act on the part of Bank or any indulgence shown by
Bank, from time to time and in one or more instances (without notice to or
further assent from any of Obligors) and agree(s) to no action, failure to act
or failure to exercise any right or remedy on the part of Bank shall in any way
affect or impair the obligations of any Obligors or be construed as a waiver by
Bank of, or otherwise affect, any of Bank's rights under this Note, under any
endorsement or guaranty of this Note or under any of the Security Documents; and
(iii) agree(s) to pay, on demand, all costs and expenses of collection of this
Note or of any endorsement or guaranty hereof and the enforcement of Bank's
rights with respect to, or the administration, supervision, preservation,
protection of, or realization upon, any property securing payment hereof,
including, without limitation, reasonable attorney's fees.
2. This Note is delivered in and shall be construed under the internal laws
and Judicial decisions of the State of North Carolina, and the laws of the
United States as the same might be applicable. In any litigation in connection
with or to enforce this Note or any endorsement or guaranty of this Note or any
of the Security Documents, Obligors, and each of them, irrevocably consent(s) to
and confer(s) personal jurisdiction on the courts of the State of North Carolina
and the United States courts located within the State of North Carolina, and
expressly waive(s) any objections to the venue of the courts described on the
front of this Note, and agree(s) that service of process may be made on Obligors
by mailing a copy of the summons and complaint by registered or certified mail,
return receipt requested, to their respective addresses. Nothing contained
herein shall, however, prevent Bank from bringing any action or exercising any
rights within any other state or jurisdiction or from obtaining personal
jurisdiction by any other means available by applicable law. The term "Bank" as
used in this Note shall include Bank's successors, endorsees and assigns. The
terms "Borrower" and "Obligors" as used in this Note shall include the
respective successors, assigns, heirs and personal representatives thereto or
thereof, provided, however, that no obligations of Borrower or Obligors
hereunder can be assigned without the prior written consent of Bank.
3. The occurrence of any one or more of the following events shall constitute
a default under this Note: (i) the failure to pay or perform any obligation,
liability or indebtedness of any of Obligors to Bank, whether under this Note or
any other agreement, note or instrument now or hereafter existing, as and when
due (whether upon demand, at maturity or by acceleration, no prior demand
therefor by Bank being necessary); (ii) the failure to pay or perform any other
obligation, liability or indebtedness of any of Obligors whether to Bank or some
other party, the security for which constitutes an encumbrance on the security
for this Note; (iii) death of any of Obligors (if an individual), or a
proceeding being filed or commenced against any of Obligors for dissolution or
liquidation, or any of Obligors voluntarily or involuntarily terminating or
dissolving or being terminated or dissolved; (iv) insolvency of, business
failure of, the appointment of a custodian, trustee, liquidator or receiver for
or for any of the property of, or an assignment for the benefit of creditors by,
or the filing of a petition under any bankruptcy, insolvency or debtor's relief
law or for any adjustment of indebtedness, composition or extension by or
against any of Obligors; (v) any attachment, lien or additional security
interest being placed upon, or any seizure or forfeiture of, any of the property
which is security for this Note; (vi) acquisition at any time or from time to
time of title to the whole or any part of the property which is security for
this Note by any person, partnership, corporation or other entity other than any
of Obligors; (vii) Bank determining that any representation or warranty made by
any of Obligors to Bank is, or was, untrue or materially misleading, (viii) any
default under the Security Documents; or (ix) Bank reasonably deeming itself
insecure for any reason.
4. Whenever there is a default under this Note (a) the entire balance
outstanding hereunder and all other obligations of Obligors to Bank (however
acquired or evidenced) shall, at the option of Bank, become forthwith due and
payable, without presentment, notice, protest or demand of any kind for the
payment of the whole or any part hereof (all of which are expressly waived by
Obligors), and/or (b) to the extent permitted by law, the rate of interest on
the unpaid principal shall, at the option of Bank, be increased to the greater
of (i) three percent (3%) over the contract rate (as shown on the face of this
Note) or (ii) three percent (3%) over the Prime Rate of Bank (the rates of
interest set forth in paragraph 4(b)(i) and 4(b)(ii) are herein alternatively
called the "Default Rate"); and/or (c) to the extent permitted by law, a
delinquency charge ("Late Fee") may be imposed in an amount not to exceed four
percent (4%) of the unpaid portion of any payment in default for more than
fifteen days in the event interest is payable in arrears or for more than thirty
days in the event interest is payable in advance. Unless the terms of this Note
call for repayment of the entire balance of this Note (both principal and
interest) in a single payment and not for installments of interest or principal
and interest, the four percent (4%) Late Fee may be imposed not only with
respect to regular installments of principal, interest, or interest and
principal, but also with respect to any other payment in default under this Note
(other than a previous Late Fee), including, without limitation, a single
payment of principal due at maturity of this Note. In the event any installment,
or portion thereof, is not paid in a timely fashion, subsequent payments will be
applied first to the past due balance (which shall not include any previous Late
Fees), specifically to the oldest maturing installment, and a separate Late Fee
will be imposed for each payment that becomes due until the default is cured.
The provisions herein for a Default Rate and /or a Late Fee shall not be deemed
to extend the time for any payment hereunder or to constitute a "grace period"
giving Obligors a right to cure any default. If the Default Rate is a factor of
the Prime Rate, the Default Rate will change each time and as of the date that
the Prime Rate of Bank changes. At Bank's option, any accrued and unpaid
interest, fees or charges may, for purposes of computing and accruing interest
on a daily basis after the due date of this Note or any payment hereunder, be
deemed to be a part of the principal balance under this Note, and interest shall
accrue on a daily compounded basis after such date at the rate provided in this
Note until the entire outstanding balance of principal and interest is paid in
full. Failure at any time to exercise any of the aforesaid options or any other
rights of Bank shall not constitute a waiver thereof, nor shall it be a bar to
the exercise of any of the aforesaid options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. If this Note is payable on
demand, the acceptance by Bank of any partial payment from any of Obligors shall
not affect the demand tenor of this Note. Bank is hereby authorized at any time
to charge against any deposit accounts of any party to this Note, as well as any
other property of such party at or under the control of Bank, without notice,
any and all obligations of such party, whether due or not.
5. In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event any one or more of the provisions of this Note
operate or would prospectively operate to invalidate this Note, then and in any
of the events, such provision or provisions only shall be deemed null and void
and shall not affect any other provision of this Note and the remaining
provisions of this Note shall remain operative and in full force and effect and
shall in no way be affected, prejudiced or disturbed thereby.
ENDORSEMENTS:
The undersigned endorser(s) hereby unconditionally undertake and agree to pay
this Note in accordance with its terms and all other obligations of Borrower
to Bank.
(Seal) (Seal)
- ------------------------------------- ----------------------------------------
Individual [Name of Corporation, Partnership, etc.]
(Seal) By: /s/ JOHN VONESH
- ------------------------------------- -------------------------------------
Individual Title:
----------------------------------
<PAGE> 3
ADDENDUM TO
$40,000,000 DEMAND PROMISSORY NOTE DATED JULY 31, 1996
OF PEROT SYSTEMS CORPORATION
IN FAVOR OF
NATIONSBANK, N.A.
The above-referenced Note is amended and modified to include the
following terms:
LOAN
Commitment. During the Commitment Period, subject to the terms and
conditions hereof, the Bank agree to make revolving loans to the Borrower upon
request up to an aggregate principal amount of FORTY MILLION DOLLARS
($40,000,000) at any time outstanding. The loans hereunder may consist of Base
Rate Loans or Eurodollar Loans, or a combination thereof; provided that no more
than 8 Eurodollar Loans may be outstanding at any time. The obligation of the
Bank to make loans hereunder and to extend, or convert loans into, Eurodollar
Loans is subject to the condition that the Representations and Warranties set
forth herein are true and correct in all material respects.
Notices. Requests by the Borrower for loans hereunder, and for
extensions or conversions of loans hereunder, shall be made by written notice
(or telephone notice promptly confirmed in writing) by 12:00 Noon Charlotte,
North Carolina time on (i) the Business Day prior to the requested borrowing,
extension or conversion in the case of Base Rate Loans and (ii) the third
Business Day prior to the requested borrowing, extension or conversion in the
case of Eurodollar Loans. Each request shall be in a minimum principal amount of
$1,000,000 in the case of Eurodollar Loans and $100,000 in the case of Base Rate
Loans and, in each case, integral multiples of $100,000 in excess thereof, and
shall specify the date of the requested borrowing, extension or conversion, the
aggregate amount to be borrowed, extended or converted and if an extension of
conversion, the loan which is being extended or converted, and whether the
borrowing, extension or conversion shall consist of Eurodollar Loans, Base Rate
Loans or combination thereof. If the Borrower shall fail to specify (A) the type
of Loan requested for a borrowing, the request shall be deemed a request for a
Base Rate Loan, (B) the duration of the applicable Interest Period in the case
of Eurodollar Loans, the request shall be deemed to be a request for an Interest
Period of one month. Each request for a borrowing, extension or conversion
hereunder shall be deemed a reaffirmation that the Representations and
Warranties set forth herein are true and correct in all material respects as of
such date. Unless extended in accordance with the provisions hereof, Eurodollar
Loans shall be converted to Base Rate Loans at the end of the applicable
Interest Period.
RATE
The Rate shall be either (i) the Adjusted Eurodollar Rate plus one
percent or (ii) the Prime Rate, as the Borrower may elect. Interest will be
payable in arrears on each Interest Payment Date.
Capital Adequacy. If the Bank has reasonably determined, after the
date hereof, that the adoption or the becoming effective of, or any change in,
or any change by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof in the interpretation
or administration of, any applicable law, rule or regulation regarding capital
adequacy, in each case after the date hereof, or compliance by the Bank with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, after
the date hereof, has or would have the effect of reducing the rate of return on
the Bank's capital or assets as a consequence of its commitments or obligations
hereunder to a level below that which the Bank could have achieved but for such
adoption, effectiveness, change or
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<PAGE> 4
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
compliance (taking into consideration the Bank's policies with respect to
capital adequacy), then, upon notice from the Bank to the Borrower, the
Borrower shall be obligated to pay to the Bank such additional amount or
amounts as will compensate the Bank for such reduction. Each determination by
the Bank of amounts owing under this paragraph shall, absent manifest error, be
conclusive and binding on the parties hereto. The Bank shall not be entitled to
any payments or compensation under this paragraph for any period of time more
than 90 days prior to the date of any request by the Bank for compensation
under this paragraph.
Inability To Determine Interest Rate. If prior to the first day of any
Interest Period, the Bank shall have reasonably determined (which determination
shall be conclusive and binding upon the Borrower absent manifest error) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, the Bank shall give telecopy or telephonic notice thereof to
the Borrower. If such notice is given (x) any Eurodollar Loans requested to be
made on the first day of such Interest Period shall be made as Base Rate Loans,
(y) any Loans that were to have been converted on the first day of such
Interest Period to or continued as Eurodollar Loans shall be converted to or
continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the last day of such Interest Period, to Base Rate Loans. Until
such notice has been withdrawn by the Bank, no further Eurodollar Loans shall
be made or continued as such, nor shall the Borrower have the right to convert
Base Rate Loans to Eurodollar Loans.
Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof occurring after the date hereof shall make it unlawful for
the Bank to make or maintain Eurodollar Loans as contemplated hereunder, (a)
the Bank shall promptly give written notice of such circumstances to the
Borrower (which notice shall be withdrawn whenever such circumstances no longer
exist), (b) the commitment, if any, of the Bank hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall
no longer be unlawful for the Bank to make or maintain Eurodollar Loans, the
Bank shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) the Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days or the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrower shall pay to the
Bank such amounts, if any, as may be required pursuant to the paragraph
entitled "Indemnity".
Requirements of Law. If, after the date hereof, the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof applicable to the Bank, or compliance by the Bank with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made after the date hereof:
(a) shall subject the Bank to any tax of any kind
whatsoever with respect to any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of taxation of
payments to the Bank in respect thereof (except for Non-Excluded Taxes
covered by the paragraph entitled "Taxes" (including Non-Excluded Taxes
imposed solely by reason of any failure of the Bank to comply with its
obligations
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<PAGE> 5
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
under the paragraph entitled "Taxes") and changes in taxes measured by
or imposed upon the overall net income, or franchise tax (imposed in
lieu of such net income tax), of the Bank or its applicable lending
office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of the Bank which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or
(c) shall impose on the Bank any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to the Bank, by
an amount which the Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, upon notice to the
Borrower from the Bank, the Borrower shall be obligated to promptly pay the
Bank, upon its demand, any additional amounts necessary to compensate the Bank
for such increased cost or reduced amount receivable, provided that, in any
such case, the Borrower may elect to convert the Eurodollar Loans hereunder to
Base Rate Loans by giving the Bank at least one Business Day's notice or such
election, in which case the Borrower shall promptly pay to the Bank, upon
demand, without duplication, such amounts, if any, as may be required pursuant
to the paragraph entitled "Indemnity". If the Bank becomes entitled to claim
any additional amounts pursuant to this subsection, it shall provide prompt
notice thereof to the Borrower certifying (x) that one of the events described
in paragraph (a) has occurred and describing in reasonable detail the nature of
such event, (y) as to the increased cost or reduced amount resulting from such
event and (z) as to the additional amount demanded by the Bank and a reasonably
detailed explanation of the calculation thereof. Such a certificate as to any
additional amounts payable pursuant to this subsection submitted by the Bank
hereunder shall be conclusive and binding on the parties hereto in the absence
of manifest error. This covenant shall survive the termination of this Note and
the payment of the Loans and all other amounts payable hereunder. The Bank
shall not be entitled to any payments or compensation under this paragraph for
any period of time more than 90 days prior to the date of any request by the
Bank for compensation under this paragraph.
Taxes. Except as provided below in this subsection, all payments made
by the Borrower under this Note shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any court, or governmental body, agency or other official, excluding taxes
measured by or imposed upon the overall net income of the Bank or its
applicable lending office, or any branch or affiliate thereof, and all
franchise taxes, branch taxes, taxes on doing business or taxes on the overall
capital or net worth of the Bank or its applicable lending office, or any
branch or affiliate thereof, in each case imposed in lieu of net income taxes,
imposed: (i) by the jurisdiction under the laws of which the Bank, applicable
lending office, branch or affiliate is organized or is located, or in which its
principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii) by reason
or any connection between the jurisdiction imposing such tax and the Bank,
applicable lending office, branch or affiliate other than a connection
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-3-
<PAGE> 6
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
arising solely from the Bank having executed, delivered or performed its
obligations, or received payment under or enforced, this Note. If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Bank hereunder or under any Notes, (A) the amounts so payable to
the Bank shall be increased to the extent necessary to yield to the Bank (after
payment of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Note, and (B) as
promptly as possible thereafter the Borrower shall send to the Bank for its own
account a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes when due to the appropriate taxing authority or fails to remit to the Bank
the required receipts or other required documentary evidence, the Borrower shall
indemnify the Bank for any incremental taxes, interest or penalties that may
become payable by the Bank as a result of any such failure. The agreements in
this subsection shall survive the termination of this Note and the payment of
the Loans and all other amounts payable hereunder. The Bank shall not be
entitled to payment or compensation under this paragraph unless demand is made
hereunder within 90 days of the Bank having actual knowledge of facts or
circumstances entitling the Bank to compensation under this paragraph.
Indemnity. The Borrower promises to indemnify the Bank and to hold
the Bank harmless from any loss or expense which the Bank may sustain or incur
(other than through the Bank's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Note, (b) default
by the Borrower in making any prepayment of a Eurodollar Loan with respect
to which the Borrower has given a notice in accordance with the provisions of
this Note or (c) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto. With respect to
Eurodollar Loans, such indemnification may include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Eurodollar Loans provided for herein (excluding, however, the
Applicable Percentage included therein, if any) over (ii) the amount of
interest (as reasonably determined by the Bank) which would have accrued to the
Bank on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank Eurodollar market. The covenants of the
Borrower set forth in this paragraph shall survive the termination of this Note
and the payment of the Loans hereunder and all other amounts payable hereunder.
CLOSING FEE
The Borrower will pay a non-refundable fee of $20,000 to the Bank on
the date hereof in connection herewith.
FACILITY FEE
The Borrower agrees to pay a facility fee to the Bank in an amount
equal to one-fourth of one percent (1/4%) per annum on the average daily unused
portion of the maximum amount available under this Note. This fee shall be
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-4-
<PAGE> 7
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
payable quarterly in arrears on the 15th day following the last day of each
calendar quarter for the prior calendar quarter and on the Termination Date.
PAYMENT SCHEDULE
Principal shall be paid in a single payment on the Termination Date;
interest thereon shall be paid in arrears on each Interest Payment Date.
Voluntary Prepayments. The Borrower may make prepayment on the Loans
in whole or in part, subject to the provisions of the paragraph entitled
"Indemnity", but otherwise without premium or penalty; provided, however that
Eurodollar Loans may be prepaid only on three Business Days' prior written
notice and prepayments shall be in a minimum principal amount of $1,000,000 in
the case of Eurodollar Loans and $100,000 in excess thereof. Amounts prepaid
hereunder may be reborrowed subject to the terms hereof.
REPRESENTATIONS AND WARRANTIES
Financial Condition. The financial statements provided to the Bank,
consisting of
(i) an audited consolidated balance sheet of the Borrower and
its consolidated subsidiaries dated as of December 31, 1995 together with
related consolidated statements of income and cash flows certified by
Coopers & Lybrand LLP, certified public accountants, and
(ii) company-prepared consolidated and consolidating balance
sheets of the Borrower and its consolidated subsidiaries dated as of March
30, 1996 together with related consolidated and consolidating statements
of income and cash flows,
copies of which have been provided to the Bank, are complete and correct in all
material respects and present fairly the financial condition and results from
operations of the entities and for the periods specified, subject in the case
of interim company-prepared statements to normal year-end adjustments.
No Change. Since December 31, 1995 there has been no development or
event which has had a material adverse effect on the condition (financial or
otherwise), operations, business or prospects of the Borrower and its
subsidiaries taken as a whole.
Corporate Organization. The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
incorporation, is qualified to do business in each jurisdiction where failure
to so qualify would have a material adverse effect on the Borrower and its
subsidiaries taken as a whole and is in compliance with all Requirements of Law
except to the extent that failure to be in compliance would not have a material
adverse effect on the Borrower and its subsidiaries taken as a whole.
Enforceable Obligation. The Borrower has the power and authority and
legal right to enter into, deliver and perform under this Note and has taken
all necessary corporate action to authorize the execution, delivery and
performance by it of this Note. This Note constitutes a legal, valid and binding
obligation of the Borrower enforceable against it in accordance with its terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
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-5-
<PAGE> 8
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
No Default. No Event of Default or event or condition which with
notice or lapse of time, or both, would constitute an Event of Default,
presently exists.
Federal Regulations. No part of the proceeds of any Loan hereunder
will be used, directly or indirectly, for any purpose in violation of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended, modified or replaced.
COVENANTS
The Borrower covenants and agrees to:
Financial Statements. Furnish, or cause to be furnished, to the Bank:
(i) Annual Audited Statements. As soon as available, but in any
event within 120 days after the end of each fiscal year, audited
consolidated and company-prepared consolidating balance sheets of the
Borrower and its subsidiaries and related statements audited
consolidated and company-prepared consolidating statements of income,
retained earnings and cash flows, audited by a nationally recognized
independent public accounting firm reasonably acceptable to the Bank,
setting forth comparative information for the previous year, and
reported without a "going concern" or like qualification or exception,
or qualification indicating limitation of the scope of the audit; and
(ii) Quarterly Statements. As soon as available, and in any event
within 45 days after the end of the first three fiscal quarters, a
company-prepared consolidated and consolidating balance sheet of the
Borrower and its subsidiaries and related company-prepared consolidated
and consolidating statements of income, retained earnings and cash
flows for the quarter and for the portion of the year with comparative
information for the corresponding periods for the previous year.
All such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and, in the
case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants and disclosed therein) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change in the application of accounting principles from a prior
period.
Certificates and Notices. Furnish, or cause to be furnished, and give
notice to the Bank:
Officer's Certificate. Concurrently with the annual and quarterly
financial statements referenced above, a certificate of a responsible
officer of the Borrower stating that to the best of his knowledge and
belief, (i) the financial statements fairly present in all material
respects the financial condition of the parties to which such
statements relate and (ii) the Borrower is in compliance with the
provisions of this Note in all material respects and no Event of
Default, or event or condition which with notice or lapse of time, or
both, would constitute an Event of Default exists hereunder.
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-6-
<PAGE> 9
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
Public and Other Information. Copies of reports and information
which the Borrower or its subsidiaries sends to its stockholders or
files with the Securities and Exchange Commission, and any other
financial or other information as the Bank may reasonably request.
Notice of Default. Promptly upon becoming aware thereof
notice of the occurrence of an Event of Default hereunder.
Compliance with Laws. Comply with all Requirements of Law applicable
to it except to the extent that failure to comply therewith would not have a
material adverse effect on the Borrower and its subsidiaries taken as a whole.
Books and Records. Keep proper books and records in conformity with
GAAP and all Requirements of Law and permit the Bank upon reasonable notice to
visit and inspect such books and records.
Merger and Consolidation. The Borrower will not merge or consolidate
with any other entity unless after giving effect thereto (i) the Borrower shall
be the surviving corporation and (ii) no Event of Default, or event or condition
which on notice or lapse of time, or both, would constitute an Event of
Default, shall exist immediately before or after giving effect thereto.
Financial Covenants.
(a) Consolidated Tangible Net Worth. There shall be
maintained at all times a minimum Consolidated Tangible Net Worth of
not less than $34,000,000; provided that the minimum Consolidated
Tangible Net Worth required hereunder shall be increased (but not
decreased) on the last day of each fiscal year, beginning with the
first such date occurring after the date hereof, in an amount equal to
50% of Consolidated Net Income for the fiscal year then ending.
(b) Interest Coverage Ratio. There shall be maintained, as of
the end of each fiscal quarter, an Interest Coverage Ratio of at least
3.0:1.0.
(c) Funded Debt Ratio. There shall be maintained, as of the
end of each fiscal quarter, a Funded Debt Ratio of not greater than
2.5:1.0.
ADDITIONAL TERMS AND PROVISIONS
CHOICE OF LAW AND CONSENT TO JURISDICTION
Reference is made to paragraph 2 of the Section entitled "Additional
Terms and Provisions". Notwithstanding provisions to the contrary contained
therein or elsewhere in the Note, the Note and this Addendum shall be delivered
in and shall be construed under the internal laws and judicial decisions of the
Commonwealth of Virginia, and the laws of the United States as the same might
be applicable, and the Borrower consents to jurisdiction in the Commonwealth of
Virginia and waives objection to venue of the courts therein as provided in
paragraph 2. References in paragraph 2 and elsewhere in the Note to "North
Carolina" shall be deemed to mean, and be references instead to, "Virginia".
EVENTS OF DEFAULT
Reference is made to paragraph 3 of the Section entitled "Additional
Terms and Provisions". The Event of Default described in subsection (i) is
modified to read as follows:
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-7-
<PAGE> 10
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
(i) the failure to pay or perform any obligation, liability
or indebtedness of any of the Obligors to the Bank, whether under this Note or
under any other agreement, note or agreement now or hereafter existing, as and
when due (whether upon demand, at maturity or by acceleration, no prior demand
therefor by Bank being necessary), provided however that in the case of a good
faith failure to perform a covenant hereunder on account of an acquisition,
merger or consolidation, the Borrower shall have a period of 30 days to cure
those events or conditions giving rise to the nonperformance which are
susceptible to cure;"
Upon the occurrence of any of the Events of Default the Bank may by
notice to the Borrower, terminate the commitments hereunder and declare the
loans and other amounts owing hereunder immediately due and payable as provided
in paragraph 4(i); provided that the commitments hereunder shall be immediately
terminated and the loans and other amounts shall be immediately due and payable
upon the occurrence of an event described in paragraph 3(iv) without the
necessity of giving any notice or other action by the Bank.
LATE FEE
Reference is made to paragraph 4 of the Section entitled "Additional
Terms and Provisions". No Late Fee (as referenced and defined in paragraph 4
and as distinguished from the Default Rate) shall be imposed on the Borrower
under the Note and all references to the Late fee shall be deemed deleted. A
Default Rate, on the other hand, may be imposed as provided in the Note.
DEFINITIONS
As used herein:
"Adjusted Eurodollar Rate" means:
Adjusted Eurodollar Rate= Eurodollar Rate
--------------------------------
1- Eurodollar Reserve Percentage
"Base Rate Loans" means a Loan hereunder bearing interest at a
rate determined by reference to the Prime Rate.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina or
Reston, Virginia are authorized or required by law to close, except
that, when used in connection with a Eurodollar Loan, such day shall
also be a day on which dealing between banks are carried on in U.S.
dollar deposits in London, England and New York, New York.
"Commitment Period" means the period from and including the
date hereof to but excluding the earlier of (i) the Termination Date,
or (ii) the date on which the commitments hereunder shall have been
terminated in accordance with the provisions hereof.
"Consolidated EBITDA" means for any period, the sum of
Consolidated EBIT plus depreciation, amortization and other non-cash
charges, for the Borrower and its subsidiaries in a consolidated basis
determined in each case in accordance with GAAP applied on a consistent
basis. Except as expressly provided otherwise, the applicable period
shall be for the four consecutive quarters ending as of the date of
determination.
Initials: PSC JV
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NB
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-8-
<PAGE> 11
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
"Consolidated EBIT" means for any period, the sum of Consolidated Net
Income plus Consolidated Interest Expense plus all provisions for any Federal,
state or other income taxes, for the Borrower and its subsidiaries on a
consolidated basis determined in accordance with GAAP applied on a consistent
basis. Except as expressly provided otherwise, the applicable period shall be
for the four consecutive quarters ending as of the date of determination.
"Consolidated Interest Expense" means for any period, all interest
expense, including the amortization of debt discount and premium and the
interest component under Capital Leases for the Borrower had its subsidiaries
on a consolidated basis determined in accordance with GAAP applied on a
consistent basis. The applicable period shall be for the four consecutive
quarters ending as of the date of determination.
"Consolidated Net Income" means for any period, the net income of the
Borrower and its subsidiaries on a consolidated basis determined in accordance
with GAAP applied on a consistent basis, but excluding for purposes of
determining the Interest Coverage Ratio, any extraordinary gains or losses, and
any taxes on such excluded gains and any tax deductions or credits on accounts
of any such excluded losses. The applicable period shall be for the four
consecutive quarters ending as of the date of computation.
"Consolidated Tangible Net Worth" means total stockholders' equity of
the Borrower and its subsidiaries on a consolidated basis as determined in
accordance with GAAP applied on a consistent basis, less and except goodwill,
patents, trade names, trademarks, copyrights, franchises, experimental expense,
organizational expense, unamortized debt discount and expense, deferred assets
other than prepaid insurance and prepaid taxes, the excess of cost of shares
acquired over book value or related assets and such other assets as are
properly classified as "intangible assets" in accordance with GAAP.
"Consolidated Funded Debt" means Funded Debt of the Borrower and its
subsidiaries on a consolidated basis determined in accordance with GAAP applied
on a consistent basis.
"Eurodollar Loan" means a Loan hereunder bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Reserve Percentage" means for any day, that percentage
(expressed as a decimal) which is in effect from time to time under Regulation
D of the Board of Governors of the Federal Reserve System (or any successor),
as such regulation may be amended from time to time or any successor
regulation, as the maximum reserve requirement (including, without limitation,
any basic, supplemental, emergency, special, or marginal reserves) applicable
with respect to Eurocurrency liabilities as that term is defined in Regulation
D (or against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is determined),
whether or not Bank has any Eurocurrency liabilities subject to such reserve
requirement at that time, Eurodollar Loans shall be deemed Eurocurrency
liabilities and as such shall be deemed subject to reserve requirements without
benefits of credits for proration, exceptions or offsets that may be available
from time to time to Bank. The Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in the Eurodollar Reserve
Percentage.
Initials: PSC JV
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NB
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-9-
<PAGE> 12
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
"Eurodollar Rate" means for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "Eurodollar Rate" shall mean, for any
Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars
at approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates.
"Event of Default" means any event or condition described in paragraph
3 of the "Additional Terms and conditions" section hereof.
"Funded Debt" means (i) all indebtedness for borrowed money (including
without limitation, indebtedness evidenced by promissory notes, bonds,
debentures and similar instruments and further any portion of the purchase
price for assets or acquisitions permitted hereunder which may be financed by
the seller), (ii) all purchase money indebtedness, (iii) all capital lease
obligations, (iv) all guaranty obligations with respect to Funded Debt of
another Person, (v) all Funded Debt of another Person secured by a Lien on any
Property of the Borrower or a subsidiary, whether or not such Funded Debt has
been guaranteed or assumed, (vi) the maximum amount available to be drawn under
standby letters of credit and bankers' acceptances issued or created, (vii) all
preferred stock the terms of which require it to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed date, (viii) the aggregate
net amount of indebtedness or obligations relating to uncollected accounts
receivable subject at such time to a sale of receivables (or other similar
transaction) regardless of whether such transaction is effected without recourse
or in a manner which would not be reflected on the balance sheet in accordance
with GAAP, and (ix) the principal balance outstanding under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product to which such Person is a party, where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP. For purposes hereof,
Funded Debt shall include Funded Debt of any partnership or joint venture in
which such Person is a general partner or joint venturer.
"Funded Debt Ratio" means, as of the last day of any fiscal quarter,
the ratio of Consolidated Funded Debt to Consolidated EBITDA for the period of
four consecutive fiscal quarters ending as of such date.
"GAAP" means, generally accepted accounting principles in the United
States applied on a consistent basis.
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
Initials: PSC JV
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NB
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-10-
<PAGE> 13
Addendum to
$40,000,000 Demand Note
Perot Systems Corporation
dated July 31, 1996
"Interest Coverage Ratio" means for any period, the ratio of
Consolidated EBIT to Consolidated Interest Expense.
"Interest Payment Date" means (i) as to any Base Rate Loan, the last day
of each month, the date of repayment of principal of such Loan and the
Termination Date and (ii) as to any Eurodollar Loan, the last day of each
Interest Period for such Loan, the date of repayment of principal of such Loan
and on the Termination Date, and in addition where the applicable Interest
Period is more than 3 months, then also on the date 3 months from the beginning
of the Interest Period, and each 3 months thereafter. If an Interest Payment
Date falls on a date which is not a Business Day, such Interest Payment Date
shall be deemed to be the next succeeding Business Day, except that in the case
of Eurodollar Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day.
"Interest Period" means as to any Eurodollar Loan, a period of one, two,
three or six month's duration, as the Borrower may elect, commencing in each
case, on the date of the borrowing (including conversions, extensions and
renewals); provided, however, (A) if any Interest Period would end on a day
which is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day (except that in the case of Eurodollar Loans where the
next succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding Business Day), (B) no Interest Period shall extend beyond
the Termination Date, and (C) in the case of Eurodollar Loans, where an
Interest Period begins on a day for which there is no numerically corresponding
day in the calendar month in which the Interest Period is to end, such Interest
Period shall end on the last day of such calendar month.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its material property is subject.
"Termination Date" means July 31, 1998, or any such later date as to
which the Bank, in its sole discretion may agree.
[Remainder of Page Intentionally Left Blank]
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NB
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-11-
<PAGE> 1
EXHIBIT 10.30
AMENDED AND RESTATED
PSC STOCK OPTION AND PURCHASE AGREEMENT
AMENDED AND RESTATED PSC STOCK OPTION AND PURCHASE AGREEMENT
(this "Agreement") dated as of April 24, 1997 by and between SWISS BANK
CORPORATION, a banking corporation organized under the laws of Switzerland
("SBC"), and PEROT SYSTEMS CORPORATION, a corporation organized under the laws
of the State of Delaware ("PSC").
WITNESSETH
WHEREAS, SBC and PSC entered into the PSC Stock Option Agreement
(the "Original Agreement") dated as of January 1, 1996 (the "Original Agreement
Date");
WHEREAS, SBC and PSC now desire to amend and restate the Original
Agreement to read in its entirety as set forth in this Agreement;
WHEREAS, in connection with and in furtherance of the
transactions contemplated by the Amended and Restated Master Agreement, dated
as of the Adjustment Date, by and between SBC and PSC (as such agreement may be
amended, modified or supplemented from time to time, the "Master Agreement"),
SBC and PSC desire to enter into this Agreement and to give effect to the
transactions contemplated hereby; and
WHEREAS, SBC desires to purchase, and PSC desires to sell shares
of, and options to purchase shares of, non-voting Class B common stock, par
value $0.01 per share, of PSC (the "Class B Stock"), on the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefor below (such
meanings to be equally applicable to both the singular and the plural forms of
the terms defined). Other capitalized terms have the meanings ascribed to them
in the various provisions of this
<PAGE> 2
Page 2
Agreement.
"Adjustment Date" shall mean January 1, 1997.
"Affiliate" shall have the meaning specified in Section 1.1 of
the Master Operating Agreement.
"Agreed Claims" shall have the meaning specified in Section
6.4(d).
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Average Market Value" shall mean the average of the Closing
Price for the security in question for the thirty (30) Trading Days immediately
preceding the date as of which a determination of Average Market Value is
required.
"BHCA" shall mean the Bank Holding Company Act of 1956, as
amended.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banks located in New York, New York, Basle, Switzerland or
Zurich, Switzerland shall be authorized or required by law to close.
"Certificate" shall have the meaning specified in Section 6.4(a).
"Class A Shares" shall mean any shares of Class A Stock.
"Class A Stock" shall mean the Class A common stock, par value
$0.01 per share, of PSC.
"Class B Shares" shall mean any shares of Class B Stock.
"Class B Stock" shall have the meaning specified in the recitals
to this Agreement.
"Closing Price" shall mean, as to any security:
(a) If the primary market for the security in question is a
national securities exchange registered under the Exchange Act, the NASDAQ --
National Market, or other market or quotation system in which last sale
transactions are reported on a contemporaneous basis, the last reported sales
price, regular way, of such security for such day, or, if there has not been a
sale on such Trading Day, the highest closing or last bid quotation therefor on
such Trading Day (excluding, in any case, any price that is not the result of
bona fide arm's length trading); or
<PAGE> 3
Page 3
(b) if the primary market for such security is not an exchange
or quotation system in which last sale transactions are contemporaneously
reported, the highest closing or last bona fide bid or asked quotation by
disinterested Persons in the over-the-counter market on such Trading Day as
reported by NASDAQ or its successor or such other generally accepted source of
publicly reported bid quotations as SBC and PSC designate.
"Commission" shall mean the Securities and Exchange Commission.
"Designated Employee Options" shall mean options issued to
Designated Employees to purchase, in the aggregate, up to 378,840 Class A
Shares.
"Designated Employees" shall mean the individuals listed in a
letter delivered to PSC by SBC on or prior to the Original Agreement Date.
"Designated Value" shall mean (a) with respect to the Class B
Common Stock_(i) at any time when the Class A Shares are Publicly Traded, the
Average Market Value per share of the Class A Shares and (ii) at any time when
the Class A Shares are not Publicly Traded, the fair value per share of the
Class B Shares as determined from time to time by an independent valuation firm
selected in good faith by the Board of Directors of PSC and (b) with respect to
Options, the fair value per share of the Options as determined from time to
time by an independent valuation firm selected in good faith by the Board of
Directors of PSC.
"Encumbrances" shall mean encumbrances, liens, charges or other
restrictions of any kind or character.
"EPI Agreement" shall have the meaning specified in Section 1.1
of the Master Operating Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercisable Option Shares" shall mean, at any time, the
aggregate number of shares of Class B Stock that are at such time (a) SBC
Domestic Option Shares and (b) SBC Warburg Option Shares.
"Exercise Price" shall have the meaning set forth in Section 2.3.
"Exercised Option Shares" shall mean, at any time, the aggregate
number of Class B Shares acquired by SBC at or prior to such time upon exercise
of Options.
<PAGE> 4
Page 4
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System of the United States of America.
"First Offer" shall have the meaning specified in Section 4.4(a).
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time.
"Government Entity" shall mean any court, any supranational,
national, federal, provincial, state or local government or governmental
authority, department, commission, board, bureau, agency or instrumentality
(including, without limitation, the Federal Reserve Board and the Environmental
Protection Agency), whether domestic or foreign, or any stock exchange.
"Indemnified Party" shall have the meaning specified in Section
6.4(a).
"Indemnifying Party" shall have the meaning specified in Section
6.4(a).
"Initial Public Offering" shall mean, with respect to PSC, the
initial offer and sale to the public of PSC Shares pursuant to an effective
registration statement filed with the Commission under the Securities Act,
other than an offering registered on Form S-8 or S-4 or a successor form to
either such form.
"IPO Closing Date" shall mean the date of the closing of the
Initial Public Offering.
"IPO Notice" shall have the meaning specified in Section 4.2(b).
"Liquidation Preference Common Shares" shall mean any shares of
Liquidation Preference Common Stock.
"Liquidation Preference Common Stock" shall mean the Liquidation
Preference Common Stock, par value of $0.01 per share, of PSC.
"Loss and Expense" shall have the meaning specified in Section
6.2.
"Master Agreement" shall have the meaning specified in the
recitals to this Agreement.
"Master Operating Agreement" shall mean the Amended and Restated
Master Operating Agreement, dated as of the Adjustment Date, between SBC and
PSC, as amended, modified or supplemented from time to time.
"Master Project Agreement" shall mean the Master Project
Agreement,
<PAGE> 5
Page 5
dated as of the Original Agreement Date, between SBC and PSC, as amended,
modified or supplemented from time to time.
"NASDAQ" shall mean the National Association of Securities
Dealers' Automated Quotation System.
"NASDAQ -- National Market" shall mean the National Market of
NASDAQ.
"Nondisclosure Agreement" shall have the meaning specified in
Section 5.2.
"Options" shall have the meaning specified in Section 2.1.
"Ownership Restrictions" shall have the meaning specified in
Section 2.7(a).
"Ownership Restriction Shares" shall mean the Class A Shares, the
Class B Shares, the Liquidation Preference Common Shares and the shares of any
other class of stock of PSC that the Federal Reserve Board shall agree may be
treated as Ownership Restriction Shares for purposes of the Ownership
Restrictions.
"Person" shall mean and include an individual, corporation,
partnership (general or limited), joint venture, trust, estate, limited
liability company or other legal entity or organization and a Government
Entity.
"PSC" shall have the meaning specified in the introductory
paragraph of this Agreement.
"PSC Group" shall have the meaning specified in Section 1.1 of
the Master Operating Agreement.
"PSC Shares" shall mean any shares of PSC Stock.
"PSC Stock" shall mean, collectively, the Class A Stock, the
Class B Stock, the PSC Preferred Stock (as defined below) and the Liquidation
Preference Common Stock.
"Publicly Traded" shall mean that point in time when Class A
Shares are listed on a registered national securities exchange or approved for
quotation on NASDAQ.
"Sale" or "Sell" shall mean any sale, transfer, pledge,
hypothecation or other conveyance or disposition by any Person of any property
of such Person.
<PAGE> 6
Page 6
"SBC" shall have the meaning specified in the introductory
paragraph of this Agreement.
"SBC Affiliate" shall mean any corporation that, as of the date
hereof, is a Wholly-Owned Subsidiary of SBC, and is reasonably acceptable to
PSC as the SBC Affiliate for purposes of this Agreement.
"SBC Domestic Event" shall mean the entering into by a member of
the PSC Group and a member of the SBC Group, on or prior to December 31, 1998,
of a definitive agreement (the "SBC Domestic Agreement"), having a term of 10
years and a similar scope and size to the SBC Warburg EPI Agreement relating to
members of the SBC Group other than the members of the SBC Warburg Division (as
defined in Section 1.1 of the Master Operating Agreement), which agreement will
(a) include such terms and conditions consistent with those set forth in the
SBC Warburg EPI Agreement as may be agreed upon by the parties thereto, (b)
state that it is the definitive agreement referred to in this definition, and
(c) be entered into by each party thereto in such party's sole discretion.
"SBC Domestic Option Shares" shall mean, at any time, a number of
Class B Shares equal to, until the SBC Domestic Event occurs, zero, and upon
and following the occurrence of the SBC Domestic Event, a number of Class B
Shares, up to 3,500,000, elected by SBC in writing delivered to PSC on or
before the occurrence of the SBC Domestic Event (the "Elected Shares");
provided that if SBC does not so elect, the number shall be 3,500,000.
"SBC Domestic Purchased Shares" shall mean a number of Class B
Shares equal to 3,500,000 minus the number of Elected Shares.
"SBC Domestic Vested Shares" shall mean, at any time, a number of
Class B Shares equal to, until the SBC Domestic Event occurs, zero, and upon
and following the occurrence of the SBC Domestic Event, the lesser of (a)
3,500,000 and (b) the product of (i) 29,167 times (ii) the number of full
months beginning with the date of the effectiveness of the SBC Domestic
Agreement and ending on the date of determination of such number of SBC
Domestic Vested Shares or, if the SBC Domestic Agreement has been terminated,
the date of such termination.
"SBC Group" shall have the meaning specified in Section 1.1 of
the Master Operating Agreement.
"SBC Warburg EPI Agreement" shall mean the Amended and Restated
Agreement for EPI Operational Management Services, dated as of the Adjustment
Date, between PSC and SBC, as amended, modified or supplemented from time to
time.
<PAGE> 7
Page 7
"SBC Warburg Option Shares" shall mean, subject to Section 2.6,
at any time, a number of Class B Shares equal to 3,617,160 Class B Shares.
"SBC Warburg Purchased Shares" shall mean 50,000 Class B Shares.
"SBC Warburg Vested Shares" shall mean, subject to Section 2.6,
at any time, a number of Class B Shares equal to the lesser of (a) 3,667,160
and (b) the sum of (X) the product of (i) 29,167 times (ii) the number of
full months beginning with the Adjustment Date and ending on the date of
determination of such number of SBC Warburg Vested Shares or, if the SBC
Warburg EPI Agreement has been terminated, the date of such termination plus
(Y) the product of (i) 2,786 times (ii) the number of full months beginning on
the Adjustment Date and ending on the date of determination of such number of
SBC Warburg Vested Shares, provided that such ending date for the purposes of
this clause (Y) shall never be later than the earlier to occur of the date that
the SBC Warburg EPI Agreement is terminated and the fifth anniversary of the
Adjustment Date.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Start-Up Agreement" shall mean the Start-Up_Agreement, dated as
of the Original Agreement Date, between PSC and SBC, as amended, modified or
supplemented from time to time.
"Subsidiary" shall mean, with respect to any Person, each other
Person in which such Person owns, directly or indirectly, (a) any capital stock
or other equity interest or any other type of ownership interest representing a
majority of voting rights to elect or appoint the board of directors (or
similar governing body) of such other Person or (b) if there is no such
governing body, the majority of the capital stock or other equity interest or
any other type of ownership interest in such other Person.
"Systor" shall mean Systor AG, a corporation organized under the
laws of Switzerland and, as of the Original Agreement Date, a Wholly-Owned
Subsidiary of SBC.
"Systor Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of the Original Agreement Date, among PSC and SBC, as
amended, modified or supplemented from time to time.
"Trading Day" shall mean any Business Day on which the securities
in question are tradable on stock exchanges, in the over-the-counter markets or
otherwise.
"Transaction Documents" shall mean this Agreement, the Master
<PAGE> 8
Page 8
Agreement, the Master Operating Agreement, the SBC Warburg EPI Agreement, the
Master Project Agreement, the Systor Stock Purchase Agreement, the Start-Up
Agreement, and any other agreements executed and delivered by the respective
duly authorized officer(s) of SBC and PSC or Affiliates of either SBC or PSC in
connection with the transactions contemplated either by the original Master
Agreement dated as of the Original Agreement Date or the Master Agreement.
"Unvested SBC Domestic Shares" shall mean, at any time, the
number of Class B Shares equal to the sum obtained by subtracting the number of
SBC Domestic Vested Shares from 3,500,000 (as adjusted pursuant to Section 2.5
hereof).
"Unvested SBC Warburg Shares" shall mean, at any time, the number
of Class B Shares equal to the sum obtained by subtracting the number of SBC
Warburg Vested Shares from 3,667,160 (as adjusted pursuant to Section 2.5
hereof).
"Unvested Stock" shall mean the Unvested SBC Domestic Shares and
the Unvested SBC Warburg Option Shares.
"Vested Stock" shall mean the SBC Domestic Vested Shares and the
SBC Warburg Vested Shares.
"Wholly-Owned Subsidiary" shall mean, with respect to any Person,
each other Person in which such Person owns, directly or indirectly, (a) all of
the capital stock or other equity interest or other type of ownership interest
representing all of the voting rights to elect or appoint the board of
directors (or similar governing body) of such other Person or (b) if there is
no such governing body, all of the capital stock or other equity interest or
any other type of proprietary or other ownership interest in such other Person.
All references herein to "$" or "dollars" shall be to United
States dollars, and all references to "CHF" shall be to Swiss francs.
ARTICLE II
OPTIONS
2.1 Grant of Options. (a) Subject to the terms and conditions
of this Article II, PSC hereby agrees to issue and sell to SBC, subject to
the conditions specified in Section 2.1(b) hereof, options (collectively, the
"Options") to purchase, at any time or from time to time, a number of Class B
Shares equal to the Exercisable Option Shares at such time less the number of
Exercised Option Shares.
(b) SBC agrees that it will be a condition precedent to the
effectiveness of the
<PAGE> 9
Page 9
Options with respect to the SBC Domestic Option Shares and the SBC Warburg
Option Shares that SBC pay to PSC in immediately available funds in
consideration of the issuance of such Options with respect to the SBC Warburg
Option Shares and the SBC Domestic Option Shares the amounts specified below on
the dates specified below:
(i) for the Options covering SBC Warburg Option Shares an amount
equal to $2.25 per share, subject to Section 2.6 (the "SBC Warburg
Option Purchase Price"); and
(ii) for the Options covering SBC Domestic Option Shares an
amount per share equal to the Designated Value of the Options covering
the SBC Domestic Option Shares as of the date of the occurrence of the
SBC Domestic Event, which amount will be payable on the date of the SBC
Domestic Event (the "SBC Domestic Option Purchase Price").
2.2 Exercise of Options. (a) Subject to the terms and
conditions set forth below, SBC shall have the right (subject to Section 2.7)
to exercise the Options, in whole or in part, at any time on or after February
1, 1996 and from time to time thereafter, by notice given to PSC in accordance
with Section 7.3 specifying (i) the number of Class B Shares to be purchased,
(ii) the number of such shares that constitute SBC Warburg Option Shares and
SBC Domestic Option Shares, and (iii) the place and date for the closing of the
purchase, provided that such date shall be not earlier than five (5) Business
Days from the date such notice is given.
(b) [Intentionally omitted.]
2.3 Exercise Price. For the purpose of this Agreement, "Exercise
Price" shall mean the price per share of Class B Stock (subject to adjustment
as provided in Section 2.5) set forth below with respect to the Exercisable
Option Shares indicated:
(a) $7.30 per share for SBC Warburg Option Shares, subject to
Section 2.6 (the "SBC Warburg Exercise Price"); and
(b) The dollar amount per share for SBC Domestic Option Shares
equal to the Designated Value per share as of the date of the SBC Domestic
Event (the "SBC Domestic Exercise Price").
2.4 Payment for and Delivery of Shares. At the time of any
purchase of Class B Shares pursuant to the exercise of any Options, (a) SBC
shall pay the aggregate Exercise Price for the Class B Shares to be purchased
in immediately available funds by wire transfer to a bank account designated by
PSC in writing at least two (2) Business Days prior to such purchase and (b)
PSC shall deliver to SBC one (1) or more certificates, as requested by SBC,
representing the Class B Shares so purchased, registered in the name of SBC,
the SBC Affiliate or another SBC designee
<PAGE> 10
Page 10
reasonably acceptable to PSC.
2.5 Adjustment to Exercise Price and Shares. (a) In the event
that PSC, at any time after the date hereof, declares a dividend on PSC Shares
payable in Ownership Restriction Shares, subdivides the outstanding Ownership
Restriction Shares, combines the outstanding Ownership Restriction Shares into
a smaller number of Ownership Restriction Shares, or issues any shares of its
capital stock in a reclassification of the PSC Shares (including, without
limitation, any such reclassification in connection with a consolidation or
merger involving PSC), the Exercise Price set forth in Section 2.3 and the
number of Class B Shares issuable upon the exercise of the Options will be
proportionately adjusted so that SBC will be entitled to receive, upon payment
of the aggregate Exercise Price, the aggregate number of Class B Shares that,
if such Options had been exercised immediately prior to the record date for
such dividend or the effective date of such subdivision, combination or
reclassification and at a time when the transfer books of PSC were open, SBC
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification.
2.6 Additional Options. If and to the extent that any Designated
Employee Options are canceled or expire, or any unvested PSC Shares received by
employees upon exercise of the Designated Employee Options are repurchased or
redeemed by or returned to PSC by such employees pursuant to pre-existing
contractual rights and are not reissued to former employees of SBC or made
subject to Designated Employee Options within three (3) years of such
repurchase, return or redemption (including all shares as to which Designated
Employee Options have been cancelled or expired, the "Reacquired Employee
Stock"), then (a) the number of Class B Shares constituting SBC Warburg Option
Shares shall be increased by the number of shares of Reacquired Employee Stock
(the "Additional Option Shares") and such Additional Option Shares will be
included as SBC Option Warburg Shares under the definition of SBC Warburg
Option Shares and will vest on a pro rata basis over the then remaining term of
the vesting schedule set forth in clause (b)(X) of the definition of SBC
Warburg Vested Shares; (b) SBC shall, as part of the SBC Warburg Option
Purchase Price, pay to PSC an amount per share equal to the Designated Value of
the Options covering the Additional OptionShares as of the date that such
shares become Additional Option Shares; (c) the Exercise Price for the
Additional Option Shares shall be an amount equal to the Designated Value per
share for the SBC Warburg Option Shares as of the date that such shares become
Additional Option Shares; and (d) SBC shall be entitled to exercise Options to
purchase such Additional Option Shares in accordance with the procedures set
forth in Sections 2.2(a) and 2.4 with respect to the SBC Warburg Option Shares.
2.7 Ownership Restrictions; Termination of Options. (a) After
giving effect to any exercise of the Options by SBC and the payment of the
Exercise Prices therefor, the acquisition of Class B Shares pursuant to the
terms of this Agreement and
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the payment of the SBC Warburg Purchase Price and the SBC Domestic Purchase
Price, and/or any acquisition of the Options under this Agreement and the
payment of the SBC Warburg Option Purchase Price or the SBC Domestic Option
Purchase Price (collectively, the "Stock Acquisition Transactions"), (i) the
aggregate number of Class B Shares owned by SBC (including any Class B Shares
then owned by any employee of SBC), together with the aggregate number of any
Class B Shares owned by SBC at any time prior to the time of such exercise,
shall not exceed 10.0% of the aggregate number of Ownership Restriction Shares
outstanding at the time of such exercise or acquisition, and (ii) the aggregate
amounts paid by SBC in all Stock Acquisition Transactions shall not exceed 10%
of the consolidated stockholders' equity of PSC determined in accordance with
GAAP (the "Ownership Restrictions"). If any change in the BHCA makes
permissible an increase in the level of ownership by SBC or if the Federal
Reserve Board determines in advance that an increase in ownership level by SBC
is permissible under Federal Reserve Board interpretations prevailing at the
time, the Ownership Restrictions will be changed to incorporate such change in
the BHCA or such determination.
The Options shall expire and become null and void as to each
Class B Share in respect of which the Options are not exercised within five (5)
years after the date that such Shares becomes Vested Stock; provided that such
periods shall be tolled during any time that the Ownership Restrictions prevent
the exercise of such Options.
2.8 Outstanding Shares Deficiency. If, on the eighth,
eleventh, fourteenth or seventeenth anniversary of the date of the Original
Agreement Date (each, a "Trigger Date"), the number of Class B Shares for which
the Options are then exercisable is limited by Section 2.7(a) because of an
insufficient number of Ownership Restriction Shares being outstanding (an
"Outstanding Shares Deficiency") and such Outstanding Shares Deficiency is not
the result of a change in the BHCA or prevailing Federal Reserve Board policies
or interpretations related to the BHCA occurring after the date hereof that
makes the Ownership Restrictions more restrictive than those described in
Section 2.7(a), then if SBC has Sold to non-affiliates all the Vested Stock
that is available to it for Sale under the Ownership Restrictions, SBC will
have the right, exercisable in its discretion by written notice to PSC (the
"Triggering Notice") delivered within thirty (30) days after the Triggering
Date on which an Outstanding Shares Deficiency is in effect, to initiate the
procedure described below in this Section 2.8.
Beginning upon the date of delivery of the Triggering Notice, PSC and
SBC will use all reasonable efforts to eliminate the Outstanding Shares
Deficiency, including by PSC's issuing additional Ownership Restriction Shares
and SBC's requesting that the Federal Reserve Board approve an increase in the
percentage of outstanding Ownership Restriction Shares that SBC may own.
If the efforts required by paragraph (a) above are not successful in
eliminating
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the Outstanding Shares Deficiency within one hundred and twenty (120) days, PSC
and SBC will negotiate in good faith to reach a mutually acceptable resolution
to the Outstanding Shares Deficiency, which resolution shall be evidenced by a
written agreement between PSC and SBC.
If the negotiations contemplated by paragraph (b) above do not result in
a mutually acceptable resolution of the Outstanding Shares Deficiency within
ninety (90) days (the "Negotiation Period"), PSC shall, within three (3) years
of the Trigger Date, either:
issue additional Ownership Restriction Shares so that the number
of shares subject to the Outstanding Shares Deficiency as of the Trigger Date,
calculated consistent with the exercise and vesting schedules set forth in
this Agreement (the number of the reduced Outstanding Shares Deficiency, the
"Adjusted Deficiency Shares"), is eliminated; or
to the extent that PSC does not issue enough additional Ownership
Restriction Shares so that the number of Adjusted Deficiency Shares is
eliminated, then PSC will purchase from SBC, and SBC will sell to PSC, the
remaining Adjusted Deficiency Shares not so eliminated (the "Remaining Adjusted
Deficiency Shares") at the Fair Market Value (as defined below) for Class A
Shares calculated on the tenth Trading Day immediately preceding the date of
payment, or if the Class A Shares are not then regularly traded, on the date
twenty days after the determination of Fair Market Value. The Fair Market
Value shall be the average of the Closing Price on the thirty (30) consecutive
Trading Days immediately preceding the date of calculation, or, if such
securities are not regularly traded in the securities markets, the Fair Market
Value of such securities as determined as set forth below. If SBC and PSC fail
to agree in good faith on the Fair Market Value within five (5) days prior to
the payment date, then the Fair Market Value will be determined by an
independent appraiser mutually acceptable to SBC and PSC (the "Appraiser")
whose appraisal will be conclusive and binding on all parties. For purposes of
such appraisal, fair market value will be calculated without premium for
control or discount for minority interests, illiquidity, or restrictions on
transfer. The costs of the Appraiser will be borne by SBC and PSC equally.
SBC will transfer valid title to the Remaining Adjusted Deficiency Shares to
PSC, free and clear of any and all Encumbrances, other than those attributable
to the legal status of PSC, and other than restrictions imposed by applicable
law (including, without limitation, federal or state securities laws).
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ARTICLE IIA
PURCHASE AND SALE OF
SBC WARBURG PURCHASED SHARES
AND
SBC DOMESTIC PURCHASED SHARES
2A.1 Purchase and Sale.
(a) On the date hereof, PSC hereby agrees to sell, against
receipt of the purchase price specified below, and SBC hereby agrees to
purchase and pay for, the SBC Warburg Purchased Shares for a purchase price per
share of $7.30 (the "SBC Warburg Purchase Price"), which will be payable in
immediately available funds to PSC on or before April 28, 1997.
(b) Upon a date mutually agreed by SBC and PSC not later than 15
days after the SBC Domestic Event, PSC hereby agrees to sell, and SBC hereby
agrees to purchase, the SBC Domestic Purchased Shares for a purchase price per
share (subject to adjustment as provided in this Agreement) of the Designated
Value as of the date of the SBC Domestic Event (the "SBC Domestic Purchase
Price"), which will be payable in immediately available funds to PSC.
2A.2 Return of Shares and Cancellation of Options on Termination.
(a) In the event of the termination of the SBC Domestic
Agreement for any reason, (i) all Options to purchase Unvested SBC
Domestic Stock will be terminated and be null and void and (ii) SBC will
deliver to PSC, or will cause to be delivered to PSC at the SBC/D
Repurchase Closing (as defined below), against payment therefor as
provided below, good and marketable title to all Unvested SBC Domestic
Shares together with all dividends and other distributions made with
respect to such Unvested SBC Domestic Shares, free and clear of any
Encumbrances attributable to any actions taken by SBC or any of its
Affiliates. At the SBC/D Repurchase Closing, PSC will pay to SBC an
amount equal to the aggregate amount of the SBC Domestic Exercise Price
and SBC Domestic Purchase Price paid with respect to the Unvested SBC
Domestic Shares being acquired by PSC at the SBC/D Repurchase Closing.
The "SBC/D Repurchase Closing" will take place at the offices of PSC on
the Business Day specified by PSC by 10 day's written notice to SBC
provided that the SBC/D Repurchase Closing shall take place not later
than 75 days after the termination of the SBC Domestic Agreement.
Notwithstanding the foregoing, if the payment of the amount provided
above would cause PSC or any of its Affiliates to be in default under
any material agreement or shall be prohibited by any applicable law,
then PSC will have the right to defer the SBC/D Repurchase Closing for a
period of not more than one year following the termination of the SBC
Domestic Agreement.
(b) In the event of the termination of the SBC Warburg Agreement
for any reason, (i) all Options to purchase Unvested SBC Warburg Stock
will be terminated and be null and void and (ii) SBC will deliver to
PSC, or will cause to be delivered to PSC at the SBC/W Repurchase
Closing (as defined below),
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against payment therefor as provided below, good and marketable title to
all Unvested SBC Warburg Shares together with all dividends and other
distributions made with respect to such Unvested SBC Domestic Shares,
free and clear of any Encumbrances attributable to any actions taken by
SBC or any of its Affiliates. At the SBC/W Repurchase Closing, PSC will
pay to SBC an amount equal to the aggregate amount of the SBC Warburg
Exercise Price and SBC Warburg Purchase Price paid with respect to the
Unvested SBC Warburg Shares being acquired by PSC at the SBC/W
Repurchase Closing. The "SBC/W Repurchase Closing" will take place at
the offices of PSC on the Business Day specified by PSC by 10 day's
written notice to SBC provided that the SBC/W Repurchase Closing shall
take place not later than 75 days after the termination of the SBC
Warburg EPI Agreement. Notwithstanding the foregoing, if the payment of
the amount provided above would cause PSC or any of its Affiliates to be
in default under any material agreement or shall be prohibited by any
applicable law, then PSC will have the right to defer the SBC/W
Repurchase Closing for a period of not more than one year following the
termination of the SBC Warburg EPI Agreement.
ARTICLE III
REPRESENTATIONS OF PSC
PSC represents and warrants as follows:
3.1 Capital Stock. On the date of purchase of any Class B Shares
pursuant to the exercise of any Options or otherwise pursuant to Article II or
Article IIA hereof, the Class B Shares to be issued to SBC will be duly
authorized and, when issued and delivered and paid for in accordance with this
Agreement, will be validly issued, fully paid and non-assessable. The delivery
to SBC of any Class B Shares issued pursuant to the Options, and payment
therefore pursuant to the provisions of this Agreement, will transfer to SBC
valid title thereto, free and clear of any and all Encumbrances, other than
Encumbrances arising out of actions taken by SBC or attributable to the legal
status of SBC, and other than restrictions imposed by applicable law
(including, without limitation, federal or state securities laws) and this
Agreement.
3.2 Capitalization. As of March 31, 1997, the authorized capital
stock of PSC consisted of (i) 100,000,000 shares of Class A Common Stock, par
value $.01 per share, of which 39,444,543 shares were issued and outstanding ,
16,293,868 shares were issuable on the exercise of outstanding options, and
718,782 shares were held in treasury; (ii) 24,000,000 shares of Class B Common
Stock, par value $.01 per share, of which no shares were outstanding and
10,500,000 were issuable on the exercise of outstanding options; (iii)
4,000,000 shares of Series A Preferred Stock, par value $2.125 per share (the
"PSC Preferred Stock"), none of which were outstanding; and (iv) 16,000,000
shares of Liquidation Preference Common Stock, none of which shares
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were outstanding.
ARTICLE IV
RESTRICTIONS ON TRANSFER
4.1 No Market Disruption. SBC shall not at any time Sell any
Class B Shares in any manner that would, based on the advice of an
internationally recognized investment banking firm reasonably acceptable to
both parties hereto, disrupt the orderly development of a public market for the
PSC Shares, provided that this Section shall not be applied to limit the
ability of SBC to Sell up to 200,000 Class B Shares to employees of SBC or its
Affiliates, and/or to Sell Class B Shares as permitted by Rule 144 (or any
successor thereto) under the Securities Act.
4.2 Transfer of Options; Initial Public Offering. (a) Neither
the Unvested Stock, the Options nor any interest in the Unvested Stock or the
Options will be transferable to any Person. SBC shall not Sell any Class B
Shares until the first anniversary of the IPO Closing Date, provided that SBC
(i) may sell up to 200,000 Class B Shares to employees of SBC or its Affiliates
and (ii) may, with the prior written consent of the investment banking firm
acting as managing underwriter in connection with the Initial Public Offering
and in accordance with the procedure specified in Section 4.2(b), Sell up to
the lesser of (x) that number of Class B Shares owned by SBC which represents
ten percent (10%) of the aggregate number of Ownership Restriction Shares
offered in the Initial Public Offering or (y) 300,000 Class B Shares, subject
to adjustment in a manner consistent with Section 2.5.
(b) PSC agrees that, in the event it intends to launch
the Initial Public Offering, it shall promptly give written notice (the "IPO
Notice") to SBC as soon as practicable prior to the date that the registration
statement with respect to the proposed Initial Public Offering is filed with
the Commission, but in no event less than fifteen (15) days prior to such
filing. SBC shall have the right, exercisable upon written notice to PSC
within five (5) Business Days after receipt of the IPO Notice, to have PSC
include in such registration the number of Ownership Restriction Shares owned
by SBC which are to be Sold in the Initial Public Offering in compliance with
the provisions of Section 4.2(a).
(c) It shall be a condition precedent to the obligation
of PSC to take any action pursuant to this Section 4.2 in respect of the
Ownership Restriction Shares that are to be registered at the request of SBC
that (i) SBC furnish to PSC such information regarding the Ownership
Restrictions Shares held by SBC as may be required pursuant to the Securities
Act and the rules and regulations of the Commission promulgated thereunder or
otherwise reasonably requested by the managing underwriter of an underwritten
Initial Public Offering, and (ii) SBC enter into an underwriting agreement with
any underwriter of an underwritten Initial Public Offering
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containing representations, warranties, covenants, conditions, and indemnities
(for the benefit of PSC, its officers and directors, any Person who "controls"
PSC within the meaning of the Securities Act and such underwriters), with
respect to information provided by SBC specifically for inclusion in the
registration statement relating to the Initial Public Offering, that are
reasonably satisfactory to the underwriters and customary for transactions of
the type contemplated. Except as provided in the following sentence, PSC will
bear all expenses arising or incurred in connection with any of the
transactions contemplated by this Section 4.2, such expenses to include,
without limitation, (i) all expenses incident to filing with the National
Association of Securities Dealers, Inc.; (ii) registration fees and other
expenses incurred in connection with registering the Ownership Restriction
Shares under the Securities Act; (iii) all expenses incident to listing the PSC
Shares on any stock exchange; (iv) printing expenses; (v) legal fees and
expenses of PSC; (vi) accounting fees and expenses, including the fees and
expenses incurred in connection with any special audits or comfort letters
incident to or required by any such registration or qualification; (vii) the
fees and expenses of any transfer agent; and (viii) the expenses of complying
with the securities or blue sky laws of any jurisdictions in connection with
such registration or qualification. Notwithstanding the foregoing, SBC will be
responsible for the payment of any fees and expenses relating to the
registration of any Ownership Restriction Shares to be sold by it (including,
without limitation, underwriting discounts and commissions) and for the fees
and expenses of its counsel.
4.3 BHCA Requirements. SBC shall not, at any time, Sell any
Class B Shares or any interest therein in any manner that would contravene the
requirements of the BHCA and any rules and regulations or interpretations
promulgated or issued by the Federal Reserve Board pursuant thereto.
4.4 First Offer. (a) SBC acknowledges and agrees that, in the
event it shall, at any time during the period beginning on the Adjustment Date
and ending on the date of termination of the SBC Warburg EPI Agreement, desire,
other than in connection with the Initial Public Offering, to Sell Class B
Shares acquired pursuant to this Agreement, SBC shall first offer to sell any
such Class B Shares or Options in respect thereof to PSC for a price, including
an amount equal to the fair market value of any consideration not paid in cash,
and upon terms, specified in writing by SBC and delivered to PSC (each such
offer, a "First Offer"), provided that SBC shall not be required to deliver a
First Offer to PSC in respect of Class B Shares being Sold by SBC in any
widely-disbursed offering or in any transaction that complies with Rule 144 (or
any successor thereto) under the Securities Act, or in respect of up to 200,000
Class B Shares which may be Sold to employees of SBC or its Affiliates.
(b) In the event that PSC notifies SBC in writing of
its acceptance of any First Offer within twenty (20) days of receipt by PSC of
the First Offer, SBC shall be obligated to Sell, and PSC shall be obligated to
purchase, the Class B Shares or Options in respect thereof at the price,
including an amount equal to the
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fair market value of any consideration not paid in cash, and upon the terms
contained in such First Offer. The notice of acceptance by PSC shall specify a
date for the closing of the purchase, which shall be not more than twenty (20)
days after the date of such notice. At such closing, PSC will deliver the
purchase price specified in Section 4.4(a) to SBC in immediately available
funds against receipt by PSC from SBC of one (1) or more certificates
representing the Class B Shares described herein or the cancellation of Options
in respect thereof, which Class B Shares or Options in respect thereof shall be
free of any Encumbrances attributable to any action taken by SBC or any of its
Affiliates.
(c) In the event PSC rejects or does not accept a First Offer
within twenty (20) days of its receipt, SBC shall be entitled to offer the
Class B Shares referred to in the First Offer to third parties for a price and
upon other terms and conditions at least as favorable to SBC as those set forth
in the First Offer.
(d) If any third party shall accept an offer by SBC's
complying with the requirements of Section 4.4(c), then PSC's right to purchase
or otherwise acquire the Class B Shares subject to such offer or Options in
respect thereof shall be terminated; provided that in the event such acceptance
does not result in a sale or acquisition of such Class B Shares within three
(3) months of the rejection or non-acceptance of the First Offer by PSC, then
SBC shall not Sell such Class B Shares to any third party unless such Shares or
Options in respect thereof are offered again to PSC as provided in Section
4.4(a).
(e) The rights set forth in this Section 4.4 shall not be
assignable by PSC except in whole and to a Wholly-Owned Subsidiary of PSC.
ARTICLE V
COVENANTS
5.1 Legend. It is understood and agreed that the certificates
evidencing any securities acquired under the terms of this Agreement shall,
prior to the registration of such securities under applicable securities laws
or to any sale of such securities as permitted by Rule 144 (or any successor
thereto) under the Securities Act, bear the following legend:
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY
AND NOT WITH A VIEW TO ANY DISTRIBUTION HEREOF. THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED,
SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED
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OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
THESE SECURITIES ARE SUBJECT TO THE TERMS AND PROVISIONS OF AN
AMENDED AND RESTATED STOCK OPTION AND PURCHASE AGREEMENT DATED AS
OF April 24, 1997, BETWEEN SWISS BANK CORPORATION AND PEROT
SYSTEMS CORPORATION (AS SUCH AGREEMENT MAY BE AMENDED, MODIFIED,
OR SUPPLEMENTED FROM TIME TO TIME, THE "AGREEMENT").
COPIES OF THE AGREEMENT ARE AVAILABLE FOR INSPECTION AT THE
EXECUTIVE OFFICES OF PEROT SYSTEMS CORPORATION.
5.2 Confidentiality. The provisions of the Nondisclosure
Agreement dated June 8, 1995 between PSC and SBC (the "Nondisclosure
Agreement") are hereby incorporated by reference and shall survive the
consummation of the transactions contemplated by this Agreement.
5.3 Public Announcements. Except as otherwise required by law or
regulation (in the context of the Initial Public Offering or otherwise),
neither party hereto shall issue or make any press release or any other public
disclosure or announcement concerning the transactions contemplated by this
Agreement and the other Transaction Documents without the prior written consent
of the other party hereto as to the timing, content and manner of presentation
of such press release or public disclosure, which consent shall not be
unreasonably withheld.
5.4 Initial Public Offering. (a) PSC and SBC each acknowledges
and agrees that it is the intention of PSC to commence an Initial Public
Offering in respect of the PSC Shares, and to make application for the listing
of the PSC Shares on a national securities exchange and/or the quotation of the
PSC Shares on NASDAQ-National Market, within twenty-four (24) months of the
Adjustment Date.
(b) SBC acknowledges and agrees that it will reasonably
cooperate with the efforts of PSC to consummate the Initial Public Offering.
5.5 Acquisition of PSC Shares. SBC covenants and agrees that it
will not, and will cause its Subsidiaries not to, knowingly acquire, directly
or indirectly, or as a member of any group or consortium, any PSC Shares other
than as contemplated by this Agreement or the other Transaction Documents.
5.6 Status of Class B Shares. (a) PSC hereby covenants and
agrees that it shall at all times reserve for issuance (i) the number of Class
B Shares issuable upon the exercise by SBC of the Options and (ii) the number
of Class A Shares sufficient to
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permit the conversion of Class B Shares into Class A Shares pursuant to the
provisions of Section 3 of Article IV of the Certificate of Incorporation of
PSC.
(b) So long as SBC owns any Class B Shares, (i) PSC shall not
issue any Class B Shares to any Person other than SBC and (ii) PSC shall treat
the Class A Stock, the Class B Stock and the Liquidation Preference Common
Stock as being identical for all purposes, except as otherwise expressly
provided in the Certificate of Incorporation of PSC.
ARTICLE VI
SURVIVAL OF COVENANTS AND
REPRESENTATIONS; INDEMNIFICATION
6.1 Survival of Covenants and Representations. The respective
covenants and agreements of the parties hereto contained in this Agreement
shall survive the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents. The representations and
warranties in Section 3.1 shall survive indefinitely, and SBC shall be entitled
to institute a claim in respect of such representation and warranty at any
time. The representations and warranties of PSC set forth in Section 3.2 shall
not survive the date of execution of this Agreement.
6.2 Indemnification by PSC. PSC shall indemnify, defend and hold
SBC harmless from and against any and all direct, out-of-pocket, pecuniary
damage, loss, cost (including reasonable attorneys' fees and expenses) and
expense (collectively, "Loss and Expense") actually incurred that results from
the failure of any representation or warranty made in Section 3.1 by PSC to be
true and correct in all material respects as of the date hereof.
6.3 [Intentionally Omitted.]
6.4 Indemnification Procedure. (a) Within a reasonable time
after the incurrence of any Loss and Expense by the party seeking
indemnification (the "Indemnified Party"), including, without limitation, any
claim by a third party described in Section 6.4(c), that might give rise to
indemnification hereunder, the Indemnified Party shall deliver to the party
from which indemnification is sought (the "Indemnifying Party") a certificate
(the "Certificate"), which Certificate shall:
(1) state that the Indemnified Party has paid or properly
accrued Loss and Expense, or anticipates that it will incur liability
for Loss and Expense for which such Indemnified Party is entitled to
indemnification pursuant to this Agreement; and
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(2) specify in reasonable detail each individual item of Loss
and Expense included in the amount so stated, the date such item was
paid or properly accrued, the basis for any anticipated liability and
the nature of the misrepresentation, breach of warranty or claim to
which each such item is related and the computation of the amount to
which such Indemnified Party claims to be entitled hereunder.
Failure of an Indemnified Party to deliver a Certificate as
provided in this Section 6.4(a) shall not affect such Indemnified Party's right
to indemnification hereunder unless and to the extent that such failure
actually prejudices the Indemnifying Party.
(b) In case the Indemnifying Party shall object to the
indemnification of an Indemnified Party in respect of any claim or claims
specified in any Certificate, the Indemnifying Party shall, within thirty (30)
calendar days after receipt by the Indemnifying Party of such Certificate,
deliver to the Indemnified Party a written notice to such effect and the
Indemnifying Party and the Indemnified Party shall, within the thirty (30)
calendar day period beginning on the date of receipt by the Indemnified Party
of such written objection, attempt in good faith to agree upon the rights of
the respective parties with respect to each of such claims to which the
Indemnifying Party shall have so objected. If the Indemnified Party and the
Indemnifying Party shall succeed in reaching agreement on their respective
rights with respect to any of such claims, the Indemnified Party and the
Indemnifying Party shall promptly prepare and sign a memorandum setting forth
such agreement. Should the Indemnified Party and the Indemnifying Party be
unable to agree as to any particular item or items or amount or amounts, then
the Indemnified Party and the Indemnifying Party shall submit such dispute to a
court of competent jurisdiction.
(c) Promptly after the assertion by any third party of any claim
against any Indemnified Party that, in the judgment of such Indemnified Party,
may result in the incurrence by such Indemnified Party of Loss and Expense for
which such Indemnified Party would be entitled to indemnification pursuant to
this Agreement, such Indemnified Party shall deliver to the Indemnifying Party
a written notice describing in reasonable detail such claim and such
Indemnifying Party may, at its option, assume the defense of the Indemnified
Party against such claim (including the employment of counsel, who shall be
reasonably satisfactory to such Indemnified Party, and the payment of
expenses). Any Indemnified Party shall have the right to employ separate
counsel in any such action or claim and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Indemnifying Party unless (i) the Indemnifying Party shall have failed, within
a reasonable time after having been notified by the Indemnified Party of the
existence of such claim as provided in the preceding sentence, to assume the
defense of such claim, (ii) the employment of such counsel has been
specifically authorized in writing by the Indemnifying Party, which
authorization shall not be unreasonably withheld, or (iii) the named parties to
any such
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action (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party and such Indemnified Party shall have been advised
in writing by such counsel that there exists a conflict of interest between the
Indemnifying Party and the Indemnified Party. No Indemnifying Party shall be
liable to indemnify any Indemnified Party for any settlement of any such action
or claim effected without the consent of the Indemnifying Party but if settled
with the written consent of the Indemnifying Party, or if there be a final
judgment for the plaintiff in any such action, the Indemnifying Party shall
indemnify and hold harmless each Indemnified Party from and against any loss or
liability by reason of such settlement or judgment.
(d) Claims for Loss and Expense specified in any Certificate
to which an Indemnifying Party shall not object in writing within thirty (30)
calendar days of receipt of such Certificate, claims for Loss and Expense
covered by a memorandum of agreement of the nature described in Section 6.4(b),
claims for Loss and Expense the validity and amount of which shall have been
the subject of judicial determination as described in Section 6.4(b) and claims
for Loss and Expense the validity and amount of which shall have been the
subject of a final judicial determination as described in Section 6.4(c) are
hereinafter referred to, collectively, as "Agreed Claims." Within ten (10)
Business Days of the determination of the amount of any Agreed Claim, the
Indemnifying Party shall pay to the Indemnified Party an amount equal to the
Agreed Claim by wire transfer of immediately available funds to the bank
account or accounts designated in writing by the Indemnified Party not less
than two (2) Business Days prior to such payment.
6.5 Exclusive Remedy. The sole and exclusive remedy of SBC for
breach of the representations and warranties set forth in Section 3.1, except
as specified in the last sentence of this Section 6.5, shall be restricted to
the indemnification rights set forth in this Article VI. The parties expressly
agree that no Person will be liable for any consequential, punitive, exemplary
or special damages. Notwithstanding the foregoing, this Section 6.5 shall not
be applied to limit the liability of either party for the actual fraud of such
party.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement signed by each of the
parties hereto.
7.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of either of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits
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thereof only by a written instrument signed by the party granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
7.3 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or by facsimile transmission or three (3) calendar days after
mailing by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice; provided that notices of a
change of address shall be effective only upon receipt thereof):
if to PSC, to:
Perot Systems Corporation
12377 Merit Drive
Suite 1100
Dallas, Texas 75251
Attn: General Counsel
Telecopy: (972) 383-5735
with copies to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: Glen J. Hettinger, Esq.
Telecopy: (214) 939-5849
if to SBC, to:
Swiss Bank Corporation
Legal Services SBC Group
Malzgasse 30-32
CH-4002 Basle, Switzerland
Attn: Mr. Mario Cueni
Telecopy: (41-61) 288-3832
with copies to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
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Page 23
Attn: Alison M. Dreizen, Esq.
Telecopy: (212) 354-8113
7.4 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but except as expressly provided
herein, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned or delegated by either party hereto without the
prior written consent of the other party hereto, nor is this Agreement intended
to confer upon any other Person except the parties hereto and their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities hereunder. Notwithstanding the foregoing, SBC shall be entitled to
assign its rights and obligations under this Agreement to the SBC Affiliate,
provided that no such assignment shall relieve SBC of liability in the event of
the non-performance by the SBC Affiliate of any of the obligations of SBC set
forth herein, and provided further that in the event that, and prior to such
time as, the SBC Affiliate ceases to be a Wholly-Owned Subsidiary of SBC, SBC
shall take all action necessary to ensure that any Options or shares purchased
hereunder, any securities purchased upon any exercise of the Options and any
rights or obligations held by the SBC Affiliate hereunder are transferred to
SBC or a Wholly-Owned Subsidiary of SBC.
7.5 GOVERNING LAW. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW YORK, OTHER THAN THE CONFLICTS-OF-LAW PRINCIPLES THEREOF, PROVIDED
THAT THE LAWS OF THE RESPECTIVE JURISDICTION OF INCORPORATION OF THE PARTIES
WILL GOVERN THE INTERNAL AFFAIRS OF SUCH PARTIES.
7.6 Jurisdiction; Agent for Service of Process. Any judicial
proceeding brought against any of the parties to this Agreement or any dispute
under or arising out of or in connection with this Agreement or any matter
related hereto may be brought in the courts of the State of New York or in the
United States District Court for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the parties to this Agreement
accepts the exclusive jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. PSC
shall, within thirty (30) days of the date hereof, appoint CT Corporation
System ("CT") as agent to receive on its behalf service of process in any
proceeding in any such court in the State of New York, and shall enter into an
agreement with CT in a form mutually satisfactory to the parties hereto. In
the event that SBC shall cease to maintain an office in the State of New York
at which process may be served on SBC, it shall, within thirty (30) days of the
date on which it so ceases to maintain such office, appoint CT as its agent to
receive on its behalf service of process in any proceeding in any such court in
the State of New York, and shall enter into an agreement with CT in a form
mutually satisfactory to the parties hereto. The foregoing consents to
jurisdiction and appointments of agent to receive service of process shall not
constitute general consents to service of process in the State of New
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York for any purpose except as provided above and shall not be deemed to confer
rights on any Person other than the respective parties to this Agreement.
7.7 Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument.
7.8 Headings. The Article and Section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
7.9 Severability. If any provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
either party. Upon such determination that any provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled.
7.10 Entire Agreement. Except as set forth in the Principal
Agreements (as defined in the Master Agreement), this Agreement, including the
Exhibits, documents, Schedules, certificates and instruments referred to
herein, embodies, together with any other written agreement or letter between
SBC and PSC dated the Adjustment Date or as of the Adjustment Date or the
Original Agreement Date or as of the Original Agreement Date (not including
agreements or letters amended, restated or superseded as of the Adjustment
Date), the entire agreement and understanding of the parties hereto in respect
of the transactions contemplated by this Agreement, and there are no
representations, warranties, understandings or agreements, written or oral,
relative hereto that are not fully expressed herein or therein.
7.11 Expenses. Except as otherwise provided in this Agreement,
each of SBC and PSC will pay all of its own expenses relating to the
negotiation, execution and delivery of this Agreement (excluding any
amendments, modifications or supplements hereto), including, without
limitations, the fees and expenses of its counsel, financial advisors and
accountants.
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IN WITNESS WHEREOF, each of PSC and SBC has caused its corporate
name to be hereunto subscribed by its officers thereunto duly authorized, all
as of the day and year first above written.
PEROT SYSTEMS CORPORATION SWISS BANK CORPORATION
By: By:
---------------------- ------------------------
Title: Title:
---------------------- ------------------------
By:
------------------------
Title:
------------------------
<PAGE> 1
EXHIBIT 10.31
AMENDED AND RESTATED
MASTER OPERATING AGREEMENT
THIS AMENDED AND RESTATED MASTER OPERATING AGREEMENT (as amended, modified and
supplemented from time to time, this "Agreement"), dated as of January 1, 1997
(the "Adjustment Date"), is between Swiss Bank Corporation, a corporation
organized under the laws of Switzerland ("SBC Parent"), and Perot Systems
Corporation, a Delaware corporation ("PSC Parent").
WITNESSETH:
WHEREAS, SBC Parent and PSC Parent entered into the Master Operating Agreement
(the "Original Agreement") dated as of January 1, 1996 (the "Original Agreement
Date");
WHEREAS, SBC Parent and PSC Parent now desire to amend and restate the Original
Agreement to read in its entirety as set forth herein;
WHEREAS, PSC Parent is in the business of providing information management
services, including data processing, voice and data communications, distributed
systems, workstation support, computer and communications procurement and
management, and related services;
WHEREAS, SBC Parent, through various direct and indirect subsidiaries,
divisions, and operating units, is in the business of providing a variety of
banking and financial services, including investment and commercial banking, on
a world-wide basis;
WHEREAS, it is expected by SBC Parent and PSC Parent that, from time to time
during the term of this Agreement, certain SBC Entities and PSC Entities (as
each term is hereinafter defined) will enter into EPI Agreements (as
hereinafter defined) that will identify specific information technology and
operational services to be provided by the applicable PSC Entity to the
applicable SBC Entity and the amounts to be paid for those services; and
WHEREAS, SBC Parent and PSC Parent desire to establish the standard terms and
conditions that will be applicable to each EPI Agreement and to document
certain other understandings and agreements between the parties;
NOW, THEREFORE, SBC Parent and PSC Parent hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
(a) "Affiliate" means, with respect to any Person:
(1) A Person that controls, is controlled by, or is under
common control with that Person. For the purposes of
this Section 1.1(a)(1) the term "control" means the
ability, whether exercised or unexercised, to direct
the management or policies of a Person, directly or
indirectly, whether by ownership of securities,
contract, arrangement, agreement, understanding or
otherwise;
(2) A corporation of which that Person has the power to
elect, directly or indirectly, more than fifty
percent (50%) of the directors either by virtue of
holding, directly or indirectly, a sufficient number
of the voting securities of that corporation or by
contract;
(3) A corporation in which that Person owns, directly or
indirectly, more than fifty percent (50%) of the
outstanding equity;
(4) An unincorporated entity which that Person has the
power, directly or indirectly, to bind, individually,
irrespective of whether other Persons also have the
power to bind that entity; or
(5) An unincorporated entity, over which that Person,
directly or indirectly, has more than fifty percent
(50%) of the voting power to bind that entity, or
the power to elect more than fifty percent (50%) of
the persons serving functions similar to that of
directors of a corporation.
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(b) "Change in Control" means the occurrence of any of the
following events, whether in one or a series of related
transactions: (a) the acquisition of at least fifty percent
(50%) of the then outstanding Class A Shares by any Person (or
twenty-five percent (25%) of the then outstanding Class A
Shares by any Person listed as such in the separate letter
executed by PSC and SBC, dated the Original Agreement Date,
which specifically references this definition), other than a
Perot Family Member or Affiliate (including, on the date
hereof, HWGA, Ltd.) or a trust established for the benefit of
such Perot Family Member or Affiliate, (b) the acquisition of
all or substantially all of the assets of the PSC Group, and
(c) any merger or consolidation of PSC Parent where PSC Parent
is not the surviving corporation, provided that the events
described in clause (b) or (c) of this definition will not be
deemed a Change in Control if more than fifty percent (50%) of
the then outstanding shares of capital stock of the acquiring
or surviving entity are owned by Persons who, immediately
prior to such event, owned more than fifty percent (50%) of
the then outstanding Class A Shares. In determining whether
the fifty percent (50%) and twenty-five percent (25%)
thresholds discussed above have been met, shares which are
subject to voting control by a Person or Persons acting under
a voting agreement (but not a revocable proxy) will be
counted, even though such shares may not be owned by such
Person.
(c) "Class A Shares" means the shares of Class A common stock, par
value $0.01 per share, of PSC Parent.
(d) "Confidential Information" means, with respect to each member
of the SBC Group and each member of the PSC Group, all
information, documentation, data, material or know-how
concerning or in any way relating to that member of the SBC
Group or that member of the PSC Group, respectively, or to its
respective businesses, customers or suppliers, that is
proprietary or was not on the Original Agreement Date in the
public domain, including, without limitation (a) with respect
to each member of the SBC Group, all SBC Data and all other
confidential, proprietary, trade secret or customer
information of that member of the SBC Group or its customers
and any other information of that member of the SBC Group or
its customers, including information that is not permitted to
be disclosed to third parties under national or local laws or
regulations, (b) with respect to each member of the PSC Group,
all costing, pricing and other proprietary information of that
member of the PSC Group, and (c) with respect to each party,
the terms of this Agreement and of each other Definitive
Agreement to which it is a party. Except to the extent that
local law provides otherwise, however, information will not be
"Confidential Information" of a party at any time after it (i)
has been developed independently by the other party without
using information obtained from the disclosing party which was
Confidential Information of the disclosing party at the time
it was used, (ii) has become publicly known (other than
through unauthorized disclosure), (iii) has been disclosed by
that party to a third party free of any obligation of
confidentiality, (iv) is already known to the other party
without an obligation of confidentiality to any Person, or (v)
has been rightfully received by a party free of any obligation
of confidentiality.
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(e) "Contracting Party" means (i) with respect to this Agreement,
SBC Parent or PSC Parent, and (ii) with respect to each EPI
Agreement, the SBC Entity receiving Services pursuant to that
EPI Agreement or, if SBC Parent signs that EPI Agreement, SBC
Parent, as signatory to that EPI Agreement on behalf of that
SBC Entity, and the PSC Entity providing Services pursuant to
that EPI Agreement or, if PSC Parent signs that EPI Agreement,
PSC Parent, as signatory to that EPI Agreement on behalf of
that PSC Entity.
(f) "Definitive Agreements" mean each of this Agreement, the SBC
Warburg EPI Agreement, the Master Project Agreement, the
Start-Up Agreement, the Master Agreement, the PSC Stock
Agreement and the Systor Stock Purchase Agreement (as defined
in the Master Agreement).
(g) "EPI" means all existing and future information technology
services provided by or on behalf of any SBC Entity that are
related to the Operational Management of that SBC Entity's
mainframe and other computers (including personal computers),
including peripheral equipment, and associated voice, data and
video communications network.
(h) "EPI Agreement" means any agreement, as provided for in
Section 3.2 hereof, that is entered into between a PSC Entity
and an SBC Entity for the provision of Services by that PSC
Entity to that SBC Entity.
(i) "Equipment" means, with respect to each EPI Agreement, all
computer-related and communications equipment owned or leased
by any member of the SBC Group, including without limitation
personal computers, modems, printers, mainframes, routers,
cabling and related equipment, required by the applicable PSC
Entity to provide the Services to the applicable SBC Entity
pursuant to that EPI Agreement.
(j) "HWGA, Ltd." means HWGA, Ltd., a Texas limited partnership,
and its successors and assigns.
(k) "Information Technology" means any combination of Systems,
Equipment, documentation and know-how relating to data
processing or other electronic functions.
(l) "IT Services" means the business of providing support to
end-users in the organization and maintenance of the
Information Technology employed by such end-users.
(m) "Licensed PSC Programs" has the meaning ascribed to that term
in Section 4.3 hereof.
(n) "Licensed SBC Systems" means, with respect to any EPI
Agreement, all SBC Systems used by a member of the SBC Group
prior to the effective date of that EPI Agreement (with
respect to the SBC Warburg EPI Agreement this date shall be
January 1, 1996 ) and necessary to provide the Operational
Management of
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the EPI of the applicable SBC Entity for which the applicable
PSC Entity is assuming responsibility thereunder (including
the SBC Systems listed in such EPI Agreement) and any Systems
(excluding PSC Systems) developed or obtained by or on behalf
of that SBC Entity after the effective date of that EPI
Agreement that perform functions supporting the Operational
Management of the EPI of that SBC Entity.
(o) "Master Agreement" means that certain Amended and Restated
Master Agreement, dated as of the Adjustment Date, between SBC
Parent and PSC Parent, relating to the transactions
contemplated by the Definitive Agreements, as amended,
modified or supplemented from time to time.
(p) "Master Project Agreement" has the meaning ascribed to that
term in the Master Agreement.
(q) "Operational Management" means responsibility for the
management of the provision, directly or through third
parties, of the people, assets and other resources, including,
without limitation, third party telecommunication and carrier
services and hardware and network maintenance services,
involved in advising on the setting of standards, and the
procurement, design and engineering, implementation, operation,
change management and on-going maintenance and support of
Information Technology related activities.
(r) "Perot Family Member" means a member of the family of Ross
Perot, an individual resident of the State of Texas, and any
direct descendants thereof, or by or through marriage.
(s) "Person" means an individual, corporation, partnership
(general or limited), joint venture, trust, estate, limited
liability company, government entity, or other legal entity or
organization.
(t) "Project Agreement" has the meaning ascribed to that term in
the Master Project Agreement.
(u) "PSC Group" means PSC Parent and each Affiliate of PSC Parent,
collectively.
(v) "PSC Entity" means any Affiliate, division, functional entity,
group, or department within the PSC Group (including PSC
Parent) which has been formed and exists as of the Adjustment
Date or will be formed and exist in the future.
(w) "PSC Stock Agreement" has the meaning ascribed to that term in
the Master Agreement.
(x) "PSC System" means any System or part thereof, which is owned
or licensed (other than pursuant to a license from a member of
the SBC Group) by a member of the PSC Group.
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(y) "Restricted Application Systems" means all SBC Systems other
than Licensed SBC Systems, but specifically including all
proprietary application Systems or other Systems that provide
business functionality as opposed to technical functionality.
(z) "SBC Brinson Division" means, collectively, the business units
of the SBC Group engaged in the business of institutional
asset management.
(ab) "SBC Data" means all information relating to any member of the
SBC Group (including any information relating to any
transaction to which that member of the SBC Group is a party)
or its customers that is contained in the data files of any
member of the SBC Group.
(ac) "SBC Entity" means any Affiliate, division, functional entity,
group, or department within the SBC Group (including SBC
Parent) which has been formed and exists as of the Adjustment
Date or will be formed and exist in the future.
(ad) "SBC Group" means SBC Parent and each Affiliate of SBC Parent,
collectively.
(ae) "SBC Private Banking Division" means, collectively, the
business units of the SBC Group engaged in the business of
asset management for clients who are natural persons.
(af) "SBC Systems" means the Systems (including, without
limitation, third party software) operated by or on behalf of
any member of the SBC Group on the Original Agreement Date and
other Systems (other than PSC Systems) that may be used by a
PSC Entity to provide Services pursuant to an EPI Agreement.
(ag) "SBC Warburg Division" means, collectively, and subject to
Section 2.4 hereof, (i) the business units of the SBC Group
engaged in the business of investment banking, excluding (A)
SBC Warburg Australia, (B) Bunting Warburg Inc., and (C) the
Guibergia Warburg group, and in any event including (ii) the
SBC Brinson Division and (iii) the SBC Private Banking
Division. SBC businesses outside of the business of
investment banking may be included in this definition upon
the mutual agreement in writing of PSC Parent and SBC Parent.
Any business unit, or portion thereof, included in the SBC
Warburg Division may be excluded from this definition upon the
mutual consent in writing of PSC Parent and SBC Parent.
(ah) "SBC Warburg EPI Agreement" has the meaning ascribed to that
term in the Master Agreement.
(ai) "Security Procedures" means, with respect to each EPI
Agreement, the written procedures and written undertakings
developed, maintained and updated by the applicable SBC Entity
addressing the scope of, and compliance procedures for, all
applicable regulations, whether governmental or imposed by any
regulator or exchange of which that SBC Entity is a member,
concerning the flow of SBC
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Data (but excluding restrictions on the ability of Persons to
trade in securities) and bank secrecy related to the SBC
Group, as those procedures and undertakings may be amended,
modified or supplemented by that SBC Entity from time to time.
(aj) "Service Levels" means the quantitative and qualitative
standards of performance applicable to the Services that may
be established from time to time in connection with unit
pricing and pursuant to each EPI Agreement and which are
called "Service Levels".
(ak) "Services" means, with respect to each EPI Agreement, the
services required for the Operational Management of the EPI of
the applicable SBC Entity and which are described as such in
that EPI Agreement.
(al) "Shares Termination Value" means, for purposes of Section 10.7
hereof, an amount to be calculated as follows:
(1) The Value (as defined below) of the Exercisable
Option Shares (whether or not exercised), the SBC
Warburg Purchased Shares and the SBC Domestic
Purchased Shares (each as defined in the PSC Stock
Agreement, and together, the "Stock Agreement
Shares") as of the date (the "Determination Date")
that the arbitration, judicial, or other legal
proceeding, as applicable, to resolve the applicable
claim commences.
(2) If any EPI Agreement has been terminated, the Stock
Agreement Shares, with respect to that terminated EPI
Agreement, will be calculated with reference to the
termination date of that EPI Agreement.
(3) "Value" means the sum of:
(a) The total number of Stock Agreement Shares
sold by all SBC Entities as of the
Determination Date to any Person that is not
an Affiliate of any SBC Entity, multiplied by
(i) the per share sales price paid to SBC
Entities for those Stock Agreement Shares
minus (ii) the purchase price for the Options
paid under Section 2.1(b) of the PSC Stock
Agreement, the Exercise Price, the SBC
Domestic Purchase Price or the SBC Warburg
Purchase Price (together, the "Acquisition
Price") applicable to such Stock Agreement
Shares under the PSC Stock Agreement, as the
case may be;
(b) The total number of Stock Agreement Shares
owned by all SBC Entities as of the
Determination Date, multiplied by (i) the
Fair Market Value of those owned Stock
Agreement Shares minus (ii) the Acquisition
Price applicable to those Stock Agreement
Shares; and
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(c) The total number of Stock Agreement Shares
sold by any SBC Entity to an Affiliate of any
SBC Entity as of the Determination Date,
multiplied by (i) the Fair Market Value of
such Stock Agreement Shares minus (ii) the
Acquisition Price applicable to those Stock
Agreement Shares.
(4) "Fair Market Value" has the meaning ascribed thereto
in Schedule A hereto.
(am) "Start-Up Agreement" has the meaning ascribed to that term in
the Master Agreement.
(an) "System" means a computer program with supporting system and
user documentation, including without limitation input and
output formats, program listings, narrative descriptions and
operating instructions, and includes the tangible media upon
which the program is recorded.
(ao) "Third Party Service Contracts" means those agreements to
which an SBC Entity is a party and pursuant to which that SBC
Entity is obligated to obtain from a Person, other than a
member of the PSC Group, services related to the Operational
Management of the EPI of an SBC Entity.
(ap) "Transitioned Employees" means, with respect to each EPI
Agreement, the employees of any SBC Entity that accept
employment with PSC pursuant to that EPI Agreement.
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ARTICLE II
AGREEMENT, TERM AND AUTHORITY
2.1 Scope of Agreement. Except as the Contracting Parties may otherwise
expressly agree in an EPI Agreement, this Agreement establishes the
standard terms and conditions that will be applicable to each EPI
Agreement.
2.2 Term. The term of this Agreement will commence on the Adjustment
Date, and will continue until terminated by the mutual agreement of
PSC Parent and SBC Parent or pursuant to Sections 8.1 through 8.9 or
10.7(a) hereof; provided, however, that this Agreement may be
terminated effective at any time on or after December 31, 2008 by
either of the parties hereto by giving at least sixty (60) days prior
written notice to the other party. Notwithstanding the termination of
this Agreement for any reason, any provisions of this Agreement that
have been incorporated by reference into any EPI Agreement entered
into prior to such termination will remain valid and binding
provisions of that EPI Agreement unless the Contracting Parties
thereto otherwise agree.
2.3 Authority. PSC Parent represents and agrees that as of the Adjustment
Date it has, and as of the effective date of each EPI Agreement it
will have, the authority to cause each PSC Entity to act with respect
to all applicable matters relating to this Agreement and any EPI
Agreement to which that PSC Entity is a Contracting Party, including
the giving or withholding of any approval, acceptance, consent,
notice, or other action required or permitted by this Agreement or
that EPI Agreement, and that it will be responsible for the
performance of all of the obligations of the members of the PSC Group
under each of the applicable EPI Agreements and for causing each
member of the PSC Group to comply with all applicable provisions of
each applicable EPI Agreement. SBC Parent represents and agrees that
as of the Adjustment Date it has, and as of the effective date of each
EPI Agreement it will have, the authority to cause each SBC Entity to
act with respect to all applicable matters relating to this Agreement
and any EPI Agreement to which that SBC Entity is a Contracting Party,
including the giving or withholding of any approval, acceptance,
consent, notice, or other action required or permitted by this
Agreement or that EPI Agreement, and that it will be responsible for
the performance of all obligations of the members of the SBC Group
under each EPI Agreement and for causing each member of the SBC Group
to comply with all applicable provisions of each applicable EPI
Agreement.
2.4 Major Changes:
(a) If at any time during the term of the SBC Warburg EPI
Agreement, and subject to the provisions of Section 8.7
hereof, a member or combination of members of the SBC Group
acquires, in a single transaction or series of related
transactions, any business, whether through acquisition of
securities, assets or otherwise that could reasonably be
expected to result in the revenue paid to the applicable PSC
Entity under the SBC Warburg EPI Agreement increasing, on an
annualized basis in the
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year of the transfer, by more than fifty percent (50%), if
that business were to become a part of the SBC Warburg
Division, then that business will not become part of the SBC
Warburg Division for purposes of this Agreement or the SBC
Warburg EPI Agreement.
(b) If at any time during the term of the SBC Warburg EPI
Agreement, a member or combination of members of the SBC Group
sells or otherwise disposes outside of the SBC Group, in a
single transaction or series of related transactions, of any
portion of its or their business that could reasonably be
expected to result in the revenue paid to the applicable PSC
Entity under that EPI Agreement decreasing, on an annualized
basis in the year of the transfer, by more than fifty percent
(50%), then SBC Parent will require (unless PSC Parent waives
the requirement as described in the last sentence of this
Section 2.4(b)) the purchaser of that business to assume the
applicable SBC Entity's obligations under the SBC Warburg EPI
Agreement that relate to the transferred business from the
date of the transfer and to continue to obtain from the
applicable PSC Entity the acquired business' requirements for
the Services in accordance with the terms and conditions of
the SBC Warburg EPI Agreement. The SBC Warburg EPI Agreement
will continue to apply to the business not so transferred.
Unless the purchaser of the transferred business has a credit
rating substantially equivalent to or better than, and a
shareholders' equity equal to or larger than, SBC Parent, the
PSC Group may, but will have no obligation to, provide
Services to the purchaser, and, if the PSC Group elects to not
provide Services to the purchaser, the purchaser will have no
obligation to assume any obligations under any EPI Agreement.
(c) If an event described in Section 2.4(a) or 2.4(b) shall occur,
the provisions of Section 4.4 of the Master Agreement shall
apply.
ARTICLE III
SERVICES
3.1 Services. It is the intention of SBC Parent and PSC Parent that an
EPI Agreement be entered into for any Services to be provided by any
member of the PSC Group to any member of the SBC Group.
3.2 Scope of EPI Agreement. Unless otherwise expressly provided in an EPI
Agreement, each EPI Agreement will provide that the applicable PSC
Entity will provide, and the applicable SBC Entity will obtain from
that PSC Entity, that SBC Entity's requirements for Operational
Management of the EPI of that SBC Entity.
3.3 Terms of EPI Agreements. Unless the Contracting Parties to an EPI
Agreement otherwise expressly agree in that EPI Agreement, each EPI
Agreement may:
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(a) Incorporate by reference the terms and conditions of this
Agreement identified for such purpose in that EPI Agreement.
(b) Designate the date as of which the provisions of that EPI
Agreement will be effective and the term or period of time
during which the applicable PSC Entity will provide the
Services pursuant to that EPI Agreement.
(c) Describe the obligations of the applicable PSC Entity pursuant
to that EPI Agreement, including the Services to be provided
by the PSC Entity pursuant to that EPI Agreement and any
Service Levels applicable to those Services.
(d) Describe the obligations of the applicable SBC Entity pursuant
to that EPI Agreement, including any obligations relating to
the provision of space, facilities, equipment, or other
support to be provided by the SBC Entity that are different
from, or in addition to, the resources and support to be
provided as described in this Agreement.
(e) Specify the applicable PSC Entity's charges and the method of
payment of those charges for the Services provided under that
EPI Agreement, as well as the methodology for any bonus
payments to the PSC Entity or credits to the SBC Entity.
(f) Include any other provisions deemed necessary or desirable by
the Contracting Parties to that EPI Agreement, including
provisions necessary to comply with local law or custom or
regulation or internal policies of the members of the SBC
Group.
3.4 Security Procedures. With respect to each EPI Agreement, the
applicable SBC Entity will be responsible for developing, maintaining
and updating the Security Procedures, the form and substance of which
will be determined by the applicable SBC Entity. The applicable SBC
Entity will be responsible for providing those Security Procedures,
including updates and modifications, to the applicable PSC Entity.
During the term of each EPI Agreement, the applicable PSC Entity will,
and will cause its employees to, comply, with respect to Services
provided to members of the SBC Group, with the Security Procedures
with which it has been provided by the applicable SBC Entity to the
extent that those Security Procedures are no more rigorous than
similar security procedures applicable to the members of the SBC
Group. The applicable PSC Entity will provide notice to the
applicable SBC Entity of any known instances of non-compliance with
the Security Procedures by that PSC Entity.
3.5 Export Matters. With respect to each EPI Agreement, the applicable
PSC Entity will be responsible for all non-banking related export
regulations with respect to PSC Systems, and the applicable SBC Entity
will be responsible for all non-banking related export regulations
with respect to SBC Systems (other than SBC Systems with respect to
which PSC is the purchaser).
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3.6 Other Regulatory Issues. No Contracting Party will be required to
commit an illegal act in connection with any EPI Agreement, and if an
EPI Agreement would require such an act, then that EPI Agreement will
be deemed amended by modifying the provisions to the extent necessary
to make it legal while preserving the economic benefits to each party,
or, if that is not possible, by substituting another provision that is
legal and enforceable and achieves the same objective.
3.7 Future EPI Agreements. SBC Parent and PSC Parent will negotiate in
good faith to execute an EPI Agreement, on or prior to December 31,
1998, having a term of ten (10) years and a similar scope and size to
the SBC Warburg EPI Agreement relating to SBC's private banking and
retail and commercial banking activities in Switzerland (the "SBC
Domestic Division"), which agreement will (i) include such terms and
conditions consistent with those set forth in the SBC Warburg EPI
Agreement as may be agreed upon by the parties thereto and (ii) state
that it is the definitive agreement referred to in this Section 3.7 (a
"Domestic Agreement"). SBC shall be considered to have negotiated in
good faith as provided above if, on or before December 31, 1999, SBC
Parent does not enter into a significant information technology
outsourcing or similar agreement with a third party that is not an
Affiliate of SBC Parent to provide services to the SBC Domestic
Division, but continues to provide those services internally.. The
obligation of the parties set forth in this Section 3.7 shall
terminate upon termination of the SBC Warburg EPI Agreement.
ARTICLE IV
SBC RESOURCES
4.1 SBC Systems.
(a) SBC Parent represents that one or more members of the SBC
Group has all rights in and to the SBC Systems necessary to
grant to the members of the PSC Group the rights described in
this Section 4.1. SBC Systems will be and remain the property
of the members of the SBC Group. With respect to the Licensed
SBC Systems required by a PSC Entity to provide the Services
under any EPI Agreement, including those Licensed SBC Systems
listed in the applicable EPI Agreement, SBC Parent hereby
grants to PSC Parent and the applicable PSC Entity the
non-exclusive right, at no charge to PSC Parent or the
applicable PSC Entity, to market, license, operate, copy,
modify or otherwise use those specified Licensed SBC Systems
in order to provide Services to the applicable SBC Entity
pursuant to that EPI Agreement, and to provide services to
other customers of members of the PSC Group and for the PSC
Group members' own internal use. PSC Parent acknowledges and
agrees that for purposes of using the Licensed SBC Systems for
third party customers of members of the PSC Group and for the
PSC Group members' own internal use, the license granted
pursuant to this Section 4.1(a) is granted on an "AS IS"
basis, and each member of the PSC Group will remove all
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indicia of any member of the SBC Group's interest in and
affiliation with the Licensed SBC System prior to using the
Licensed SBC System for third party customers of members of
the PSC Group.
(b) The members of the SBC Group, with the cooperation and
assistance of the members of the PSC Group, will use all
commercially reasonable efforts to obtain any consents from
third parties necessary for the applicable PSC Entity to
operate any Licensed SBC Systems as contemplated by this
Agreement. Upon the termination of the applicable EPI
Agreement, the members of the PSC Group may continue to use
the Licensed SBC Systems for the internal operations of the
members of the PSC Group and for customers of members of the
PSC Group, provided that:
(1) Except as otherwise necessary to utilize the Licensed
SBC Systems as authorized by this Agreement, no
member of the PSC Group will at any time allow the
Licensed SBC Systems, or any of the various
components thereof or any modifications thereto, to
be disclosed to third parties, sold, assigned, leased
or commercially exploited in any way, with or without
charge, by that member of the PSC Group or its
employees or agents or, except to the extent required
for normal operation of the Licensed SBC Systems, to
be copied or reproduced, in whole or in part, by any
person, firm or corporation, at any time.
(2) The members of the PSC Group agree that the Licensed
SBC Systems are the valuable property of one or more
members of the SBC Group, that violation in any
material respect of any provision of this Section 4.1
would cause the members of the SBC Group irreparable
injury for which they would have no adequate remedy
at law and, in addition to any and all other remedies
or rights the members of the SBC Group may have at
law or in equity, the members of the SBC Group will
be entitled to preliminary and other injunctive
relief against any such violation.
(c) During the term of this Agreement, no member of the SBC Group
may license the Licensed SBC Systems to any third party.
Notwithstanding the foregoing, however, the members of the SBC
Group may use the Licensed SBC Systems for their own internal
purposes and may provide the Licensed SBC Systems to clients
of members of the SBC Group as necessary in conjunction with
the SBC Group members' services to their clients.
(d) Notwithstanding the provisions of Section 4.1(a) hereof, no
member of the PSC Group may use the Restricted Application
Systems for its own internal purposes or for any of its
customers (other than a member of the SBC Group), unless PSC
Parent and SBC Parent agree that such use is in the best
interests of the parties and agree in writing upon a mutually
acceptable royalty structure.
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(e) Except as otherwise provided in an EPI Agreement, the PSC
Group will operate and the SBC Group will maintain the
Restricted Application Systems and related documentation. The
PSC Group will maintain the documentation of each Licensed SBC
System as long as that Licensed SBC System is being operated
and maintained by the PSC Group hereunder. The PSC Group will
not have access to the source code for the Restricted
Application Systems or system documentation therefor.
4.2 Rights in Developed Systems. Ownership and use rights in Systems and
modifications to Systems developed on or after the Original Agreement
Date will be as follows:
(a) Except as provided in Sections 4.2(b), 4.2(c), 4.2(d) and
4.2(e) below, the members of the PSC Group will own any
System, and any modifications to any System, developed on or
after the Original Agreement Date by the applicable PSC Entity
pursuant to this Agreement or any EPI Agreement, subject to
the SBC Group's rights in the underlying SBC System if an SBC
System was the basis for such modification.
(b) If PSC performs any software development project pursuant to
any EPI Agreement that is specifically requested, identified
in writing when requested as subject to this Section 4.2(b)
and agreed prior to such development by PSC and SBC to be
wholly financed by SBC, the copyright in the software
resulting from that project will be owned by SBC, and PSC will
be limited to using that software for SBC and PSC's internal
use except as provided in Section 4.2(f) below.
(c) Ownership of Restricted Applications Systems will remain with
SBC.
(d) Incidental infrastructure software programs developed by PSC
in the course of providing services pursuant to an EPI
Agreement will be owned by PSC unless the cost of development
exceeds $5,000,000 per individual program in a given Budget
Period (as defined in the SBC Warburg EPI Agreement), and is
wholly financed by SBC, in which case the copyright in such
program will be owned by SBC and the rights of PSC will be as
described in Section 4.2(b) above for a software development
project specifically requested and agreed by PSC and SBC to be
wholly financed by SBC.
(e) Notwithstanding anything to the contrary in Section 4.1 hereof
or this Section 4.2, material new Systems (that are not
Restricted Applications Systems or Developed SBC Systems)
custom developed for or on behalf of any member of the SBC
Group by any member of the PSC Group or its subcontractors
after the Original Agreement Date and for which at least fifty
percent (50%) of the development costs are provided by the
members of the SBC Group, will be owned by SBC Parent, and SBC
Parent will grant to members of the PSC Group the right, at no
charge to the members of the PSC Group, to market, license,
operate, copy, modify or otherwise
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use those SBC Systems on behalf of the members of the SBC
Group, for the internal use of the members of the PSC Group,
and for any other customer of any member of the PSC Group.
(f) Prior to the use by any PSC Entity of any Systems owned by SBC
as described in Sections 4.2(b), 4.2(c) or 4.2(d) (the
"Developed SBC Systems") for any customer of that PSC Entity
(other than a member of the SBC Group), that PSC Entity will
obtain the consent of the applicable SBC Entity based upon a
business case prepared by the PSC Entity for the applicable
SBC Entity's review and approval specifying (i) any capital
investment that will be required from that SBC Entity to
obtain any additional resources to provide services to the
customer of the PSC Group and, if so, any payments that will
be made to the applicable SBC Entity in connection with or
attributable to the use of the Developed SBC Systems; (ii) any
impact on the overall operating expenses of the Developed SBC
Systems; (iii) any impact the introduction of the third party
customer would have on existing Service Levels; and (iv) any
impact on the applicable PSC Entity's charges to the
applicable SBC Entity for the Services. The applicable PSC
Entity will also satisfy the applicable SBC Entity, in that
SBC Entity's sole discretion, that adequate Security
Procedures have been instituted to prevent disclosure of any
Confidential Information of the SBC Group to the third party
customer.
4.3 PSC Systems. PSC Parent represents that one or more members of the
PSC Group will have, at the time of the use of PSC Systems for
provision of the Services, all rights in and to the PSC Systems
necessary to use the PSC Systems that PSC elects to use on behalf of
members of the SBC Group and to license the PSC Systems to the members
of the SBC Group that PSC Parent is obligated to license pursuant to
this Section 4.3. PSC Systems will be and remain the property of PSC
Parent, and the members of the SBC Group will have no rights or
interests therein except as described herein. During the term of an
EPI Agreement, PSC Parent hereby grants to the applicable SBC Entity,
and that SBC Entity will be deemed to accept from PSC Parent, a
nonexclusive, nontransferable, paid up, royalty free license to access
any PSC System as necessary in connection with the Services that the
applicable PSC Entity is obligated to provide to the applicable SBC
Entity under such EPI Agreement, subject to PSC Parent's right to
grant such a license with respect to any PSC Systems licensed by PSC
Parent. PSC Parent, with the cooperation of SBC Parent, will use all
commercially reasonable efforts to obtain any third party consents
necessary for members of the SBC Group to access the PSC Systems as
contemplated by the preceding sentence. With respect to each EPI
Agreement, provided that the SBC Entity is not in breach of that EPI
Agreement and subject to PSC Parent's rights under any license
agreement for any PSC System licensed by PSC Parent, PSC Parent will
grant to that SBC Entity at the termination of that EPI Agreement
possession of two (2) copies of the source code, user documentation
and system documentation and a perpetual, nontransferable,
nonexclusive, paid up, royalty free license to use the application
software programs (including all related documentation) of any PSC
Systems then being used by the applicable PSC Entity in providing the
Services to the applicable SBC Entity (the "Licensed PSC Programs"),
subject to the following:
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(a) Except with the prior written consent of PSC Parent or to the
extent required by natural disaster or similar emergency, the
Licensed PSC Programs will not be operated, directly or
indirectly, (i) by persons other than employees of such SBC
Entity or a third party vendor providing services to any SBC
Entity, or (ii) on equipment that is not under the control of
any SBC Entity or a third party vendor providing services to
any SBC Entity.
(b) Except with the prior written consent of PSC Parent, the
Licensed PSC Programs may only be used for the internal
operations of the applicable SBC Entity.
(c) The SBC Entity will keep the Licensed PSC Programs
confidential, will not at any time allow the Licensed PSC
Programs, 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 the SBC Entity or its
employees or agents and, except to the extent required for
normal operation of the Licensed PSC Programs as permitted
herein, will not permit the Licensed PSC Programs to be copied
or reproduced, in whole or in part, by any Person, at any
time.
(d) The SBC Entity agrees that the Licensed Programs are the
valuable property of PSC Parent, that violation in any
material respect of any provision of this Section 4.3 would
cause PSC Parent irreparable injury for which it would have no
adequate remedy at law, and, in addition to any and all other
remedies or rights PSC Parent may have at law or in equity,
PSC Parent will be entitled to preliminary and other
injunctive relief against any such violation.
4.4 SBC Equipment.
(a) SBC Parent and PSC Parent acknowledge and agree that, except
for the rights granted to the applicable PSC Entity pursuant
to this Section 4.4, or as otherwise expressly agreed in an
EPI Agreement, all right, title and interest in and to the
Equipment is owned by and will continue to be owned by one or
more members of the SBC Group.
(b) During the term of each EPI Agreement and unless otherwise
provided for therein, the applicable SBC Entity will make
available to the applicable PSC Entity, for that PSC Entity's
use, at no charge except as provided in the last sentence of
this Section 4.4(b), all Equipment that is expressly
referenced in the applicable EPI Agreement as being provided
by the applicable SBC Entity to the applicable PSC Entity.
With respect to personal computers, modems, printers and
related personal Equipment used by Transitioned Employees
generally prior to the effective date of the applicable EPI
Agreement, the applicable PSC Entity will pay the applicable
SBC Entity for such use on a monthly basis for the
depreciation costs of that Equipment for that month until that
Equipment has been fully depreciated.
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(c) Prior to the use by any PSC Entity of the Equipment for any
customer of that PSC Entity (other than a member of the SBC
Group), that PSC Entity will obtain the consent of the
applicable SBC Entity based upon a business case prepared by
the PSC Entity for the applicable SBC Entity's review and
approval specifying (i) any capital investment that will be
required from that SBC Entity to obtain any additional
resources to provide services to the customer of the PSC Group
and, if so, any payments that will be made to the applicable
SBC Entity in connection with or attributable to the use of
the Equipment; (ii) any impact on the overall operating
expenses of the Equipment; (iii) any impact the introduction
of the third party customer would have on existing Service
Levels; and (iv) any impact on the applicable PSC Entity's
charges to the applicable SBC Entity for the Services. The
applicable PSC Entity will also satisfy the applicable SBC
Entity, in that SBC Entity's sole discretion, that adequate
Security Procedures have been instituted to prevent disclosure
of any Confidential Information of the SBC Group to the third
party customer.
4.5 Additional Equipment. Any additional Equipment (other than personal
computers, modems, printers and related personal Equipment used by PSC
personnel) which a PSC Entity elects to add in order to provide the
Services to an SBC Entity during the term of any EPI Agreement will be
purchased in accordance with the terms of that EPI Agreement.
4.6 SBC Facilities.
(a) Commencing on the effective date of each EPI Agreement, the
applicable SBC Entity will provide to the applicable PSC
Entity such space, office furnishings, janitorial service,
telephone service, utilities (including air conditioning) and
office-related equipment, supplies, and duplicating services
in such SBC Entity's premises as the applicable PSC Entity may
reasonably require to provide the Services to the applicable
SBC Entity pursuant to that EPI Agreement, including the
space, furnishings, and equipment utilized by the applicable
Transitioned Employees prior to the effective date of that EPI
Agreement (under all EPI Agreements collectively, the "SBC
Facilities"). The employees of the applicable PSC Entity will
have reasonable access to the applicable SBC Facilities
twenty-four (24) hours a day, seven (7) days a week and will,
at all times, comply with the applicable SBC Entity's
reasonable physical security procedures while on the premises
of the SBC Facilities. In addition, the applicable SBC Entity
will provide necessary storage space for backup data files and
will provide such additional storage space as may be required
by any change in retention schedules required by any
regulatory authority with jurisdiction over the applicable SBC
Entity's business.
(b) The applicable PSC Entity will pay the applicable SBC Entity
on a monthly basis for the SBC Facilities at that SBC Entity's
actual costs for those SBC Facilities, and the amounts of
those payments will be reimbursed by the applicable SBC Entity
to the applicable PSC Entity but will not be included, for
purposes of the applicable EPI Agreement, in PSC Costs (as
defined in that EPI Agreement).
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(c) Prior to relocating Services from any SBC Facility to any
other facility, the applicable PSC Entity will obtain the
consent of the applicable SBC Entity based upon a business
case prepared by the PSC Entity for the review and approval of
the SBC Entity, which approval will not be unreasonably
withheld.
4.5 PSC Facilities. Subject to the Security Procedures, a PSC Entity may
from time to time perform the Services pursuant to any EPI Agreement,
including processing of the applicable SBC Entity's data, in
facilities maintained by the PSC Group (under all EPI Agreements
collectively, "PSC Facilities") as that PSC Entity deems appropriate,
provided that the applicable SBC Entity must be and remain satisfied
that adequate Security Procedures have been implemented and are being
observed at the applicable PSC Facility.
4.6 Third Party Services Contracts.
(a) On or prior to the date each EPI Agreement (which for purposes
of this Section for the SBC Warburg EPI Agreement will be the
Original Agreement Date) is executed and again on or prior to
the effective date of that EPI Agreement, the applicable SBC
Entity will use reasonable efforts to provide the applicable
PSC Entity with a list of all Third Party Service Contracts
related to the Operational Management of the EPI of that SBC
Entity. The applicable PSC Entity will assume responsibility
for the applicable Third Party Service Contracts as of the
effective date of the applicable EPI Agreement and any other
Third Party Service Contract to which an entity that is
acquired and becomes part of the SBC Warburg Division is a
party or to which a member of the SBC Group may become a party
after the effective date of the applicable EPI Agreement as
the result of an acquisition of any entity that becomes part
of an SBC Entity. SBC Parent agrees that, until the
applicable PSC Entity assumes responsibility for any Third
Party Service Contract pursuant to an EPI Agreement, it will
manage all Third Party Service Contracts related to that EPI
Agreement to expire at the earliest reasonable opportunity
that does not result in a termination penalty.
(b) Commencing on the effective date of any EPI Agreement, unless
prohibited by the applicable Third Party Service Contract:
(1) The applicable SBC Entity will make available to the
applicable PSC Entity during the term thereof, at a
charge to that PSC Entity equal to the amounts such
SBC Entity is obligated to pay under such Third Party
Service Contracts, the services provided by third
parties pursuant to each Third Party Service Contract
and utilized by the applicable SBC Entity prior to
the effective date of that EPI Agreement in
performing the services and functions assumed by the
PSC Entity thereunder.
(2) The applicable PSC Entity will have administrative
and management responsibility for managing such third
party services to the same extent as if that PSC
Entity were the contracting party for such services
during the term
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of that EPI Agreement. The applicable SBC Entity
will retain sole authority to execute amendments to
the Third Party Service Contracts, but, unless that
SBC Entity and the applicable PSC Entity otherwise
agree, that SBC Entity will act to terminate those
Third Party Service Contracts at the earliest
available opportunity that does not result in a
termination penalty.
(3) Nothing in this Section 4.8 will require an SBC
Entity to make available to a PSC Entity the services
under a Third Party Services Contract, grant to the
applicable PSC Entity management or administrative
responsibility for third party services, or assign or
terminate a Third Party Services Contract if the
terms of the applicable Third Party Services Contract
prohibit the applicable SBC Entity from doing so, or
if the applicable SBC Entity would subject itself to
a penalty by doing so.
4.9 Transfer of Personnel. Unless otherwise provided in an EPI Agreement,
commencing on the effective date of each EPI Agreement (which for the
purposes of this Section for the SBC Warburg EPI Agreement will be
the Original Agreement Date), the applicable PSC Entity will offer
employment to all employees of the applicable SBC Entity identified in
that EPI Agreement in accordance with the transition plan described
therein and otherwise in accordance with the applicable PSC Entity's
normal employment policies. PSC agrees that each Transitioned
Employee will be offered a salary and benefits package that is
substantially comparable to the salary and benefits package received
by that Transitioned Employee prior to the effective date of that EPI
Agreement. Should a PSC Entity request that the applicable SBC Entity
continue to make payments to such employees after they are hired by
such PSC Entity, as an administrative convenience and until such
personnel can be integrated into the PSC payroll system, the
applicable SBC Entity will do so for a reasonable period not to
exceed three (3) months, subject to reimbursement therefor and
appropriate indemnification by the applicable PSC Entity. In such
event, the SBC Entity will be acting solely as the PSC Entity's agent
and the applicable PSC Entity will reimburse the applicable SBC Entity
for all wages paid and employer's contributions made by such SBC
Entity in connection therewith.
4.10 Resource Payments. The applicable PSC Entity will reimburse the
applicable SBC Entity pursuant to the applicable EPI Agreement for the
amounts due with respect to this Article IV by issuing to that SBC
Entity a credit against that SBC Entity's invoices for such amounts.
Any credit due to an SBC Entity pursuant to this Section 4.10 will be
given by the PSC Entity in the next succeeding month after the month
in which the credit is determined.
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ARTICLE V
SAFEGUARDING OF DATA AND AUDIT RIGHTS
5.1 SBC Data.
(a) The members of the SBC Group own and will continue to own all
right, title and interest in and to all SBC Data. Upon the
termination of this Agreement or of any EPI Agreement for any
reason or, with respect to any SBC Data, on such earlier date
as the applicable SBC Entity and the applicable PSC Entity
mutually determine that any of the same will no longer be
required by that PSC Entity in order to render Services to
such SBC Entity, such SBC Data will be either erased from the
data files maintained by each member of the PSC Group or, if
the applicable SBC Entity so elects, returned to such SBC
Entity. SBC Data may not be utilized by any member of the PSC
Group for any purpose except to provide Services to the
members of the SBC Group, nor may SBC Data or any part thereof
be disclosed, sold, assigned, leased or otherwise disposed of
to third parties by any member of the PSC Group or
commercially exploited by or on behalf of any member of the
PSC Group, or any of its employees or agents.
(b) The parties hereto acknowledge and agree that, in connection
with each EPI Agreement, unless the applicable SBC Entity is
satisfied that its security concerns are adequately addressed,
that EPI Agreement will provide that that SBC Entity will
retain exclusive supervisory control of the systems and
personnel required to ensure that the confidentiality and
secrecy of SBC Data will be maintained; provided that if that
EPI Agreement provides that such SBC Entity will retain
control over the systems and personnel, the members of the PSC
Group will be excused from its Service and Service Level
obligations to the extent that such retention by the SBC
Entity prevents, materially hinders or delays the members of
the PSC Group from providing the Services or meeting any
applicable Service Level as set forth in such EPI Agreement.
Without the consent of the applicable SBC Entity, Information
Technology related security-related functions or crypto codes
will not be shared by any member of the SBC Group with any
member of the PSC Group and only personnel of members of the
SBC Group will execute such functions.
(c) PSC Parent agrees that if any employee of any member of the
PSC Group who is providing Services to the SBC Group is
granted access by a member of the SBC Group to (i) any
facility at which customer or customer-related data of any
member of the SBC Group is located, or (ii) any Systems upon
which any customer or customer-related data of any member of
the SBC Group is contained, that employee will, upon the
request of the applicable member of the SBC Group, be required
to execute an agreement (and amendments to that agreement as
required to comply with this Section 5.1(c)) that contains
provisions requiring that employee to
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maintain the confidentiality of all customer or
customer-related data of any member of the SBC Group, which
provisions will be no more restrictive than the
confidentiality provisions contained in any agreement that the
members of the SBC Group generally require their employees,
contractors and agents with similar access to execute from
time to time.
5.2 Safeguarding SBC Data. With respect to, and under the terms and
conditions of, each EPI Agreement, the applicable PSC Entity will
establish and maintain safeguards against the destruction, loss or
alteration of SBC Data in the possession of any member of the PSC
Group which are no less rigorous than those in effect at the
applicable SBC Facilities as of the effective date of that EPI
Agreement. In the event that additional safeguards for SBC Data are
reasonably requested by the SBC Entity, the applicable PSC Entity will
provide those additional safeguards and that SBC Entity will pay that
PSC Entity therefor in accordance with the payment terms provided in
the applicable EPI Agreement. An SBC Entity will 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
applicable PSC Entity will have access to such backup data and data
files as is reasonably required by that PSC Entity to provide the
Services. Each PSC Entity's access to such data and data files must
be consistent with the Security Procedures.
5.3 Physical Security for Facilities. With respect to, and under the
terms and conditions of, each EPI Agreement, the applicable PSC Entity
will perform all reasonably required security procedures at any place
where Services are performed by that PSC Entity. The procedures at
the SBC Facilities will be no less rigorous than those in effect there
as of the effective date of that EPI Agreement. The applicable SBC
Entity will provide all necessary security personnel and security
equipment at the SBC Facilities. Personnel of members of the PSC
Group will comply with the reasonable physical security procedures of
members of the SBC Group with respect to access to any SBC Facilities,
data and data files.
5.4 Audit Rights. The members of the SBC Group and/or its independent
auditors (who shall not be PSC Competitors (as defined in the Master
Agreement) or Affiliates of PSC Competitors, other than the reporting
auditors of the applicable member of the SBC Group), at no additional
expense to any member of the PSC Group, and upon ten (10) business
days' written notice to the applicable member of the PSC Group, will
have the right to conduct an operational audit pertaining to Services
rendered pursuant to this Agreement or any EPI Agreement, including
but not limited to having the members of the PSC Group process through
any system test data supplied by a member of the SBC Group or its
auditors, operate audit software on any System, download SBC Data to a
computer designated by the applicable member of the SBC Group or its
auditors, or conduct a System backup and disaster recovery audit. The
purpose of the operational audit will be to verify that each member of
the PSC Group is exercising reasonable data processing operational
procedures in its performance of the Services and confirm that each
member of the PSC Group is performing and observing its obligations
hereunder or under the applicable EPI Agreement. The report resulting
from each operational audit will be reviewed by the applicable SBC
Entity and the applicable PSC Entity and appropriate actions will be
taken
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based upon each such review. The members of the PSC Group will
provide to such auditors and inspectors any assistance that they
reasonably require, and the costs incurred by the members of the PSC
Group in connection with services rendered in connection with any such
audit or inspection will be included in the PSC Costs in accordance
with the terms of the applicable EPI Agreement.
5.5 Disaster Recovery. During the term of each EPI Agreement, the
applicable PSC Entity will maintain and continue to maintain
throughout the term of that EPI Agreement, an off-site disaster
recovery capability, including a disaster recovery plan, as mutually
agreed in connection with that EPI Agreement. In the event of a
disaster affecting the Services provided by the PSC Entity pursuant to
any EPI Agreement, the PSC Entity will implement the disaster recovery
plan applicable to that EPI Agreement. The costs incurred by the PSC
Entity in connection with any disaster recovery Services provided by
that PSC Entity as described in this Section 5.5 will be included in
the PSC Costs in accordance with the provisions of the applicable EPI
Agreement.
5.6 Regulatory Access. The parties agree that the records maintained and
produced under this Agreement and any EPI Agreement will at all times
be available for examination and audit by governmental agencies,
regulators or exchanges of which any member of the SBC Group is a
member having jurisdiction over the business of any member of the SBC
Group. Each party to this Agreement will notify the other party
promptly of any formal request by an authorized governmental agency,
regulator or exchange to examine records regarding any member of the
SBC Group that are maintained by any member of the PSC Group. Upon
the written request of any member of the SBC Group, the applicable
member of the PSC Group will provide any relevant assurances to such
agencies, regulators or exchanges and will subject itself to any
required examination or regulation, and the costs incurred by the
applicable member of the PSC Group for any services rendered in
connection with any such examination will be included in the PSC Costs
in accordance with the applicable EPI Agreement.
5.7 Viruses. Each party will use its reasonable efforts to ensure that no
viruses, worms or similar items ("Viruses") are introduced into any
System used under this Agreement or any EPI Agreement. If a Virus is
found in any such System, the applicable PSC Entity will, promptly
upon the discovery thereof, use its best efforts to eliminate such
Virus and ameliorate the effect thereof. If a Virus causes a loss of
operational efficiency or data, the applicable PSC Entity will
mitigate and restore such loss as quickly as feasible.
5.8 Disabling Code. No System provided by either any member of the SBC
Group or any member of the PSC Group will include, nor will any member
of the PSC Group or any member of the SBC Group introduce into any
System, any code with the purpose to disable or reduce the efficiency
of all or any portion of any System.
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ARTICLE VI
MANAGEMENT
6.1 Relationship Managers. Each party (an "Appointing Party") will
appoint an individual (a "Relationship Manager") who, until replaced
by the Appointing Party, will serve as that Appointing Party's
representative under this Agreement. Each Relationship Manager will
(i) have overall responsibility for managing and coordinating the
performance of the Appointing Party's obligations under this
Agreement, (ii) be authorized to act for and on behalf of the
Appointing Party with respect to all matters relating to this
Agreement, and (iii) work with the Operational Managers for the SBC
Entities or the PSC Entities, as applicable, to establish appropriate
uniform procedures for the Services to be provided by the members of
the PSC Group to the members of the SBC Group. Neither party will
reassign its Relationship Manager or cause its Relationship Manager to
no longer serve in that capacity without the other party's prior
consent, which consent will not be unreasonably withheld. Each party
further agrees that if its Relationship Manager ceases to be employed
by that party, or is reassigned, such party's Relationship Manager may
only be replaced with the consent of the other party, which consent
will not be unreasonably withheld.
6.2 Operational Managers. Each Contracting Party to an EPI Agreement will
appoint an individual (an "Operational Manager") who will serve as
that Contracting Party's representative under that EPI Agreement.
Each Operational Manager will (i) have overall responsibility for
managing and coordinating the performance of the Contracting Party's
obligations under that EPI Agreement and (ii) be authorized to act for
and on behalf of the Contracting Party with respect to all matters
relating to that EPI Agreement. No Contracting Party may reassign its
Operational Manager or cause its Operational Manager to no longer
serve in that capacity without the other Contracting Party's prior
consent, which consent will not be unreasonably withheld. Each
Contracting Party further agrees that if its Operational Manager
ceases to be employed by that Contracting Party, or is reassigned,
that Contracting Party's Operational Manager may only be replaced with
the other Contracting Party's consent, which consent will not be
unreasonably withheld.
6.3 Change Control Procedures. Within one hundred and eighty (180) days
after the effective date of each EPI Agreement and as part of the
Services provided by the applicable PSC Entity under that EPI
Agreement, that PSC Entity and the applicable SBC Entity will mutually
establish a written description of the change control procedures that
will be applicable to any Changes related to that EPI Agreement. For
the purpose of this Section 6.3, "Changes" are any changes to the
Systems, the Equipment or the Services that would materially alter the
functionality, Service Levels or technical environment of the Systems
or the Equipment, or the manner in which the Services are provided or
the composition of the Services. These change control procedures will
provide that, except for Changes made on a temporary basis to maintain
the continuity of the Services, the applicable SBC Entity and the
applicable PSC Entity will implement Changes only after consultation
and agreement between the applicable SBC Entity and the applicable PSC
Entity.
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6.4 Crisis Management Procedures. In connection with each EPI Agreement,
the applicable PSC Entity and the applicable SBC Entity will establish
a procedure for immediately escalating to a team of appropriate senior
level managers or officers, including the Relationship Manager for
each party, any significant technical problem that may arise from time
to time that, if not quickly resolved, could have a negative impact on
critical portions of that SBC Entity's business. This procedure will,
at a minimum, provide that in the event of a major service outage,
then:
(a) The production manager for the applicable PSC Entity, who will
be available on a seven (7) days a week, twenty-four (24)
hours a day basis will be notified of all details of the
outage. If that production manager is not able to implement a
plan to resolve the outage within two (2) hours of receipt of
notice, then;
(b) The crisis manager for the applicable PSC Entity and the
President of PSC Parent will be notified and a hot line will
be established to provide continuous information with respect
to the status of the outage and estimated time of repair. If
the outage is not resolved within two (2) hours of the crisis
manager being notified, then;
(c) A crisis management "SWAT" team, consisting of personnel of
the applicable PSC Entity and personnel of the applicable SBC
Entity, will be formed and the Chairman of PSC Parent will be
notified. Every hour on the hour, until the outage is
resolved, there will be bridged status report calls from the
"SWAT" team to key managers of the applicable PSC Entity and
the applicable SBC Entity and PSC Parent and SBC Parent.
ARTICLE VII
PERFORMANCE REVIEW AND DISPUTE RESOLUTION
7.1 Scope. The dispute resolution procedures specified in Sections 7.2 and
7.3 hereof will apply to all matters arising out of this Agreement and
each EPI Agreement that relate to technical matters such as Service
Levels and to the performance of Services. With respect to any other
dispute arising under this Agreement or any EPI Agreement, including,
without limitation, compliance by the members of the PSC Group with
the Security Procedures or the payment of PSC invoices, the applicable
Contracting Parties will have immediate recourse to the arbitration
provisions of Section 7.4 hereof. The parties agree that PSC Costs
(as defined in each EPI Agreement) will not include the fees and
charges of legal counsel (outside or internal) incurred in connection
with any enforcement action, formal dispute resolution procedure or
formal court or arbitration proceedings against an SBC Entity or in
connection with the determination of whether any such action,
procedure or proceeding should be initiated or defended.
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7.2 Performance Review. The Relationship Managers will meet as often as
either Relationship Manager reasonably requests to review the
performance of the PSC Group under this Agreement and each EPI
Agreement. Subject to the provisions of Section 7.1 hereof, in the
event of any dispute or disagreement between the parties hereto, upon
the written request of either party, each party will appoint an equal
number of designated officers, plus both Relationship Managers
(collectively, the "Special Resolution Committee"), whose task it will
be to meet for the purpose of endeavoring to resolve such dispute or
to negotiate for an adjustment to the relevant provisions of this
Agreement or the applicable EPI Agreement. The Special Resolution
Committee will meet as often as the parties reasonably deem necessary
in order to gather and furnish to the members of the Special
Resolution Committee all information with respect to the matter at
issue which either party believes to be appropriate and germane in
connection with its resolution. The Special Resolution Committee will
discuss the problem and/or negotiate in good faith in an effort to
resolve the dispute or renegotiate the applicable section or provision
without the necessity of any further proceeding relating thereto.
During the course of the negotiation, all reasonable requests made by
one party to the other for information relating to the dispute and the
resolution thereof will be honored. The specific format for such
discussions will be left to the discretion of the Special Resolution
Committee, but may include the preparation of agreed upon statements
of fact or written statements of position furnished to the other
party. No further proceedings for the resolution of any dispute may
be commenced until the earlier of (i) the date on which a majority of
the members of the Special Resolution Committee conclude in good faith
that an amicable resolution through continued negotiation of the
matter in issue does not appear likely, or (ii) thirty (30) days from
the date the dispute was submitted to the Special Resolution
Committee.
7.3 Escalation of Disputes. Subject to the provisions of Section 7.1
hereof, any dispute that is not resolved by the Special Resolution
Committee in accordance with the procedures described in Section 7.2
above will be escalated to the Chief Executive Officers of PSC Parent
and SBC Parent, who will each appoint one (1) corporate officer to
discuss the problem and negotiate in good faith to resolve the dispute
or controversy. The specific format for such discussions and
negotiations will be left to the discretion of the two (2) appointed
corporate officers. No further proceedings for the resolution of any
dispute may be commenced until the earlier of (i) the date on which
the two (2) appointed directors conclude in good faith that a
resolution to the dispute through continued negotiations is not
likely, or (ii) thirty (30) days from the date the dispute was
escalated to the Chief Executive Officers of PSC Parent and SBC
Parent.
7.4 Arbitration. Subject to Section 7.1 hereof, any dispute that is not
resolved through negotiation pursuant to Sections 7.2 or 7.3 hereof
will be settled exclusively by final and binding arbitration in
accordance with the following:
(a) Except as specified below or otherwise mutually agreed in
writing by the parties to the dispute, the arbitration will be
conducted in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association.
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(b) Any demand for arbitration or any counterclaim will specify in
reasonable detail the facts and legal grounds forming the
basis for the claimant's request for relief, and will include
a statement of the total amount of damages claimed, if any,
and any other remedy sought by the claimant.
(c) The arbitration will be conducted by an arbitration panel
consisting of three neutral arbitrators selected in accordance
with those Commercial Arbitration Rules. The arbitration will
be conducted in the English language.
(d) The arbitration proceedings will take place in New York.
(e) The arbitration panel may render awards of monetary damages,
direction to take or refrain from taking action, or both.
However, the arbitration panel may not award monetary damages
in excess of compensatory damages and will in no event award
any damages not permitted by Sections 10.6 and 10.7 hereof.
(f) The arbitration panel may, at its discretion, require any
party to the arbitration to reimburse any other party to the
arbitration for all or any part of the expenses of the
arbitration paid by the other party and the attorneys' fees
and other expenses reasonably incurred by the other party in
connection with the arbitration.
(g) Judgment upon the award rendered in the arbitration may be
entered in any court of competent jurisdiction.
(h) The parties will direct the arbitration panel to reach a
decision within one hundred and eighty (180) days of the date
on which the parties submit the dispute for resolution
pursuant to this Section 7.4.
7.5 Injunctive Relief. Nothing in this Article VII will prevent any
Contracting Party from immediately seeking injunctive or other
equitable relief, including termination under Article VIII hereof,
from any court having competent jurisdiction.
7.6 Continued Performance. Unless the applicable EPI Agreement has been
terminated in accordance with the provisions of Article VIII hereof,
the applicable PSC Entity will continue to provide the Services
contemplated by that EPI Agreement during any dispute resolution or
arbitration proceedings commenced pursuant to this Article VII,
provided that the applicable SBC Entity will continue to make payment
for those Services as provided in that EPI Agreement.
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ARTICLE VIII
TERMINATION
8.1 Termination for Cause. In the event that a Contracting Party
materially defaults in the performance of any of its duties or
obligations under this Agreement or under an EPI Agreement, which
default is not substantially cured within sixty (60) days after
written notice is given to the defaulting Contracting Party specifying
the default (or, with respect to any such default which cannot
reasonably be cured within such sixty (60) day period but is curable,
(x) if the defaulting Contracting Party fails to proceed within such
sixty (60) day period to commence curing the default and thereafter to
proceed with all due diligence to substantially cure the same, or (y)
if any such default referenced in clause (x) is not substantially
cured within one hundred twenty (120) days after the giving of such
written notice), then the non-defaulting Contracting Party may
terminate this Agreement and the applicable EPI Agreement on the date
specified in such notice of termination, which date will be no later
than one (1) year after the date on which that Contracting Party's
right to terminate this Agreement and the applicable EPI Agreement
arose.
8.2 Termination for Non-Payment. In the event that an SBC Contracting
Party defaults in the payment when due of any amount in excess of
$500,000 due to a PSC Contracting Party under any EPI Agreement, and
does not cure the default within thirty (30) days after being given
written notice of the default, then the applicable PSC Contracting
Party may, by giving written notice thereof to that SBC Contracting
Party, terminate the applicable EPI Agreement as of a date specified
in the notice of termination, which date will be no later than one (1)
year after the date on which that PSC Contracting Party's right to
terminate this Agreement or the applicable EPI Agreement arose.
8.3 Termination for Insolvency. In the event that a Contracting Party
(the "Insolvent Party") becomes or is declared insolvent or bankrupt,
is the subject of any proceedings relating to its liquidation,
insolvency or for the appointment of a receiver or similar officer for
it (which, in the case of involuntary proceedings, remains undismissed
for at least sixty (60) days), 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 applicable
Contracting Party may, by giving written notice thereof to the
Insolvent Party, terminate this Agreement and each EPI Agreement as of
a date specified in such notice of termination. Neither this
Agreement nor any EPI Agreement may be terminated pursuant to this
Section 8.3 once the Insolvent Party ceases to be insolvent or be the
subject of a proceeding relating to its liquidation, insolvency or the
appointment of a receiver.
8.4 Termination for PSC Change in Control. In the event that a Change in
Control occurs in a single transaction or series of related
transactions, then the applicable SBC Entity will have the right to
terminate this Agreement and the applicable EPI Agreement, if such
Change in Control is reasonably likely to have a significant adverse
impact on the performance of or the charges for the Services generally
rendered by the applicable PSC Entities under all EPI
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Agreements or rendered by the applicable PSC Entity pursuant to that
EPI Agreement, by giving that PSC Entity at least ninety (90) days
prior written notice designating the termination date on which this
Agreement or that EPI Agreement will terminate if such Change in
Control has not been cured by such date; provided, however, that the
date specified in such termination notice will be no later than one
(1) year after the Change in Control occurred.
8.5 Termination for Change of Circumstances. The applicable SBC Entity
may terminate this Agreement and the applicable EPI Agreement in the
event that the members of the PSC Group cease generally to offer IT
Services (other than to existing customers with non-terminable
contracts) by giving at least sixty (60) days prior written notice to
the applicable PSC Entity specifying the date on which that SBC Entity
intends to terminate this Agreement and the applicable EPI Agreement,
which date will be no later than one (1) year after the date on which
the SBC Entity's right to terminate this Agreement or that EPI
Agreement arose.
8.6 Termination for Cross-Default. With respect to each EPI Agreement,
either Contracting Party may, by giving prior written notice to the
other, terminate that EPI Agreement in the event there has been a
termination (as a result of a breach by a PSC Entity or an SBC Entity,
as the case may be) of another EPI Agreement between a PSC Entity and
an SBC Entity or of an agreement between the other and a third entity,
in each case, with annual revenues at least equal to the annual
revenues from the EPI Agreement to be terminated. No EPI Agreement
may be terminated for such cross-default more than one (1) year after
the date on which the right to terminate pursuant to this Section 8.6
arose.
8.7 Termination for SBC Major Event. The applicable SBC Entity may, by
giving one hundred eighty (180) days' prior written notice to the
applicable PSC Entity, terminate this Agreement and the applicable EPI
Agreement in the event that SBC Parent is merged into, is acquired by
or acquires another significant entity (an "Acquiring Entity") with a
market value equal to at least fifty percent (50%) of SBC Parent's
market value which has a nonterminable significant exclusive
information technology services contract with annual revenues to the
other provider (the "Other IT Provider) of at least fifty percent
(50%) of the annual revenues to the members of the PSC Group from the
members of the SBC Group under all EPI Agreements, the absence of
which would have a material adverse effect on the combined entity and
the members of the SBC Group choose to contract with the Other IT
Provider for the work formerly performed by the members of the PSC
Group, provided that the parties agree that they will use their best
efforts to find a solution acceptable to both the members of the SBC
Group and the members of the PSC Group other than terminating an EPI
Agreement. If such Acquiring Entity has a nonterminable non-exclusive
contract with the Other IT Provider, the members of the SBC Group will
be permitted to continue such contract. Neither this Agreement nor
any EPI Agreement may be terminated for such event more than one year
after the date on which either party determines that a solution
acceptable to both parties as described above will not be found.
8.8 [Intentionally omitted.]
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8.9 Termination for Security Breach. The applicable SBC Entity may
terminate the applicable EPI Agreement if (i) the applicable PSC
Entity fails to cure, within ten (10) days after written notice is
given to it by the applicable SBC Entity, a curable breach of the
Security Procedures that has a material adverse effect on the business
or reputation of the members of the SBC Group, or (ii) the applicable
PSC Entity commits a non-curable breach of the Security Procedures
that has a material adverse effect on the business or reputation of
the members of the SBC Group and the applicable PSC Entity has not,
within thirty (30) days after written notice of the breach is given to
it by the applicable SBC Entity, implemented a plan to prevent a
substantially similar breach, except that if the non-curable breach
occurs on two additional occasions, the applicable SBC Entity may
terminate the EPI Agreement under which such breach arose.
8.10 Rights Upon Termination of EPI Agreements. Upon termination of any
EPI Agreement, and for a period of eighteen (18) months thereafter,
each Contracting Party thereto will have the following rights and
obligations:
(a) Commencing upon any notice of termination by any member of the
SBC Group pursuant to Sections 8.1, 8.3, 8.4, 8.5, 8.6, 8.7,
8.9 or 10.7(a) hereof or expiration of the term of that EPI
Agreement, the applicable PSC Entity will comply with the
applicable SBC Entity's reasonable directions, and will
provide to such SBC Entity any and all termination assistance
reasonably requested to allow the Services provided under that
EPI Agreement to continue and to facilitate the orderly
transfer of responsibility for performance of the Services to
the members of the SBC Group or a third party designated by
SBC Parent. The applicable SBC Entity will pay the applicable
PSC Entity for such assistance in accordance with the terms of
the applicable EPI Agreement. The termination assistance to
be provided in accordance with this Section 8.10 may include
the following:
(1) Continuing to perform, following the termination
date, any or all of the Services in accordance with
all applicable Service Levels then being performed by
that PSC Entity.
(2) Developing, together with that SBC Entity, a plan for
the orderly transition of the performance of the
Services from that PSC Entity to that SBC Entity or a
third party designated by SBC Parent.
(3) Providing reasonable training for personnel of that
SBC Entity or a third party designated by SBC Parent
in the performance of the Services then being
transitioned to that SBC Entity or a third party
designated by SBC Parent.
(4) Providing that SBC Entity the right to assume any
leases for Equipment leased by that PSC Entity or to
purchase from that PSC Entity Equipment owned by that
PSC Entity that is then dedicated to providing
Services for
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the SBC Entity pursuant to that EPI Agreement. If
that SBC Entity exercises this right, it will pay to
the applicable PSC Entity an amount equal to such PSC
Entity's net book value of the applicable Equipment
calculated in accordance with generally accepted
accounting principles.
(b) If, upon the expiration or termination of an EPI Agreement, a
PSC Entity is using any Equipment to provide services to a
third party customer of the PSC Group, such PSC Entity may
continue to use that Equipment in accordance with Section 4.4
hereof until such time as the PSC Entity can reasonably
transition to other equipment, but for no more than eighteen
(18) months after termination.
(c) Following the termination of an EPI Agreement, the applicable
member of the PSC Group and the applicable member of the SBC
Group will have the right to solicit for employment and employ
any of its former employees then employed by the other.
8.11 Escrow Upon Termination. If any EPI Agreement is terminated by an SBC
Contracting Party pursuant to the provisions of Sections 8.1, 8.4,
8.5, 8.6 or 8.9 hereof, PSC Parent will create an escrow in accordance
with the procedures described in Schedule A hereto.
ARTICLE IX
CONFIDENTIALITY
9.1 General Obligations. All Confidential Information relating to any
member of the SBC Group or the PSC Group will be held in confidence by
the other to the same extent and in at least the same manner as such
party protects its own confidential or proprietary information. No
member of the PSC Group or the SBC Group may disclose, publish,
release, transfer or otherwise make available Confidential Information
of the other party in any form to, or for the use or benefit of, any
Person without the other party's written consent. Each member of the
PSC Group and each member of the SBC Group will, however, be permitted
to disclose relevant aspects of the other party's Confidential
Information to its respective officers, agents, subcontractors and
employees and to the officers, agents, subcontractors and employees of
its Affiliates to the extent that such disclosure is reasonably
necessary for the performance of its duties and obligations under this
Agreement or any EPI Agreement; provided, however, that such party
will take all reasonable measures to ensure that Confidential
Information of the other party is not disclosed or duplicated in
contravention of the provisions of this Agreement or any EPI Agreement
by such officers, agents, subcontractors and employees. PSC Parent
agrees that it will cause each employee of each member of the PSC
Group providing Services to any member of the SBC Group to execute a
PSC Parent confidentiality agreement, which will require confidential
treatment of nonpublic information of and about customers of members
of the PSC Group (which shall include members of the SBC Group). Each
member of the PSC Group or of the SBC Group, as the case may be, may
disclose Confidential Information of the other party if required
pursuant to an order or
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requirement of a court, administrative agency or other governmental
body, regulator or exchange of which that SBC Entity is a member,
provided that the applicable member of the PSC Group or the SBC Group,
as the case may be, will (i) give the other party written notice of
such order or requirement as soon as practicable after it has
knowledge thereof and in any event prior to disclosure of the
Confidential Information, (ii) disclose no more Confidential
Information than is required by such order or requirement, and (iii)
seek confidential treatment from the court, administrative agency or
other governmental body for that Confidential Information. Nothing in
this Section 9.1 will prevent any Contracting Party from exercising
its rights pursuant to Sections 4.1, 4.2 and 4.3 hereof. Subject to
any obligation of any member of the PSC Group to continue to provide
termination assistance in accordance with Section 8.10 hereof and
subject to each party's rights under Sections 4.1, 4.2 and 4.3 hereof,
upon the termination of this Agreement or any EPI Agreement, the
members of the PSC Group or the SBC Group, as the case may be, will
return to the members of the SBC Group or the PSC Group, as the case
may be, and at the other's expense, any Confidential Information of
the other party then held by the members of the SBC Group or of the
PSC Group, as the case may be. The obligations of the members of PSC
Group under this Section 9.1 are in addition to any obligations it has
under Articles IV and V hereof and any obligations it has to comply
with the Security Procedures.
9.2 Unauthorized Acts. Each member of the PSC Group and each member of
the SBC Group will:
(a) Notify the other promptly of any material unauthorized
possession or use of the other's Confidential Information by
any Person which may become known to such party, if such
unauthorized possession arose as a result of the acts or
failures to act of the notifying party.
(b) Promptly furnish to the other full details of the unauthorized
possession or use, and use reasonable efforts to assist the
other in investigating or preventing the recurrence of any
unauthorized possession or use of Confidential Information.
(c) Use reasonable efforts to cooperate with the other in any
litigation and investigation against third parties deemed
necessary by the other to protect its Confidential
Information.
(d) Promptly use all reasonable efforts to prevent a recurrence of
any such unauthorized possession or use of Confidential
Information.
ARTICLE X
INDEMNITIES AND LIABILITY
10.1 Cross Indemnity. PSC Parent and SBC Parent each agree to indemnify,
defend and hold harmless the other and the other's Affiliates from any
and all claims, actions, losses,
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damages, liabilities, costs and expenses, including reasonable
attorneys' fees and expenses, arising out of or relating to the death
or bodily injury of any agent, employee, customer, business invitee or
business visitor of the indemnitor or its Affiliates, or arising out
of or relating to loss of or damage to tangible real or tangible
personal property, to the extent that such claim, action, liability,
loss, damage, cost or expense was proximately caused by the
indemnifying party's tortious act or omission, or by those of its
agents or employees. For purposes of this Section 10.1, no
Transitioned Employee to whom any member of the SBC Group continues to
make payments pursuant to Section 4.9 hereof will be deemed to be an
employee of the SBC Group solely as a result of those payments.
10.2 Intellectual Property Indemnity.
(a) PSC Parent and SBC Parent each agree to indemnify, defend and
hold harmless the other and the other's Affiliates from any
and all claims, actions, damages, liabilities, costs and
expenses, including reasonable attorneys' fees and expenses,
arising out of any claims of infringement of any patent, or a
trade secret, or any copyright, trademark, service mark, trade
name or similar proprietary rights conferred by contract or by
common law or by any law of any applicable jurisdiction
alleged to have resulted from the use of Systems provided by
the indemnitor or its Affiliates under this Agreement or any
EPI Agreement; provided, however, that, subject to Section
10.5 hereof, this indemnity will not apply unless the party
claiming indemnification notifies the other promptly of any
matters in respect of which the foregoing indemnity may apply
and of which the notifying party has knowledge and gives the
other full opportunity to control the response thereto and the
defense thereof, including, without limitation, any agreement
relating to the settlement thereof.
(b) PSC Parent will indemnify, defend and hold harmless the
members of the SBC Group from any and all claims, actions,
damages, liabilities, costs and expenses, including reasonable
attorneys' fees and expenses, arising out of any claims of
infringement of any patent, or a trade secret, or any
copyright, trademark, service mark, trade name or similar
proprietary rights conferred by contract or by common law or
by any law of any applicable jurisdiction resulting from use
of a Licensed SBC System provided by a member of the PSC
Group to a third party customer of the PSC Group (other than
members of the SBC Group) in accordance with the provisions of
Article IV of this Agreement.
10.3 SBC Indemnity. SBC Parent agrees to indemnify, defend and hold
harmless the members of the PSC Group from any and all claims,
actions, damages, losses, liabilities, costs and expenses, including
reasonable attorneys' fees and expenses, arising out of (i) any claims
for rent or utilities at any location where SBC is required to furnish
space and/or utilities to PSC pursuant to this Agreement or any EPI
Agreement, (ii) any claim arising in connection with the Equipment,
SBC Facilities, SBC Systems, Transitioned Personnel or the Third Party
Service Contracts, to the extent such claim under this subsection (ii)
arose on or prior to the effective date of the applicable EPI
Agreement, and (iii) any investigations,
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proceedings or other activities undertaken by any European fiscal
authority with respect to this Agreement or any EPI Agreement (except
as a result of the gross negligence or willful misconduct of a member
of the PSC Group).
10.4 VAT Indemnity.
(a) If, pursuant to this Agreement or any EPI Agreement:
(1) Any member of the PSC Group makes a supply or is
deemed or treated by applicable law or the practice
from time to time of any European fiscal authority to
make a supply to any member of the SBC Group, and
European VAT is chargeable in respect of such supply,
and as a result any member of the PSC Group is
required to account to any European fiscal authority
for such European VAT ("SBC Supply Vat"); or
(2) Either of PSC Parent, on the one hand, or any other
member of the PSC Group, on the other, makes or is
deemed or treated by applicable law or the practice
from time to time of any European fiscal authority to
make a supply to the other in connection with this
Agreement or any EPI Agreement, and European VAT
("Perot Supply VAT") is payable in respect of such
supply;
then, SBC Parent will on demand pay to the applicable member
of the PSC Group a sum equal to the amount of the SBC Supply
VAT or the Perot Supply VAT, as the case may be; provided,
that, in the latter case, SBC Parent's liability will not
extend to any Perot Supply VAT for which PSC Parent or the
applicable member of the PSC Group, as the case may be, is
entitled to credit or repayment from any European fiscal
authority.
(b) Where PSC Parent or any member of the PSC Group obtains a
repayment or credit in respect of Perot Supply VAT more than
one (1) month after the prescribed accounting period in which
that Perot Supply VAT was incurred, SBC Parent will pay
interest to PSC Parent or the applicable member of the PSC
Group, as the case may be, from the date on which that Perot
Supply VAT was incurred to and including the date on which the
repayment or credit is obtained. The interest shall accrue
from day to day at the PSC Interest Rate (as defined in the
SBC Warburg EPI Agreement), minus any interest paid by the
relevant authority in connection with the repayment or credit.
(c) For purposes of this Section 10.4, "European VAT" means value
added tax as provided for in the Value Added Tax Act 1994 (as
amended or re-enacted from time to time, the "Act") and
legislation supplemental thereto and any other tax (whether
imposed in the United Kingdom in substitution thereof or in
addition
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thereto or elsewhere) of a similar fiscal nature, and (except
as a result of the gross negligence or willful misconduct of a
member of the PSC Group) includes a reference to all fines,
penalties, surcharges and interest which may be assessed,
levied, charged or imposed pursuant to the Act and/or relevant
legislation.
10.5 Indemnification Procedures. With respect to third-party claims
subject to the indemnities set forth in this Article X, the indemnitee
will notify the indemnitor promptly of any matters in respect of which
the foregoing indemnities may apply and of which the indemnitee has
knowledge and will give the indemnitor full opportunity to control the
response thereto and the defense thereof, including, without
limitation, any agreement relating to the settlement thereof, provided
that the indemnitee will have the right to approve any settlement or
any decision not to defend. The indemnitee's failure to promptly give
notice will affect the indemnitor's obligation to indemnify the
indemnitee only to the extent that the indemnitor's rights are
prejudiced thereby. The indemnitee may participate, at its own
expense, in any defense and any settlement directly or through counsel
of its choice. If the indemnitor elects not to defend, the indemnitee
will have the right to defend or settle the claim as it may deem
appropriate, at the cost and expense of the indemnitor, which will
promptly reimburse the indemnitee for all such costs, expenses and
settlement amounts.
10.6 Consequential and Punitive Damages. In no event will either
Contracting Party be liable to the other under this Agreement or under
any EPI Agreement for indirect, incidental, consequential, reliance or
punitive damages, including, without limitation, damages for lost
profits (other than, to the extent recoverable under New York law in
appropriate judicial, arbitration or other legal proceedings, the lost
profits of any PSC Entity under this Agreement or any EPI Agreement,
provided, that the amount of any recovery for such lost profits shall
be deemed to be included within the scope of the maximum liability of
the SBC Group referred to in Section 10.7(ii)(B) hereof) or injury to
property or reputation regardless of the form of action, whether in
contract, indemnity, warranty, strict liability or tort (including
negligence) and regardless of whether such party has reason to know or
in fact knows of the possibility thereof.
10.7 Definition of Liability. All PSC Entities, in the aggregate, and all
SBC Entities, in the aggregate, will only be liable to the other under
this Agreement or any EPI Agreement for direct damages that arise
from:
(a) its gross negligence or willful misconduct and that for all
events, acts or omissions do not exceed, in the aggregate for
this Agreement and all EPI Agreements and for all PSC
Entities, $75,000,000, and for all SBC Entities, $75,000,000;
provided, that the amount of any recovery for gross negligence
or willful misconduct by any SBC Entity shall be deemed to be
included within the scope of the maximum liability of the SBC
Group referred to in Section 10.7(ii)(B); provided, further,
however, if at any time the PSC Entities have paid damages to
the SBC Entities aggregating at least $65,000,000, then PSC
Parent will have the option, within thirty (30) days of such
time, to provide written notice to SBC Parent that PSC Parent
has increased the
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aggregate limitation under this Section 10.7(a) by an amount
equal to the amount required to increase the aggregate
available liability amount back to $75,000,000. If PSC Parent
does not so increase the liability amount, SBC Parent will
have ninety (90) days to provide PSC Parent with written
notice that this Agreement and each EPI Agreement will
automatically terminate unless PSC Parent agrees, in writing,
to increase, and does so increase, the liability amount as
described above within fifteen (15) days of such written
notice. The procedure described above will be repeated each
time the aggregate remaining liability amount under this
Section 10.7(a) decreases to less than $10,000,000; and
(b) its negligence and that for all events, acts or omissions do
not exceed (i) the amount of insurance coverage maintained by
the liable SBC or PSC Entity, as the case may be, less (ii)
any amounts payable by that liable SBC or PSC Entity, as the
case may be, pursuant to Section 10.7(a) above; provided that
no amount will be due or payable to either the members of the
PSC Group or the members of the SBC Group, as the case may be,
under this Section 10.7(b) unless and until the liable party
is finally paid that amount by its insurance carrier. In the
event of any dispute between a SBC Entity and a PSC Entity
that is likely to give rise to a claim that would be subject
to the provisions of this Section 10.7(b), the liable party
will upon request of the other party exercise good faith in
determining whether and when to notify its insurance carrier
of the claim in order to preserve its ability to collect under
the applicable insurance policies with respect to that claim
and will comply with the claim handling procedures specified
by its applicable insurance policies.
The limitations set forth in this Section 10.7 will not apply (i) with
respect to either the members of the SBC Group or of the PSC Group to
the indemnity obligations under Section 10.2 hereof or the indemnity
obligations under Section 10.1 hereof that relate to personal injury,
and (ii) with respect to the members of the SBC Group, to (A) amounts
payable by the members of the SBC Group to the members of the PSC
Group for Services that have been provided under any EPI Agreement,
and (B) in the event of a breach or termination of this Agreement or
any EPI Agreement, direct damages recoverable under New York law and
any recoverable lost profits under New York law of any PSC Entity
under this Agreement or any EPI Agreement in respect of such breach or
termination, but in no event will the members of the SBC Group be
liable for any amounts described in this Section 10.7(ii)(B), which
exceed, in the aggregate for all such breaches and terminations under
this Agreement and all EPI Agreements for all members of the SBC
Group, $250,000,000 plus one-half (1/2) of the Shares Termination
Value, plus all amounts recoverable under Section 10.7(ii)(A) hereof.
10.8 Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
AN EPI AGREEMENT, NEITHER ANY MEMBER OF THE PSC GROUP NOR ANY MEMBER
OF THE SBC GROUP MAKES ANY, AND EACH SUCH MEMBER HEREBY DISCLAIMS ALL,
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF
MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE RELATING TO ANY
GOODS OR SERVICES PROVIDED PURSUANT TO THIS AGREEMENT OR ANY EPI
AGREEMENT.
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10.9 Risk of Loss. Subject to Section 10.7 hereof, during the term of each
EPI Agreement, the risk of loss for Equipment and Systems provided in
accordance with Article IV hereof or otherwise pursuant to any EPI
Agreement will remain with the owner of the applicable Equipment or
System.
ARTICLE XI
MISCELLANEOUS
11.1 Original Agreement. SBC Parent and PSC Parent each acknowledge and
agree that, notwithstanding anything to the contrary contained herein,
the terms of the Original Agreement will govern PSC Parent's and SBC
Parent's respective obligations thereunder with regard to any matters
that occurred prior to the Adjustment Date.
11.2 Binding Nature and Assignment. This Agreement and each EPI Agreement
will be binding on the applicable Contracting Party and their
respective successors and assigns, but no Contracting Party may, or
will have the power to, assign this Agreement without the prior
written consent of the other Contracting Party, except that the
applicable SBC Entity may assign those portions of an EPI Agreement
(including to an SBC Entity) necessary to comply with, and to the
extent required by, Section 2.4(b) hereof.
11.3 Hiring of Employees. Except as otherwise expressly provided herein,
each Contracting Party agrees that, during the term of the EPI
Agreement to which it is a party and for two (2) years thereafter,
neither it nor any of its Affiliates may, except with the prior
written consent of the other, offer employment to or employ any person
employed then or within the preceding twelve (12) months by the other
or any Affiliate of the other.
11.4 Notices. Whenever under this Agreement one party is required or
permitted to give notice to the other, such notice will be deemed
given when delivered by hand or when mailed by overnight mail, or
registered or certified mail, return receipt requested, postage
prepaid, and addressed as follows: In the case of PSC:
Perot Systems Corporation
Robert Fulton Drive, Suite 200
Reston, Virginia 22091
Attention: Division President - Global Financial Services
Division
with a copy to:
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Perot Systems Corporation
Merit Drive, Suite 1100
Dallas, Texas 75251
Attention: General Counsel
In the case of SBC:
Swiss Bank Corporation
Swiss Bankcenter
Europastrasse
CH-8152 Opfikon
Attention: Managing Director - Corporate Information
Technology.
with a copy to:
Swiss Bank Corporation
Legal Services SBC Group
Malzgasse 30-32
CH-4002 Basel, Switzerland
Attention: General Counsel
Either party hereto 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.
11.5 Counterparts. This Agreement may be executed in several counterparts,
all of which taken together constitute one single agreement between
the Contracting Parties hereto and each EPI Agreement may be executed
in several counterparts, all of which taken together will constitute
one single agreement between the Contracting Parties thereto.
11.6 Headings. The article and section headings used herein and in each
EPI Agreement are for reference and convenience only and will not
enter into the interpretation hereof and thereof.
11.7 Relationship of Parties. Each PSC Entity, in furnishing services to
each SBC Entity hereunder or under any EPI Agreement, is acting only
as an independent contractor. No PSC Entity undertakes by this
Agreement or any EPI Agreement or otherwise to perform any obligation
of any SBC Entity, whether regulatory or contractual (excluding the
Third Party Service Contracts), or to assume any responsibility for
any SBC Entity's business or operations. Each PSC Entity has the sole
right and obligation to supervise, manage, contract, direct, procure,
perform or cause to be performed, all work to be performed by that PSC
Entity under the applicable EPI Agreement, unless otherwise provided
therein.
11.8 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action by any Contracting Party to this Agreement
or any EPI Agreement is required by any provision of this Agreement or
that EPI Agreement (except with respect to the Security
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Procedures), such action will not be unreasonably delayed or withheld.
Each member of the PSC Group will be relieved of its obligation to
perform any Service or meet any Service Level to the extent that the
ability of such member of the PSC Group to perform those obligations
under this Agreement or any EPI Agreement is adversely affected by any
member of the SBC Group unreasonably withholding or delaying any
agreement, approval, consent or similar action on account of or with
respect to the Security Procedures, and each member of the SBC Group
hereby waives any right to terminate, or claim a breach of or default
under, this Agreement or any EPI Agreement on account of or with
respect to any failure by the applicable member of the PSC Group to so
perform.
11.9 Media Releases. All media releases, public announcements and public
disclosures by any member of the SBC Group or any member of the PSC
Group relating to this Agreement or the transactions contemplated
hereby, including, without limitation, promotional or marketing
material (but not including any announcement intended solely for
internal distribution within the SBC Group or the PSC Group, as the
case may be, or any disclosure required by legal, accounting or
regulatory requirements beyond the reasonable control of any member of
the SBC Group or the PSC Group, as the case may be, to the extent the
timing of any such disclosure reasonably prevents any coordination
with the other party) will be coordinated with and approved by the
other prior to the release thereof.
11.10 Force Majeure. Each Contracting Party will be excused from
performance hereunder and under any EPI Agreement for any period and
to the extent that it is prevented from performing, in whole or in
part, under this Agreement and under any EPI Agreement as a result of
delays caused by the other party or an act of God, war, civil
disturbance, court order, governmental actions, adverse weather
condition, labor dispute, third party nonperformance, or other cause
beyond its reasonable control, including failures or fluctuations in
electrical power, heat, light, or air conditioning, and such
nonperformance will not be a default hereunder or under any EPI
Agreement or grounds for termination hereof or thereof. If a PSC
Entity suspends performance of the Services under any EPI Agreement
pursuant to this Section 11.10 for a period of time greater than two
(2) consecutive days or four (4) days within any thirty (30) day
period for any reason, (a) the applicable SBC Entity's payment
obligations with respect to that portion of the Services that the
applicable PSC Entity has suspended performance of pursuant to this
Section 11.10 will also be suspended for an identical period of time,
(b) the applicable PSC Entity, or if that PSC Entity is unwilling or
unable, the applicable SBC Entity, may contract with a third party to
provide services in substitution of the suspended Services for the
period of the suspension, it being agreed that the applicable SBC
Entity will not be obligated to compensate that PSC Entity for
services that have been provided by a member of the SBC Group or such
third party during that period of suspension, except as otherwise
specifically provided in the EPI Agreement, and (c) the applicable
Contracting Parties agree to use commercially reasonable efforts and
to cooperate in good faith to resolve any issue that arises in
connection with a suspension of the provision of Services by the
applicable PSC Entity in accordance with this Section 11.10.
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11.11 Severability. If any provision of this Agreement or any EPI Agreement
is declared or found to be illegal, unenforceable or void, then the
applicable Contracting Parties will 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 parties that this Agreement and any applicable EPI
Agreement will be deemed amended by modifying such provision to the
extent necessary to make it legal and enforceable while preserving the
economic benefits of each party or, if that is not possible, by
substituting therefor another provision that is legal and enforceable
and achieves the same objective. If the remainder of this Agreement
and any applicable EPI Agreement will not be affected by such
declaration or finding and is capable of substantial performance in a
manner that would preserve each party's economic benefit, then each
provision not so affected will be enforced to the extent permitted by
law.
11.12 Waiver. No delay or omission by any Contracting Party hereto or to
any EPI Agreement to exercise any right or power hereunder or
thereunder will impair such right or power or be construed to be a
waiver thereof. A waiver by any Contracting Party hereto or to any
EPI Agreement of any of the covenants to be performed by the other or
any breach thereof will not be construed to be a waiver of any
succeeding breach thereof or of any other covenant herein or therein
contained. Except as otherwise provided in this Agreement or any EPI
Agreement, all remedies provided for in this Agreement and any EPI
Agreement will be cumulative (with respect to either this Agreement or
that EPI Agreement) and in addition to and not in lieu of any other
remedies available to either party at law, in equity or otherwise.
11.13 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement of this Agreement or any EPI Agreement, or because
of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement or any EPI
Agreement, the prevailing party will be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding,
in addition to any other relief to which it may be entitled.
11.14 Entire Agreement. Except as set forth in the Principal Agreements,
(as defined in the Master Agreement) this Agreement, including any
Schedules and agreements referred to herein and attached hereto, each
of which is incorporated herein for all purposes, constitutes,
together with any other written agreement or letter between SBC and
PSC dated the Adjustment Date or as of the Adjustment Date, or the
Original Agreement Date or as of the Original Agreement Date (not
including agreements or letters amended, restated or superseded as of
the Adjustment Date), that relates to this Agreement, the entire
agreement between the parties hereto with respect to the subject
matter hereof and there are no representations, understandings or
agreements, written or oral, relative hereto which are not fully
expressed herein. No change, waiver or discharge hereof will be valid
unless in writing and signed by an authorized representative of the
party against which such change, waiver, or discharge is sought to be
enforced.
11.15 Governing Law. This Agreement and each EPI Agreement will be governed
by and construed in accordance with the laws, other than choice of law
rules, of the State of New
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York; provided, however, that to the extent any claim or cause of
action is based upon a violation of the Security Procedures, such
claim or cause of action will be governed by the laws of the
jurisdiction whose bank secrecy laws are alleged to have been
violated.
11.16 Venue. Any arbitration proceeding regarding any dispute arising under
or related to this Agreement will take place in New York as described
in Section 7.4 hereof. Any judicial proceeding, referenced in Section
7.5 hereof, regarding any dispute arising under or related to this
Agreement or any EPI Agreement will be brought exclusively in the
courts of the State of New York, or in the United States District
Court for the Southern District of New York, and each party hereto
submits to the personal jurisdiction of such courts and hereby
irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement or any EPI Agreement and waives any
claim or defense that party may have based on a lack of personal
jurisdiction or the doctrine of forum non conveniens. Notwithstanding
the foregoing, if any claim or cause of action seeking non-monetary
injunctive relief (and excluding damages) is brought regarding the
violation of the Security Procedures, such claim or cause of action
will be brought exclusively in the courts of Switzerland, and each
party hereto submits to the personal jurisdiction of such courts and
hereby irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement or any EPI Agreement and waives any
claim or defense that party may have based on a lack of personal
jurisdiction or the doctrine of forum non conveniens.
11.17 Survival. The provisions of Sections 4.1, 4.2, 4.3, 8.10 and 11.3,
and Articles IX and X shall survive any termination of this Agreement
or any EPI Agreement and the consummation of the transactions
contemplated hereby or thereby.
11.18 Expenses. Except as otherwise provided in this Agreement, each of SBC
and PSC will pay all of its own expenses relating to the negotiation,
execution and delivery of this Agreement (excluding any amendments,
modifications or supplements hereto), including without limitation,
the fees and expenses of its counsel, financial advisors and
accountants.
IN WITNESS WHEREOF, PSC Parent and SBC Parent have each caused this Agreement
to be signed and delivered by its duly authorized officer(s), all as of the
Adjustment Date.
PEROT SYSTEMS CORPORATION SWISS BANK CORPORATION
By: By:
--------------------------------- --------------------------------
Title: Title:
------------------------------ --------------------------------
By:
--------------------------------
Title:
--------------------------------
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SCHEDULE A
ESCROW OF SHARES
If any EPI Agreement (the "Terminated EPI Agreement") is terminated by an SBC
Contracting Party pursuant to Sections 8.1, 8.4, 8.5, 8.6 or 8.9 of this
Agreement, then in order to secure the payment to any member of the SBC Group
by any member of the PSC Group of any damages for which that member of the PSC
Group is liable hereunder as a result of the failure by that member of the PSC
Group to perform its termination assistance obligations pursuant to this
Agreement or the applicable EPI Agreement:
1. PSC Parent will deposit into escrow a number of shares of Class A
Stock (the "Escrow Shares") equal to 90% (or, if the Terminated EPI
Agreement is the SBC Warburg EPI Agreement, 95%) of the number of
additional shares of Class B common stock, par value $.01 per share of
PSC (the "Class B Stock"), for which the options warrants or similar
rights (if any) would have become or remained exercisable under the
Terminated EPI Agreement had the Terminated EPI Agreement not been
terminated and instead remained in effect for its full stated term
plus the number of shares of Class B Stock that would have become
vested (if any) under the Terminated EPI Agreement had the Terminated
EPI Agreement not been terminated and instead remained in effect for
its full stated term.
2. If the Fair Market Value (as defined in paragraph 5 below) of the
Escrow Shares does not equal or exceed $50,000,000 and, prior to the
termination date of the Terminated EPI Agreement, Class A Shares have
been Publicly Traded, then PSC Parent will:
(a) Deposit into the escrow an amount either by deposit of cash,
additional Class A Shares or other valuables, with a value
(which, in the case of any such Class A Shares, will equal
Fair Market Value) up to the difference between the Fair
Market Value of the Escrow Shares and $50,000,000; and
(b) Provide other security in the form of a bond, guaranty or
other form of assurance reasonably acceptable to SBC Parent in
an amount equal to the difference between the Fair Market
Value of the Escrow Shares and $50,000,000 (less the value of
the property placed in escrow under paragraph (2)(a) above).
3. Notwithstanding anything to the contrary above, the Fair Market Value
of all the Escrow Shares, plus the value of the cash and other assets
placed in escrow by PSC Parent pursuant to Section 2(a) above and the
amount of other security and assurances provided by PSC Parent
pursuant to Section 2(b) above, with respect to all EPI Agreements,
may never exceed, in the aggregate, $50,000,000 (valued on the date of
deposit into escrow).
4. The Escrow Shares and other amounts held in escrow and any other
security and assurances provided by PSC Parent (collectively, the
"Security") will be released in accordance with the following:
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(a) The applicable PSC Contracting Party will notify the
applicable SBC Contracting Party when that PSC Contracting
Party believes it has performed the termination assistance
services that it was obligated to perform within the first 18
months after termination of the Terminated EPI Agreement (the
"Required Termination Assistance").
(b) If that SBC Contracting Party agrees that the applicable PSC
Contracting Party did so perform the Required Termination
Assistance, or if that SBC Contracting Party fails to notify
the applicable PSC Contracting Party of any deficiency in its
performance of the Required Termination Assistance within ten
days after receiving notification from that PSC Contracting
Party pursuant to Section 4(a) above, the Security, including
any interest thereon, will be released to PSC Parent.
(c) If that SBC Contracting Party does not agree that the
applicable PSC Contracting Party has performed the Required
Termination Assistance, that SBC Contracting Party will
provide the PSC Contracting Party with written notice
specifying the services that the SBC Contracting Party
believes the applicable PSC Contracting Party was obligated
to, and did not, perform, and provide that PSC Contracting
Party with ten working days to cure the failure to perform. If
that PSC Contracting Party has not cured the default within
the ten working day cure period, then the parties will submit
the dispute to arbitration in accordance with Section 7.4 of
this Agreement.
(d) The arbitration panel will be directed by each party to first
determine the maximum amount of damages that the PSC
Contracting Party can reasonably expect to be liable for as a
result of those services that the applicable SBC Contracting
Party reasonably claims the PSC Contracting Party has failed
to perform. The difference, if any, between that amount and
the total value of the Security, including any interest
thereon, will be released to PSC Parent. The remainder of the
Security will be retained in the escrow until such time as the
arbitration panel reaches a resolution, at which point the
remainder of the Security, including any interest thereon,
will be allocated between the PSC Group and the SBC Group as
the arbitration panel determines; provided that the Class A
Shares may only be released from escrow for sale by SBC to the
extent such release and sale are permissible under the Bank
Holding Company Act of 1956, as amended.
5. For purposes of this Schedule A:
(a) "Average Market Value" means the average of the Closing Price
for the security in question for the thirty (30) Trading Days
immediately preceding the date of termination of the
Terminated EPI Agreement.
(b) "Closing Price" means, as to any security:
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(1) If the primary market for the security in question is
a national securities exchange registered under the
Securities Exchange Act of 1934, as amended, the
Nasdaq National Market or another market or quotation
system in which last sale transactions are reported
on a contemporaneous basis, the last reported sales
price, regular way, of such security for such day,
or, if there has not been a sale on such Trading Day,
the highest closing or last bid quotation therefor on
such Trading Day (excluding, in any case, any price
that is not the result of bona fide arm's length
trading); or
(2) If the primary market for such security is not an
exchange or quotation system in which last sale
transactions are contemporaneously reported, the
highest closing or last bona fide bid or asked
quotation by disinterested Persons in the
over-the-counter market on such Trading Day as
reported by the National Association of Securities
Dealers through its Automated Quotation System or its
successor or such other generally accepted source of
publicly reported bid quotations as SBC and PSC
designate.
(c) "Fair Market Value" means:
(1) As to securities regularly traded in the organized
securities markets, the Average Market Value; and
(2) As to all securities not regularly traded in the
securities markets, the fair market value of such
securities as determined as set forth below. For a
period of thirty (30) days after the termination date
of the Terminated EPI Agreement (the "Negotiation
Period"), PSC and SBC each agrees to negotiate in
good faith to reach agreement upon the fair market
value of such securities, as of the termination date
of the Terminated EPI Agreement. In the event that
the parties are unable to agree upon the fair market
value of such securities by the end of the
Negotiation Period, then the fair market value of
such securities will be determined for purposes of
this Schedule A by an independent appraiser mutually
acceptable to SBC and PSC (the "Appraiser") whose
appraisal will be conclusive and binding on the
parties. For such purposes, fair market value will
be calculated without premium for control or discount
for minority interests, illiquidity, or restrictions
on transfer. The costs of the Appraiser will be
borne by SBC and PSC equally.
(d) "Trading Day" means any business day in which the securities
in question are tradeable on stock exchanges, in the
over-the-counter markets or otherwise.
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EXHIBIT 10.32
AMENDED AND RESTATED
AGREEMENT FOR
EPI OPERATIONAL MANAGEMENT SERVICES
THIS AMENDED AND RESTATED AGREEMENT FOR EPI OPERATIONAL MANAGEMENT SERVICES (as
amended, modified and supplemented from time to time, this "EPI Agreement"),
dated as of January 1, 1997 (the "Adjustment Date"), is between Swiss Bank
Corporation, a corporation organized under the laws of Switzerland ("SBC"), and
Perot Systems Corporation, a Delaware corporation ("PSC").
WITNESSETH
WHEREAS, SBC and PSC entered into the Agreement for Operational Management
Services (the "Original EPI Agreement") dated as of January 1, 1996 (the
"Original Agreement Date");
WHEREAS, SBC and PSC now desire to amend and restate the Original Agreement to
read in its entirety as set forth herein;
WHEREAS, contemporaneously with the execution of this EPI Agreement, PSC and
SBC are entering into the Amended and Restated Master Operating Agreement,
dated as of the date hereof (the "Master Operating Agreement"), which
establishes general terms and conditions upon which PSC or certain Affiliates
of PSC may provide Information Technology and Operational Management services
to SBC or certain Affiliates of SBC; and
WHEREAS, SBC, on behalf of the SBC Warburg Division, desires to obtain from
PSC, and PSC is willing to provide to SBC, the SBC Warburg Division's
requirements for the services described in this EPI Agreement, on the terms and
conditions set forth in the Master Operating Agreement and this EPI Agreement;
NOW, THEREFORE, SBC and PSC hereby agree as follows:
1. Master Operating Agreement. Other than Sections 2.1, 3.1, 3.2, 3.3
and 11.4 of the Master Operating Agreement and except as otherwise
expressly set forth in this EPI Agreement, all the terms and
conditions of the Master Operating Agreement will apply to this EPI
Agreement as if fully set forth herein. In the event of any conflict
or inconsistency between the terms and conditions of this EPI
Agreement and the terms and conditions of the Master Operating
Agreement, the terms and conditions of this EPI Agreement will apply.
2. EPI Agreement. During the term of this EPI Agreement and except as
otherwise provided in Schedule F hereto, PSC will provide to the SBC
Warburg Division, and SBC will obtain from PSC, the SBC Warburg
Division's requirements for the Services, all upon and subject to the
terms and conditions specified in this EPI Agreement. SBC may provide
the Services itself (but may not obtain from any third party the
Services) in those geographic areas where, and for so long as,
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no more than two (2) full-time equivalent personnel of SBC (or
temporary personnel of SBC) are performing the Services.
3. Definitions. As used in this EPI Agreement:
(a) "Moves and Restacks" means the process of relocating the staff
of the SBC Warburg Division and its contractors within and
among the offices of the SBC Warburg Division, including
without limitation moving network voice connections and
Equipment.
(b) "Budget Period" means (i) the period commencing on the
Adjustment Date and ending on December 31, 1997, and (ii) each
twelve (12) month period thereafter.
(c) "Performance Metric" means, with respect to each Budget
Period, each qualitative or quantitative standard of
performance applicable to the Services for that Budget Period
which the parties may mutually establish from time to time in
accordance with the terms of this EPI Agreement. The
Performance Metrics for the Budget Period commencing on the
Adjustment Date are as designated on Schedule G hereto.
(d) "SBC Warburg Infrastructure" means the Equipment, Licensed SBC
Systems, SBC Facilities and non- personnel services provided
pursuant to Third Party Service Contracts that SBC makes
available to PSC for PSC's use in connection with this EPI
Agreement.
(e) "SBC Warburg Division Member" means any entity included within
the SBC Warburg Division.
(f) "Scope of Services" means, collectively, the services PSC is
generally performing at the locations at which PSC is
performing services as of the Adjustment Date on behalf of the
SBC Warburg Division, except with respect to the SBC Private
Banking Division, in which case Scope of Services shall refer
only to locations outside of Switzerland at which PSC is
performing services as of the Adjustment Date and the SBC
Brinson Division, in which case Scope of Services shall refer
only to locations outside of Chicago, Illinois at which PSC is
performing services, as of the Adjustment Date. The Scope of
Services shall include those services required to support the
normal technological evolution of the SBC Warburg
Infrastructure and the ordinary growth of the business of the
SBC Warburg Division( at the locations at which PSC is
performing such services as of the Adjustment Date) being
supported by PSC as defined in Schedule A hereto. The Scope
of Services is more specifically defined to include and
exclude the services described on Schedule A hereto as being
either included or excluded.
(g) "Service Level" means each qualitative or quantitative
standard of performance applicable to the Services, which the
parties may mutually
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establish from time to time in connection with unit pricing in
accordance with the terms of this EPI Agreement and which are
called "Service Levels".
(h) "Services" mean, collectively, the services required for the
Operational Management of the EPI of each SBC Warburg Division
Member, including the services described in Schedule A hereto.
4. Term. The term of this EPI Agreement will commence on the Adjustment
Date and, unless earlier terminated in accordance with the terms of
the Master Operating Agreement, will continue until the tenth (10th)
anniversary of the Adjustment Date or such later date as the parties
may mutually agree.
5. PSC Obligations and Performance Metrics. During the term of this EPI
Agreement:
(a) PSC will make available to the SBC Warburg Division, for the
SBC Warburg Division's use in accordance with Article IV of
the Master Operating Agreement, any PSC Systems used by PSC in
the Operational Management of the EPI of the SBC Warburg
Division.
(b) PSC will provide the Services (including making available in a
timely fashion qualified people to perform, and to respond to
SBC's reasonable requests for, Services) (i) contemplated by
the PSC Costs Budget or Equipment and Facilities Budget (as
each such term is defined in Schedule F hereto) and, where
applicable, will use reasonable efforts to meet any Service
Levels mutually established for those Services or (ii) for
which SBC agrees to otherwise pay PSC in accordance with
Schedule F hereto. Additionally, and notwithstanding anything
else in this EPI Agreement to the contrary, SBC will pay PSC
in accordance with Schedule F, including the quarterly
adjustment provisions thereof, for any Services required to be
provided and which are provided by PSC to the SBC Warburg
Division whether the amounts for those Services are or are not
included in a PSC Costs Budget. Subject to the foregoing, PSC
agrees that it will abide by any cost approval processes of
which PSC may receive notice from SBC from time to time,
including the SBC Warburg Central Approval and Order Process,
within a reasonable period of time after receipt thereof.
(c) The Performance Metrics will be established as follows:
(1) During a period of at least thirty (30) days prior to
the end of each Budget Period, PSC and SBC will work
together in good faith to establish the Performance
Metrics that will apply to the following Budget
Period.
(2) In connection with the establishment of the
Performance Metrics, a weighted percentage will be
assigned to each Performance Metric in order to
calculate any "penalties" or "rewards" as described
in Schedule G hereto.
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(3) The Performance Metrics and weighted percentages will
all be established and adjusted from time to time
such that, after taking into account all "penalties"
and "rewards", if PSC's actual level of performance
meets the anticipated typical or median (neither
superior nor inferior) performance expected by the
parties, it is expected that PSC will be paid an
amount equal to the Annual Profit Amount (as defined
in Schedule F hereto).
(4) If SBC and PSC are unable to agree on the Performance
Metrics at least thirty (30) days prior to the
beginning of any particular Budget Period, (i) the
Performance Metrics that PSC and SBC have agreed will
apply for the prior Budget Period will remain in
effect until replaced by any new mutually agreed upon
Performance Metrics, and (ii) the determination of
the appropriate "rewards" and "penalties" will be
made, and payments made or credits applied on a
quarterly, rather than annual, basis within twenty
one (21) days after the end of each quarter of the
Budget Period until such time as such Performance
Metrics are replaced with new mutually agreed upon
Performance Metrics.
(5) On or before December 15 of each Budget Period, PSC
will deliver to the SBC Operational Manager in
writing its estimate of the total PSC Costs for the
current Budget Period. Within seven (7) days
thereafter, the SBC Operational Manager and the PSC
Relationship Manager will meet at a mutually agreed
time to discuss SBC's good faith estimate of the
Annual Profit Amount, as adjusted by the aggregate
Penalty Percentages or Reward Percentages, as
applicable, for such Budget Period. Thereafter, PSC
will deliver to SBC its final invoice for the Budget
Period and within seven (7) days of receipt thereof
SBC will deliver its final determination of the
Annual Profit Amount, as adjusted in accordance with
Schedule G. If PSC's estimate of the total PSC Costs
for the Budget Period is in excess by less than Five
Million Dollars ($5,000,000) of the actual total PSC
Costs for the Budget Period invoiced, then SBC's good
faith estimate of the Annual Profit Amount, as
adjusted, may only be adjusted down by a Penalty
Percentage of a maximum of five and one-half percent
(5.5%) of the Annual Profit Amount. If, however,
PSC's good faith estimate of the total PSC Costs for
the Budget Period is in excess of Five Million
Dollars ($5,000,000) over the actual total PSC Costs
for the Budget Period, then SBC may adjust the Annual
Profit Amount otherwise in accordance with Schedule G
without restriction as imposed by this Section
5(c)(5).
(6) If there is any dispute over the establishment of the
Performance Metrics or related rewards and penalties
and the dispute falls within the procedures described
in Section 7.3 of
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the Master Operating Agreement, the dispute will be
escalated to the Chairman of PSC and the CEO of SBC.
(7) Upon the request of the PSC CEO no more frequently
than once per calendar quarter, the SBC Operational
Manager will provide the PSC CEO with a good faith
outlook with respect to PSC performance on the
Performance Metrics for the remainder of the
then-current Budget Period.
(d) As PSC and SBC establish unit prices for each mutually
identified measurable unit of the Services, PSC and SBC will
also establish appropriate performance metrics with related
bonuses and credits and will adjust the Annual Profit Amount
(as defined in Schedule F hereto) and the Performance Metrics
and related bonuses and credits, all to reflect the conversion
of certain of the Services from a cost- reimbursement basis to
a fixed-unit price basis.
(e) Subject to the terms and conditions of this EPI Agreement,
including without limitation Section 8 hereof, if PSC does not
meet any Performance Metric applicable to the Services, then
as PSC's sole obligation and SBC's sole remedy, PSC's charges
to SBC will be adjusted in accordance with Schedule G hereto.
In no event will PSC be liable for failing to meet Performance
Metrics during any year of the term of this EPI Agreement if
and to the extent that any such failure arose as a result of
(i) any request by an SBC Warburg Division Member for PSC to
reduce the resources or Services that PSC is then providing
hereunder, (ii) any action taken by SBC in contravention of
the terms of this EPI Agreement or (iii) any reduction by SBC
of the PSC Costs Budget or the Equipment and Facilities Budget
(as each term is defined in Schedule F hereto). In the event
of (i), (ii), or (iii) above, PSC and SBC will work together
in good faith to renegotiate the affected Performance Metrics.
(f) PSC will timely provide SBC with a quarterly performance
report, in a form and with content mutually established by the
parties, documenting PSC's performance with respect to the
Performance Metrics.
(g) It is PSC's intention to use the SBC Warburg Infrastructure
and the Transitioned Employees in order to provide services to
other PSC customers, subject to the security and
confidentiality provisions of the Master Operating Agreement
and this EPI Agreement. Prior to any use of the SBC Warburg
Infrastructure in connection with the provision of services to
a third party by PSC, PSC must comply with the provisions of
Section 6 of Appendix 1 to Schedule F hereto. Nothing in this
EPI Agreement will limit PSC's rights to use the Licensed SBC
Systems in accordance with the Master Operating Agreement.
(h) With respect to those PSC employees that have a significant,
direct working relationship with the SBC Warburg Division
business units, SBC will provide to PSC specific criteria for
the comprehensive incentive based compensation program
established for those PSC
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employees that will be designed to reward those employees for
performance that, while not disadvantaging PSC, directly
benefits those areas of SBC's business deemed important to
SBC. During PSC's annual review of those PSC employees, SBC
will provide PSC with SBC's assessment of those PSC employees
based upon the specific criteria provided by SBC.
Notwithstanding the foregoing, PSC retains ultimate control
over the compensation of its employees.
(i) PSC will also have responsibility for the functions and
obligations set forth on Schedule D hereto.
(j) PSC will use all reasonable efforts to maintain an errors and
omissions insurance policy with one hundred million dollars
($100,000,000) of coverage and the cost of the policy will be
a direct PSC Cost. Other policies of insurance maintained by
PSC with coverage above the coverage maintained by PSC prior
to the Original Agreement Date, up to an aggregate of
seventy-five million dollars ($75,000,000) in coverage, will
be a direct PSC Cost until the time that those other policies
of insurance can be used by PSC to insure against risks
incurred by PSC as a result of its relationships with other
customers of PSC, at which time the costs of that insurance
will be allocated among all PSC accounts for which such
insurance can be used in accordance with the amount of
insurance coverage that can be used with respect to such
customer. SBC and PSC will periodically determine whether
these limits should be adjusted to take into account the
effects of inflation.
6. SBC Obligations. Commencing on the Original Agreement Date:
(a) SBC has and will continue to make available to PSC, for PSC's
use in accordance with Article IV of the Master Operating
Agreement, the SBC Warburg Infrastructure. Other than as sold
or terminated in the ordinary course of business with the
consent of both parties prior to the date of delivery of this
Agreement, SBC represents to PSC that the SBC Warburg
Infrastructure made available to PSC hereunder includes all of
the Equipment, SBC Systems, SBC Facilities and services from
Third Party Service Contracts used by or on behalf of the SBC
Warburg Division as of the Original Agreement Date to provide
the Services to the SBC Warburg Division that PSC is obligated
to provide under this EPI Agreement.
(b) Except as expressly permitted by this EPI Agreement, the
Master Agreement (herein so called), executed by SBC and PSC
as of the Adjustment Date, or the Master Operating Agreement,
neither SBC nor the SBC Warburg Division Members will enter
into any agreements with third parties relating to any
products or services for which PSC has responsibility
hereunder. SBC agrees that it will not enter into any Third
Party Service Contracts for services relating to the
Operational Management of the EPI of the SBC Warburg Division
during the term of this EPI Agreement, except as otherwise
approved by PSC or authorized by the terms of this EPI
Agreement.
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(c) SBC will retain responsibility for the functions and
obligations set forth on Schedule C hereto.
(d) SBC will use all commercially reasonable efforts to cause the
SBC Warburg Division to standardize the products and services
for which PSC has responsibility hereunder within the SBC
Warburg Division as soon as reasonably practicable.
7. PSC's Charges. SBC will pay PSC for the Services in accordance with
Schedule F hereto.
8. Operational Manager of SBC. SBC agrees that the Operational Manager
of SBC (as defined in the Master Operating Agreement) for SBC will be
David Solo, Peter Wuffli, or another individual satisfactory to the
Operational Manager of PSC; provided that should PSC not consent to
the designation of any Operational Manager designated pursuant to the
Master Operating Agreement other than David Solo or Peter Wuffli, then
the following shall apply: The matter of who shall serve as the
Operational Manager for SBC under this EPI Agreement will be referred
to the CEO's of PSC and SBC who will discuss the issue and negotiate
in good faith to resolve the dispute or controversy. The specific
format for such discussions and negotiations will be left to the
CEO's. In the event that the CEO's do not agree on the individual who
shall serve as the Operational Manager for SBC, then for the first
twelve (12) months during which such disagreement as to the
Operational Manager for SBC continues, PSC shall be deemed to have
performed under the terms of this EPI Agreement each of the
Performance Metrics to the extent necessary so that there is no Reward
Percentage or Penalty Percentage applied under Schedule G of this EPI
Agreement, and PSC will be entitled to receive the Annual Profit
Amount on a pro rata basis for each of such twelve (12) months without
adjustment pursuant to Schedule G of this EPI Agreement. Thereafter,
so long as such disagreement continues, and notwithstanding Schedule G
hereto, the Reward Pool will be an amount equal to seven and one half
percent (7.5%) of the Annual Profit Amount and the Penalty Pool will
be an amount equal to fifteen percent (15%) of the Annual Profit
Amount.
9. Notices. Wherever under this EPI Agreement one party is required or
permitted to give notice to the other, such notice shall be deemed
given when delivered by hand or when mailed by registered or certified
mail, return receipt requested, postage prepaid, and addressed as
follows:
In the case of PSC:
Perot Systems Corporation
1801 Robert Fulton Drive, Suite 200
Reston, Virginia 22091
Attention: Division President -
Global Financial Services Division
with a copy to:
Perot Systems Corporation
12377 Merit Drive, Suite 1100
Dallas, Texas 75251
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Attention: General Counsel
In the case of SBC:
Swiss Bank Corporation
1 Finsbury Avenue
London, EC2M 2P
Attention: Operational Manager - SBC Warburg
with a copy to:
Swiss Bank Corporation
Legal Services SBC Group
Malzgasse 30-32
CH-4002 Basel, Switzerland
Attention: General Counsel
Either party hereto 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.
10. Entire Agreement. Except as set forth in the Principal Agreements (as
defined in the Master Agreement), this EPI Agreement, including any
Schedules referred to herein and attached hereto, and the terms and
conditions of the Master Operating Agreement, each of which is
incorporated herein for all purposes, constitutes, together with any
other written agreement or letter between SBC and PSC dated the
Adjustment Date or as of the Adjustment Date, or the Original
Agreement Date or as of the Original Agreement Date (not including
agreements or letters amended, or restated or superseded as of the
Adjustment Date) that relates to this EPI Agreement, the entire
agreement between the parties hereto with respect to the subject
matter hereof and thereof and there are no representations,
understandings or agreements relative hereto and thereto, written or
oral, which are not fully expressed herein or therein. No change,
waiver, or discharge hereof shall be valid unless in writing and
signed by an authorized representative of the party against which such
change, waiver, or discharge is sought to be enforced.
IN WITNESS WHEREOF, PSC and SBC have each caused this EPI Agreement to be
signed and delivered by its duly authorized officer(s), all as of the
Adjustment Date.
PEROT SYSTEMS CORPORATION SWISS BANK CORPORATION
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
By:
----------------------------------
Title:
-------------------------------
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SCHEDULE A
PSC SERVICES
The Services included within the Scope of Services collectively make up data
processing services and specifically center on the support of: the entire wide
and local area communication network software and hardware; all data centers
and network, file and data servers; all desktop computer support, office
automation tools (specifically global email design, operation and support), the
work to ensure global connectivity and relatively free-seating capability;
customer help desk for non application specific problems; design, staging,
installation and restacking of an appropriate range of workstation offerings
(fixed and portable); design and support expertise for the inevitably evolving
standards of institutional process automation infrastructure (such as Internet
standards and Web technology).
The Scope of Services does not include services required for the design or
implementation of software packages ("Excluded Software Packages") for
transaction processing, custody, settlement/payments services, pricing tools,
risk control, customer MIS, financial reporting, general ledgers, payment
systems or other applications or business systems. However, the Scope of
Services does include the Services necessary for operating the systems that run
the Excluded Software Packages, to include appropriate monitoring of task
completion, etc. PSC will, within the Scope of Services, facilitate the normal
restack and periodic site relocation (to include the Stamford and Stardust work
contemplated as of the Adjustment Date), though a major relocation project
(excluding the currently configured Stamford and Stardust moves) or the support
of a new geographic officewould be outside the Scope of Services and require
additional compensation as described in Schedule F to this EPI Agreement.
Likewise, if there is a substantial increase in the services necessary to
support the SBC Warburg Division, other than the SBC Private Banking Division
outside of Switzerland and the SBC Brinson Division outside of Chicago, as
requested by SBC (for example, such as an increase of more than 7% during any
Budget Period or 35% in the aggregate in the number of workstations (not
bandwidth) currently supported by PSC), or (ii) if the services are required to
support the SBC Private Banking Division in Switzerland or the SBC Brinson
Division in Chicago then these additional services would be outside the Scope
of Services and require additional compensation as described in Schedule F to
this EPI Agreement.
A-1
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SCHEDULE B
EXCLUSIONS TO REQUIREMENTS
[Intentionally omitted]
B-1
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SCHEDULE C
SBC RESPONSIBILITIES
1. Establish appropriate requirements and priorities for the SBC Warburg
Division's requirements for the Services, including business
projections relating to such requirements, and communicate the same to
PSC.
2. Subject to the terms and conditions of this EPI Agreement and the
Master Operating Agreement, make available to PSC, as reasonably
requested by PSC, management decisions, personnel, information,
approvals, acceptances, and access to the SBC Facilities in order that
the Services may be properly performed.
3. Cooperate with PSC in establishing mutually acceptable procedures and
timing for the processing of non-scheduled, special request, or other
user-initiated services and change control activities, and modifying
those procedures as reasonably requested from time to time.
4. Supply to PSC for processing required data with applicable control
totals as such data is currently used by the SBC Warburg Division and
as may be required by PSC to provide the Services.
5. Identify a mutually acceptable number of delivery points for report
distribution within each location at which PSC is required to deliver
reports and timely notify PSC of any report distribution schedule
changes or problems which may arise from time to time.
6. Inspect and review all reports prepared by PSC as soon as reasonably
practicable after receipt and promptly notify PSC as to any required
corrections.
7. Periodically provide to PSC an updated list of SBC personnel
authorized to access data and system functions designated as
restricted by SBC.
8. Provide access control and physical security at locations provided or
controlled by the SBC Warburg Division, including such security as may
be required in connection with the installation, operation,
maintenance and removal of communication and computer equipment to, at
or from any such location.
9. Cooperate and assist PSC in instructing SBC personnel to adhere to
applicable PSC security policies and standards as necessary to protect
the information and assets of PSC and its customers.
10. Provide to PSC and the end-users the consumables, such as toner and
paper, required for all desk-top devices maintained by PSC in
connection with the Services provided hereunder.
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SCHEDULE D
ADDITIONAL PSC RESPONSIBILITIES
1. Use its commercially reasonable efforts to meet or exceed each of the
applicable Service Levels, subject to the terms and conditions of this
EPI Agreement.
2. Cooperate and consult with and assist SBC in establishing the PSC
Costs Budget and the Equipment and Facilities Budget as described in
Appendix 1 to Schedule F to this EPI Agreement.
3. Provide SBC or its representatives with reasonable access to PSC's
books and records as required for SBC to exercise its audit rights as
described in this EPI Agreement and the Master Operating Agreement.
4. Use reasonable efforts to meet or exceed applicable budget targets,
subject to the terms and conditions of this EPI Agreement.
D-1
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SCHEDULE E
LICENSED SBC SYSTEMS
[Intentionally omitted]
E-1
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SCHEDULE F
PSC CHARGES
1. Definitions. For purposes of this Schedule:
(a) "Annual Profit Amount" means, with respect to the first Budget
Period, an amount equal to Forty Million Five Hundred Thousand
Dollars ($40,500,000) and for each subsequent Budget Period,
an amount equal to Forty One Million Dollars ($41,000,000)
which will be adjusted in accordance with Appendix 2 to this
Schedule F.
(b) "Cost Plus Service" means all Services provided by PSC
pursuant to this EPI Agreement, excluding any Services for
which PSC is being paid by SBC on other than a cost
reimbursement basis as described in Section 4 of this Schedule
F.
(c) "Equipment and Facilities Budget" means, with respect to each
Budget Period, each budget relating to SBC Warburg Division
capital expenses developed for that Budget Period in the form
finally approved by SBC in accordance with Section 2 of
Appendix 1 to this Schedule F.
(d) "PSC Costs" mean all costs, excluding Corporate Overhead,
incurred by PSC in the performance and provision of the
Services pursuant to this EPI Agreement. To be chargeable to
SBC, costs shall, unless otherwise mutually agreed, be
accounted for using (i) generally accepted accounting
principles, and (ii) using reasonable cost accounting
practices. "Corporate Overhead" means the costs of the Office
of PSC Chairman, Office of the PSC CEO and President, Office
of the Global Financial Services Industry, and the corporate
(as contrasted with SBC Account) costs of the Marketing,
Finance, HR, Legal, Internal Audit, Travel, Sales Procurement,
Real Estate, Internal Systems and Recruiting Departments, all
to the extent such costs are for the general support of PSC on
a corporate-wide basis, and not for the direct support of
providing the Services pursuant to this EPI Agreement where
such direct support costs are allocated on a use, consumption
or incurrence of cost basis. SBC will notify PSC within nine
(9) months of receipt by SBC of any invoice containing a cost
item that SBC reasonably believes to be of a class or
character (but not an amount) that SBC or a third Person
similarly situated with PSC could not reasonably be expected
to incur in performing the Services. Such written notice will
set forth the basis for SBC's belief in reasonable detail.
SBC and PSC will discuss the issues raised in such notice for
a period of up to thirty (30) days following its delivery to
PSC, and if not resolved during the first twenty (20) days of
such period, there will be a meeting between the CEO of
Perot Systems
F-1
<PAGE> 15
and the Operational Manager of SBC prior to the end of such
thirty (30) day period. Any dispute between PSC and SBC with
respect to the foregoing that is not mutually resolved by PSC
and SBC within such thirty (30) day period will be resolved in
accordance with Section 7.4 of the Master Operating Agreement
with the "arbitration panel" referred to in that Section being
one of the six (6) largest internationally recognized firms of
public accountants.
PSC Costs will include:
(1) With respect to taxes, all Taxes attributable
to the Services and the resources utilized
therefor but only to the extent that those
Taxes, or the withholding or collection
thereof, are the legal obligation of PSC,
such as employee withholding taxes and sales
taxes for products or services purchased by
PSC on its own behalf to provide the
Services. All other Taxes will be paid or
reimbursed by SBC to PSC but will not be
included in PSC Costs.
(2) To the extent that PSC presents invoices for
Services in local currency, the costs of
hedging against and otherwise prudently
managing the risk of currency fluctuations,
but excluding currency profits and/or losses
from such hedging or other management
activities.
(3) To the extent that PSC presents invoices for
Services in U.S. Dollars, the costs of
hedging against and otherwise prudently
managing the risk of currency fluctuations
and any profits and/or losses from such
hedging or other management activities and
profits and/or losses from currency
fluctuations measured against the U.S.
Dollar.
(e) "PSC Costs Budget" means, with respect to each Budget Period,
each budget developed for that Budget Period in the form
finally approved by SBC in accordance with Section 1 of
Appendix 1 to this Schedule F.
(f) "PSC Interest Payment" means, with respect to any amount owed
by SBC to PSC under this EPI Agreement and for which this EPI
Agreement expressly provides for an interest payment equal to
the PSC Interest Payment:
(1) An amount equal to the fees and expenses incurred by
PSC in connection with PSC's financing of the amount
owed by SBC; or
(2) If PSC does not finance the amount owed by SBC, an
amount equal to the PSC Interest Rate on the amount
owed by SBC calculated from the date the amount owed
by SBC was due and payable until the date it is paid
to PSC.
F-2
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(g) "PSC Interest Rate" means the London Interbank Offered Rate as
published in the Wall Street Journal (national edition) for
three (3) month U.S. Dollar deposits, plus two percent (2%),
or if no such rate is quoted, the rate for certificates of
deposit of major New York banks as quoted in the Wall Street
Journal (national edition) for three (3) month certificates of
deposit plus two percent (2%). PSC and SBC will adjust the
PSC Interest Rate for each Budget Period as necessary to
reflect changed circumstances.
(h) "SBC Interest Payment" means, with respect to any amount
overpaid by SBC and reimbursable by PSC to SBC under this EPI
Agreement and for which this EPI Agreement expressly provides
for an interest payment equal to the SBC Interest Payment, an
amount equal to the SBC Interest Rate on the amount
reimbursable by PSC calculated from the date the amount
reimbursable by PSC was overpaid by SBC until the date it is
reimbursed to SBC.
(i) "SBC Interest Rate" means the London Interbank Offered Rate as
published in the Wall Street Journal (national edition) for
three (3) month U.S. Dollar deposits, plus two percent (2%) or
if no such rate is quoted, the rate for certificates of
deposit of major New York banks as quoted in the Wall Street
Journal (national edition) for three (3) month certificates of
deposit plus two percent (2%). PSC and SBC will adjust the
SBC Interest Rate for each Budget Period as necessary to
reflect changed circumstances.
(j) "Special Profit Fee" means a one time payment of Three Million
Dollars ($3,000,000) payable from SBC to PSC.
(k) "Taxes" means all foreign, federal, state, county, local and
other taxes of every kind and however measured, including,
without limitation, income, capital, gross receipts, excise,
stamp, franchise, business privilege, property, value added,
import duties, employment, withholding, payroll, sales, ad
valorem, use, leasing, profits, excess profits, occupational,
telephony, transfer, levies, imposts, duties, charges, fees,
assessments, or withholdings of any nature whatsoever, general
or special, ordinary or extraordinary, and any transaction
privilege or similar taxes together with any and all
penalties, fines, surcharges, additions to tax and interest
thereon; but excluding any taxes based on the net income (or
gross income, profits or franchise taxes in lieu of or in
conjunction with net income) of PSC imposed by any federal,
state, provincial, cantonal, local or any similar
jurisdiction, and any withholding tax associated with the
distribution of that net income (or gross income, profits or
franchise taxes in lieu of or in conjunction with net income).
2. Budget and Capacity Planning. The PSC Costs Budget and the Equipment
and Facilities Budget will be established in accordance with Appendix
1 to this Schedule F.
F-3
<PAGE> 17
3. Cost Plus Services. During each Budget Period:
(a) PSC's estimated and budgeted charges to SBC for the Cost Plus
Services will be an amount equal to (i) the PSC Costs
reflected in the PSC Costs Budget for that Budget Period that
it is estimated PSC will incur during that Budget Period
relating to the Cost Plus Services, plus (ii) the then current
Annual Profit Amount.
(b) Subject to receipt of an invoice pursuant to Section 6 hereof,
on the tenth day (or, if not a business day, the first
business day thereafter) of each month during that Budget
Period, SBC will pay to PSC, by wire transfer to a bank
account designated by PSC, an amount equal to the Monthly Run
Rate (as defined in Section 1(b)(3) of Appendix 1 to this
Schedule F) applicable to the Cost Plus Services for that
month.
(c) At the end of each calendar quarter during that Budget Period
(or, at the request of either party, more often than quarterly
to take into account significant differences between actual
PSC Costs and the Monthly Run Rate), PSC will determine the
actual PSC Costs and the pro rata portion of the Annual Profit
Amount relating to the Cost Plus Services for all prior
periods. To the extent the actual PSC Costs for the Cost Plus
Services for prior periods varied from the estimated amounts
paid under Section 3(b) with respect to those prior periods
and such variance has not been taken into account in
connection with prior adjustments under this Section 3(c), PSC
will either issue to SBC (i) an invoice for additional amounts
owed by SBC, plus the PSC Interest Payment, or (ii) a credit
against the next month's invoice for amounts overpaid by SBC
as a result of such variances, plus the SBC Interest Payment.
4. Services Not Within the Scope of Services. Upon the occurrence of
any event or events that would require PSC to provide services outside
the Scope of Services or development, maintenance or enhancement
services related to the Restricted Application Systems, SBC will pay
PSC for the resources required to provide those services as follows:
(a) If the required resources are resources for which PSC and SBC
have established unit prices as described in Section 5(d) of
the EPI Agreement, PSC will be paid pursuant to the
established unit prices.
(b) If unit prices have not been established for the required
resources, PSC will be paid an amount to be mutually agreed.
(c) If PSC and SBC are unable to agree on an amount to be paid for
the required resources, PSC will be relieved of any
responsibility for the services with respect to the required
resources, except as set forth below and SBC will have the
right to have another third party, or its own staff, provide
the services and the resources required by the services that
are not within the Scope of Services, subject to PSC's
F-4
<PAGE> 18
final right of refusal. In such a situation, PSC will have a
final right of refusal as follows:
(1) SBC will give PSC notice of the services and related
resources that it is proposing be provided by a third
party or its own staff. The notice will include the
amounts that the third party proposes to charge, or
the costs SBC estimates it will itself incur, for
those services and related resources.
(2) PSC will be given forty-five (45) days to respond to
the notice by notifying SBC whether it desires to
provide those services and related resources and the
price it offers to charge for those services.
(3) Within forty-five (45) days of receiving PSC's
response, SBC will grant PSC the right to provide
those services and related resources, unless either
the price for such services offered by PSC is
meaningfully worse or SBC in good faith believes that
PSC has not demonstrated proficiency in the area of
the applicable services.
(4) SBC may use a PSC Competitor to provide the
applicable services only if SBC and the PSC
Competitor act in good faith and not with the intent
to have the PSC Competitor "buy" the business and the
PSC Competitor charges SBC no less than its typical
retail rates for similar services.
5. [Intentionally omitted]
6. Invoices and Time of Payment. The amounts payable to PSC hereunder
will be invoiced and paid as follows:
(a) PSC will submit invoices to SBC for each month during the term
of this EPI Agreement. Invoices will be submitted in the name
of any SBC Warburg Division Member and for any location that
is requested by SBC to cover Services delivered in that
location to that SBC Warburg Division Member, in a form that
is acceptable to the taxing authorities in the applicable
location. Each invoice will contain information in a format
and with such detail as is reasonably necessary for SBC to
verify PSC's charges and to allocate PSC's charges among the
appropriate SBC Warburg Division Members. PSC will also
provide an analysis of the charges in a manner consistent with
SBC's reasonable requests from time to time.
(b) Invoices for the amounts due pursuant to Sections 3(b), 4(b),
5(b) and 6(b) of this Schedule F will be submitted on or
before the first day of each calendar month and will be
payable by the tenth day of that calendar month. Any amount
due PSC hereunder for which a time for payment is not
otherwise specified will be due and payable within thirty
F-5
<PAGE> 19
(30) days after receipt by SBC of a PSC invoice therefor. PSC
will submit such invoices on a timely basis promptly after
performing the Services or incurring the expenses that are
being invoiced.
(c) If SBC reasonably disputes any invoice in good faith, as SBC's
sole means of obtaining relief related to the invoice, SBC
must provide to PSC within nine (9) months of receipt of the
invoice concerning such dispute a detailed written reason for
its dispute and will pay to PSC all amounts due on the
invoice, except SBC may withhold a portion of the Annual
Profit Amount having the same ratio to the Annual Profit
Amount invoiced for the month as to which a dispute exists as
the ratio of the amount in dispute to all amounts due to PSC
for the month associated with the PSC Costs being disputed by
SBC. SBC will pay to PSC the PSC Interest Payment for any
late payments and withheld Annual Profit Amounts that are
ultimately determined to be due. PSC will pay to SBC the SBC
Interest Payment for any amounts required to be reimbursed by
PSC to SBC as a result of SBC's payment to PSC of amounts that
are ultimately determined not to have been due.
(d) PSC's monthly invoices will include a pro-rata portion of the
Annual Profit Amount. Adjustment to the Annual Profit Amount
to account for the aggregate sum of all Reward Percentages or
Penalty Percentages, as applicable, pursuant to Schedule G
will be determined by SBC and notified to PSC in writing in
accordance with Section 5(c)(5) of the EPI Agreement. Payment
of any reward amount by SBC will be made simultaneously with
delivery of such notice to PSC. Credit for any penalty amount
will by applied by PSC to the Monthly Run Rate for the
subsequent Budget Period.
(e) SBC will pay PSC the Special Profit Fee on or before May 31,
1997.
7. Currency of Payment. All charges to SBC will be invoiced in the
currency of the country or countries, as the case may be, in which the
PSC Costs related to the charges were incurred, and SBC will pay those
PSC charges in the currency so denominated. Upon the agreement of SBC
and PSC at the beginning of any Budget Period, charges to SBC may be
invoiced in U.S. Dollars. The Annual Profit Amount will be invoiced
in U.S. Dollars.
8. Tax Credit. As a reduction to any amounts billed to SBC under this
Schedule F, PSC will apply a credit equal to the reduction in "Income
Tax" resulting from the use of an "Existing Tax Asset" to the extent
that "SBC Taxable Income" in any jurisdiction enables PSC to "Utilize"
such Existing Tax Asset. For purposes of this Section 8:
(a) "Income Tax" means the tax liability required to be calculated
under the relevant jurisdiction's income, profits or franchise
tax laws for any tax year.
F-6
<PAGE> 20
(b) "Existing Tax Asset" means a net operating loss carryover, as
defined in the relevant jurisdiction's income, profits or
franchise tax laws, that exists at December 31, 1995.
(c) "SBC Taxable Income" means the portion of PSC Group taxable
income before net operating loss carryover as presented on any
PSC Group final tax return for any tax year in any
jurisdiction that PSC allocates to this Agreement, using any
reasonable, good faith method.
(d) "Utilize" means to use the Existing Tax Asset on any PSC Group
final income tax return for any tax year in any jurisdiction,
but only to the extent that the Existing Tax Asset would not
otherwise be offset by non-SBC Taxable Income in the current
tax year or in any subsequent tax years. For these purposes,
an Existing Tax Asset shall not be considered Utilized until a
final determination can be made that the Existing Tax Asset
would have expired unused but for availability of SBC Taxable
Income. In making this determination, non-SBC Taxable Income
shall be applied to the oldest net operating loss carryovers
first. Non-SBC Taxable Income shall mean any PSC Group
taxable income that is not SBC Taxable Income.
9. Audit of Charges. Upon the reasonable request of SBC, PSC will permit
SBC or its designated representatives (who will not be PSC Competitors
or Affiliates of PSC Competitors, other than the reporting auditors of
any SBC Warburg Division Member) access to PSC's books and records to
perform an audit up to four (4) times per Budget Period to the extent
necessary to verify PSC's charges to SBC under this EPI Agreement.
SBC will provide to PSC a copy of the audit report resulting from each
such audit upon its completion. As promptly as practicable
thereafter, but within nine (9) months of the receipt by SBC of the
invoice concerning the disputed cost, SBC must provide notice to PSC
of a dispute and the parties will then review the audit report and
work in good faith to agree upon any reimbursement of charges due to
SBC and any appropriate future adjustments to PSC's charges and
practices under this EPI Agreement. Subject to the delivery of the
notice referred to above, if such audit demonstrates that PSC's
invoiced charges for that period differ from the correct charges for
that period, PSC will either (i) issue a credit to SBC against the
next succeeding monthly invoice for the amount of any overpayments, or
(ii) issue an invoice to SBC for any underpayments, plus in the event
of (i) above, interest on the credited amounts equal to the SBC
Interest Rate calculated from the date such amounts were overpaid, and
in the event of (ii) above, interest on the invoiced amounts equal to
the PSC Interest Rate calculated from the date such amounts should
have been paid. If PSC's invoiced charges for the applicable period
exceed the correct charges for that period by more than ten percent
(10%), PSC will pay or reimburse SBC for the reasonable costs of such
audit. In the event PSC reasonably desires to limit the scope of
SBC's audit rights in order to protect confidential or proprietary
information, the audit will be conducted by an independent third party
auditor mutually acceptable to PSC and SBC who will verify PSC's
charges to SBC for the relevant period without disclosing any
F-7
<PAGE> 21
Confidential Information of any member of the PSC Group to any member
of the SBC Group or any other party.
F-8
<PAGE> 22
APPENDIX 1
TO
SCHEDULE F
BUDGET AND CAPACITY PLANNING
1. PSC Costs Budget. The PSC Costs Budget will be established for each
Budget Period as follows:
(a) SBC, in consultation with PSC, will determine the estimated
requirements of the SBC Warburg Division during that Budget
Period for the Cost Plus Services (the "Estimated Services")
(b) Following determination of the Estimated Services, PSC, in
consultation with SBC, will establish a proposed budget for
that Budget Period and PSC will submit the proposed budget to
SBC for SBC's written approval. The budget submitted by PSC
will:
(1) Reference the aggregate amount of PSC Costs that PSC
estimates it will incur in connection with providing
the Estimated Services.
(2) Itemize the aggregate PSC Costs by a number and type
of expense categories to be mutually established from
time to time.
(3) Allocate the budget over the total number of months
in that Budget Period (the "Monthly Run Rate") by
considering the month in which the various PSC Costs
will be incurred by PSC and allocate the Annual
Profit Amount on a pro-rata basis.
(4) Take into account providing the Estimated Services in
accordance with any Performance Metrics that may have
been established.
(c) Upon receipt of PSC's proposed budget, SBC will either approve
the budget as submitted or disapprove the budget as submitted
and provide to PSC the aggregate amount of PSC Costs that SBC
will approve for the budget. If SBC does not approve PSC's
proposed budget, PSC and SBC will work together to adjust the
Services and, where applicable, the Performance Metrics, and
to make any other appropriate adjustments, all as necessary to
cause the budget to meet the total PSC Costs that SBC will
approve for the budget.
(d) The final budget (the "PSC Costs Budget"), along with the
Monthly Run Rate, for each Budget Period will be subject to
SBC's final approval and will become the basis for PSC's
determination of its estimated monthly charges to SBC for the
Cost Plus Services.
1-F-1
<PAGE> 23
2. Equipment and Facilities Budget. An Equipment and Facilities Budget
will be established for each Budget Period as follows:
(a) PSC, in consultation with SBC, will establish a proposed
budget for that Budget Period covering the aggregate amount of
equipment and facilities expenditures that PSC estimates SBC
must directly incur in connection with the Services
contemplated by the PSC Costs Budget for that Budget Period
and PSC will submit the proposed budget to SBC for SBC's
written approval. The budget submitted by PSC will:
(1) itemize the aggregate equipment and facilities
expenditures by expense category to be mutually
established from time to time; and
(2) allocate the budget over the total number of months
in that Budget Period (the "Monthly Capital Rate") by
considering the month in which the various equipment
and facilities expenditures will be incurred.
(b) Upon receipt of PSC's proposed budget, SBC will either approve
the budget as submitted or disapprove the budget as submitted
and provide to PSC the aggregate amount of equipment and
facilities expenditures that SBC will approve for the budget.
If SBC does not approve PSC's proposed budget, PSC and SBC
will work together to adjust the PSC Costs Budget, the
Services and, where applicable, the Performance Metrics
reflected in the applicable PSC Costs Budget, and to make any
other appropriate adjustments, all as necessary to cause the
Equipment and Facilities Budget to meet the total equipment
and facilities expenditures that SBC will approve for the
budget.
(c) The final budget (the "Equipment and Facilities Budget") for
each Budget Period will be subject to SBC's final approval.
3. Quarterly Budget Review. At the end of each calendar quarter during a
Budget Period, PSC and SBC will jointly review (i) the Equipment and
Facilities Budget and (ii) the PSC Costs Budget, by comparing the
budgeted Monthly Run Rate and Monthly Capital Rate for that Budget
Period to the actual monthly costs incurred during that Budget Period
for each expense category reflected in the PSC Costs Budget or the
Equipment and Facilities Budget, as applicable. Based upon that
review, SBC may make adjustments to the Monthly Run Rate, the PSC
Costs Budget and the Equipment and Facilities Budget for the remainder
of the Budget Period. Additionally, based upon these quarterly
reviews, PSC's charges to SBC will be adjusted as provided in Section
3 to Schedule F. Either party may request that adjustments occur more
often than quarterly to take into account significant differences
between actual PSC Costs and the Monthly Run Rate.
1-F-2
<PAGE> 24
4. Changes to Budgets. PSC acknowledges and agrees that SBC may make
changes to the PSC Costs Budget and the Equipment and Facilities
Budget by providing prior notice to PSC. SBC acknowledges and agrees
that changes to either the PSC Costs Budget or the Equipment and
Facilities Budget may result in changes to the Services and, where
applicable, the Performance Metrics that SBC anticipates PSC will
provide during the applicable Budget Period. Subject to Section 8 of
this Appendix, if PSC desires to make any changes to either the PSC
Costs Budget or the Equipment and Facilities Budget, PSC will first
obtain the prior approval of SBC.
5. Additional Equipment. If at any time during the term of this EPI
Agreement, PSC elects to add any Equipment (excluding any personal
computers, modems, printers or other related personal Equipment for
use by PSC personnel) to the SBC Warburg Infrastructure, and the cost
of the Equipment has been included in the Equipment and Facilities
Budget covering the Budget Period in which the Equipment is to be
purchased, PSC may purchase the Equipment, and the cost thereof will
be chargeable to SBC. If the cost of the Equipment has not been
included in the Equipment and Facilities Budget covering the Budget
Period in which the Equipment is to be purchased, PSC will notify SBC
of its desire to add the Equipment to the SBC Warburg Infrastructure
and the date by which PSC desires to order the Equipment, and if SBC
consents to the purchase of the Equipment prior to the desired order
date, PSC will purchase the Equipment on behalf of SBC and SBC will
pay PSC therefor in accordance with this Schedule F. Subject to the
foregoing, PSC agrees that it will abide by any cost approval process
of which PSC may receive notice from SBC from time to time, including
the SBC Warburg Central Approval and Order Process, within a
reasonable period of time after receipt thereof.
6. Use of SBC Warburg Infrastructure. Prior to the use by PSC of the SBC
Warburg Infrastructure for any customer of PSC (other than an SBC
Warburg Division Member), PSC will obtain the consent of SBC based
upon a business case prepared by PSC for SBC's review and approval
specifying (i) any capital investment that will be required from SBC
to obtain any additional resources to provide services to the PSC
customer and, if so, any payments that will be made to SBC in
connection with or attributable to the use of the SBC Warburg
Infrastructure, (ii) any impact on the overall operating expenses of
the SBC Warburg Infrastructure, (iii) any impact the introduction of
the third party customer would have on existing Performance Metrics
and (iv) any impact on PSC's charges to SBC for the Services. PSC
shall also satisfy SBC, in SBC's sole discretion, that adequate
security procedures have been instituted to prevent disclosure of any
Confidential Information of SBC to the third party customer.
1. Operational Plan. PSC, on an annual basis, will update and provide to
SBC a twelve (12) month operational plan for the Services to be
provided by PSC under this Agreement, which will include plans for
reducing PSC Costs and will establish suggested Performance Metrics
for the Services.
1-F-3
<PAGE> 25
8. Assignment of Costs. Notwithstanding anything to the contrary in this
Appendix or elsewhere in the EPI Agreement, SBC acknowledges and
agrees that PSC may assign to SBC, and SBC will assume from PSC,
responsibility for paying directly to the applicable third party
vendor any costs that are then included in the PSC Costs. In such
event, the PSC Costs, the PSC Costs Budget, and the Monthly Run Rate
will be decreased to reflect any such assignment. Notwithstanding any
assignment by PSC to SBC of any third-party costs pursuant to this
Section 8, PSC will remain responsible for continuing to manage the
Services to which the assigned costs are applicable.
1-F-4
<PAGE> 26
APPENDIX 2
TO
SCHEDULE F
INFLATION ADJUSTMENT
1. Index. As used in this Appendix, (i) the "Index" means the Implicit
Price Deflator for the Gross Domestic Product, published by the Bureau
of Economic Analysis, an agency of the U.S. Department of Commerce,
(ii) the "Base Index" is the Index applicable to the Original
Agreement Date and (iii) the "Base Profit Amount" means $41,000,000.
2. Adjustment.
(a) Effective as of the third anniversary of the Original
Agreement Date,the Annual Profit Amount will be increased by
the percentage increase in the Index as of such date over the
Base Index.
(b) If, on any anniversary of the Original Agreement Date during
the term of this EPI Agreement after the third anniversary
referred to in clause (a) above (each, an "Inflation
Adjustment Date") the Index (the "Applicable Index") is higher
than the Base Index, then, effective as of such Inflation
Adjustment Date the Annual Profit Amount will be an amount
equal to (i) the Base Profit Amount plus (ii) the percentage
by which the Applicable Index exceeds the Base Index as of
such Inflation Adjustment Date multiplied by the Base Profit
Amount.
(c) Notwithstanding any other provision of this Appendix 2 to
Schedule F, the Annual Profit Amount will never be less than
$41,000,000 (other than for the first Budget Period, for which
it will be $40,500,000.
3. Change of Index. In the event that the Bureau of Economic Analysis
should stop publishing the Index or should substantially change the
content or format thereof, PSC and SBC will substitute therefor
another comparable measure published by a mutually acceptable source.
2-F-1
<PAGE> 27
SCHEDULE G
PERFORMANCE METRICS
1. Definitions. For purposes of this Schedule G, the following
definitions will apply:
a. "Penalty Percentage" is, with respect to each Performance
Metric, the percentage so designated in this Schedule G with
respect to that Performance Metric. The aggregate sum of all
Penalty Percentages will not exceed 100%.
b. "Penalty Pool" is, with respect to any Budget Period during
the term of this EPI Agreement, an amount equal to thirty
percent (30%) of the Annual Profit Amount.
c. "Reward Percentage" is, with respect to each Performance
Metric, the percentage so designated in this Schedule G with
respect to that Performance Metric. The aggregate sum of all
Reward Percentages will not exceed 100%.
d. "Reward Pool" is, with respect to any Budget Period during the
term of this EPI Agreement, an amount equal to fifteen percent
(15%) of the Annual Profit Amount.
2. Performance Metrics Mechanics. The Performance Metrics listed below
in Section 3 are those in effect at the Adjustment Date. It is the
intention of SBC and PSC to continue to refine the Performance Metrics
during the current Budget Period.
a. COST CONTROL
Reward Percentage: 25%
Penalty Percentage: 25%
Budgetary control needs to be assessed in the context of an overall
financial plan. PSC may request that the SBC Operational Manager
review the financials on a monthly basis. Actual costs in excess of
the PSC Costs Budget are acceptable if approved by SBC.
Examples include, but are not limited to:
o Increase in services or quality requested and approved by the client
o Agreed resource excess during a re-manning exercise
o SBC approved new projects or functions undertaken under the umbrella
of business as usual
o SBC approved tooling up for third party use of functions on a
commercial basis
G-1
<PAGE> 28
Unapproved cost overruns in excess of 15% of the PSC Costs Budget
would be considered extreme and could lead to the imposition of the
entire Penalty Percentage pertaining to this Performance Metric. An
unapproved cost overrun of 10% would be considered significant and
could lead to the imposition of 50% of the Penalty Percentage
pertaining to this Performance Metric. These ranges are meant to be
indicative and not absolute. Unapproved cost overruns include not
only PSC Costs but foreign currency dealing and costs incurred by SBC
because of significant mis-estimates of the local currency
sub-components of the budget.
b. BUSINESS SERVICE QUALITY AND SATISFACTION
Reward Percentage: 30%
Penalty Percentage: 30%
SBC and PSC will establish a structure whereby the business areas and
logistics functions of the SBC Warburg Division have an input
mechanism into this Performance Metric. Structured correctly, this
can be used over time to establish specific objectives and measures by
business areas which can be agreed on a bilateral basis. The PSC
Relationship Manager will initiate a quarterly meeting with the SBC
Operational Manager. This meeting should follow separate meetings
initiated by the PSC Operational Manager with each business area and
logistic function leader or designee with the key PSC service
providers of those businesses as well as the PSC Operational Manager.
Minutes of these meetings should be submitted to the SBC Operational
Manager and the PSC Relationship Manager for purposes of the quarterly
meeting referenced above. The initial formal meetings (all of which
will be minuted) will establish current status as well as goals for
the rest of the Budget Period to enable assessment to be made against
these goals in an objective manner. Any business area or logistics
function not taking part in this process, as requested with reasonable
notice by PSC, will be deemed to be submitting a neutral performance
recommendation for that period This would not preclude the business
areas or logistics functions contributing to performance evaluation
annually (or quarterly, if applicable), provided that for the period
during which the business area or logistic function does not take part
in this process, the PSC performance will be deemed to be at the zero
percent (0%) Penalty Percentage. It is understood that although each
business area or logistics function must participate in quarterly
reviews in order to maintainits discretion over this Performance
Metric for each respective quarter, having thus participated they
retain full control of the performance review for the full year Budget
Period up to the final annual review.
c. PROJECT MANAGEMENT
Reward Percentage: 25%
Penalty Percentage: 25%
G-2
<PAGE> 29
Each project requires detailed plans from PSC and mutually agreed
deliverables such that the performance of PSC can be assessed.
Each project should have a SBC business sponsor who should chair
regular progress meetings (which should be minuted) to monitor
progress of the project. These meetings should monitor the agreed
performance criteria as well as any changes in circumstances that
affect these measures.
The chairmen of these projects should report into the quarterly
meeting mentioned above between the SBC Operational Manager and the
PSC Relationship Manager.
d. SUBJECTIVE MEASURES
Reward Percentage: 20%
Penalty Percentage: 20%
There will be a number of subjective inputs to the assessment of PSC
performance, some of which are detailed below:
o Perceived effectiveness of the PSC management team and its added
value to the SBC-PSC alliance overall
o Value added of PSC in technology thought leadership and strategic
and structural contributions
o Relationship with the organization
o Support of SBC Warburg Division policies and attitude (e.g.,
security, standards, audit and cost consciousness)
o Proactive leadership in support of the business as a whole (e.g.,
forcing focus on issues which are relevant to the account,
examples would be 'year 2000', structural improvements in the cost
base and a meaningful and accurate budget process).
3. Penalty Amount. With respect to each period (quarterly or annual, as
applicable pursuant to Section 5(c) of the EPI Agreement) in which
PSC's performance of the Services fails to meet or fails to exceed the
standards which have been mutually established for a Performance
Metric, PSC will provide to SBC a credit in an amount equal to the
product of (i) the Penalty Percentage for that Performance Metric,
multiplied by (ii) the Penalty Pool for that Budget Period or a
quarter thereof, as applicable; provided, however, that the maximum
amount of credit that PSC is obligated to provide to SBC pursuant to
this Section 3 in any one Budget Period or a quarter thereof, as
applicable, with respect to all Performance Metrics shall not exceed,
in the aggregate, the Penalty Pool for that Budget Period or a quarter
thereof, as applicable.
4. Reward Amount. With respect to each period (quarterly or annual, as
applicable pursuant to Section 5(c) of the EPI Agreement) in which
PSC's performance of the Services meets or exceeds the standards which
have been mutually established for a Performance Metric, SBC will pay
to PSC an amount equal to the product of (i) the Reward Percentage for
that Performance Metric, multiplied
G-3
<PAGE> 30
by (ii) the Reward Pool for that Budget Period or a quarter thereof,
as applicable; provided, however, that the maximum additional amount
that SBC is obligated to pay to PSC pursuant to this Section 4 in any
one Budget Period or a quarter thereof, as applicable, with respect
to all Performance Metrics shall not exceed, in the aggregate, the
Reward Pool for that Budget Period or a quarter thereof, as
applicable.
G-4
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
Dollars and share amounts in thousands, except per share data
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net income ............................................ $ 20,499 $ 10,813 $ 6,329
Preferred stock dividend .............................. (447) (595) (595)
Modified treasury stock method adjustment ............. 909 24 13
-------- -------- --------
$ 20,961 $ 10,242 $ 5,747
======== ======== ========
Average common shares outstanding ..................... 37,042 31,151 30,720
Common stock equivalents .............................. 14,728 3,375 1,673
-------- -------- --------
Weighted average common shares outstanding ............ 51,770 34,526 32,393
======== ======== ========
-------- -------- --------
Primary and fully diluted earnings per common share ... $ 0.40 $ 0.30 $ 0.18
======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY INCORPORATION
<S> <C>
Benton International, Inc. California
Deutsche Perot Systems GmbH Germany
Doblin Group, Inc. Illinois
HCL Perot Systems N.V. The Netherlands
HCL Perot Systems Private Ltd. India
HCL Perot Systems Pte. Limited Singapore
HPS America, Inc. Delaware
Perot Systems A.G. Switzerland
Perot Systems Asia Pacific Pte Ltd. Singapore
Perot Systems, B.V. The Netherlands
Perot Systems Communication Services, Inc. Delaware
Perot Systems (Deutschland) GMBH Germany
Perot Systems Europe (Energy Services), Limited United Kingdom
Perot Systems Europe Limited United Kingdom
Perot Systems Field Services Corporation Delaware
Perot Systems Financial Services Corporation Delaware
Perot Systems Holdings Pte Ltd. Singapore
Perot Systems (Japan) Ltd. Japan
Perot Systems Monaco S.A.M. Monaco
Perot Systems Realty Corporation Texas
Perot Systems S.A. (formerly Perot Systems France) SARL) France
PSC Energy Corporation Delaware
PSC Government Services Corporation Delaware
PSC Health Care, Inc. Delaware
RothWell International, Inc. Texas
The Technical Resource Connection, Inc. Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,516
<SECURITIES> 0
<RECEIVABLES> 120,591
<ALLOWANCES> (6,787)
<INVENTORY> 0
<CURRENT-ASSETS> 176,705
<PP&E> 96,990
<DEPRECIATION> (61,242)
<TOTAL-ASSETS> 232,247
<CURRENT-LIABILITIES> 154,713
<BONDS> 5,173
0
0
<COMMON> 396
<OTHER-SE> 70,366
<TOTAL-LIABILITY-AND-EQUITY> 232,247
<SALES> 0
<TOTAL-REVENUES> 599,438
<CGS> 0
<TOTAL-COSTS> 465,140
<OTHER-EXPENSES> 94,917
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 770
<INCOME-PRETAX> 40,151
<INCOME-TAX> 19,652
<INCOME-CONTINUING> 20,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,499
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
